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Construction Magazine: July 2005 Issue |
How Design-Builders and CMs Can
Use the Best Value Approach
to Create a Competitive Advantage
By Ted Garrison |
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The
primary purpose of any business is to protect its clients.
Think about it. How long would you keep your attorney
if she weren’t protecting you? How long would
you keep your financial planner if he weren’t
protecting you? So how long should a client keep its
contractor if the contractor isn’t protecting
him?
Unfortunately, the low-bid environment
does just the opposite. It places the contractor and
client in an adversarial position. This has resulted
in increased litigation, lower quality, excessive change
orders and general unhappy customers.
The worst result is the impact on
construction labor. When contractors focus on just lowering
their price, they often think they must keep wages down.
This is a mistake. This results in lower quality people
for two reasons. The low wages don’t attract the
best people and when companies don’t invest in
their employees’ education they fail to perform
at peak performance.
In the low-bid environment, the contractor
is required to follow the plans and specifications.
This encourages contractors to place lower-qualified
people on the project, because highly skilled workers
would want to do things the best way instead of merely
following directions. Also, in this environment, when
things don’t work, it’s the customer’s
problem. When the customer issues revised directions
the contractor has a basis for a change order. Therefore,
the contractor doesn’t want its workers simply
taking the initiative to fix the problem because it
would eliminate the change order and/or place the contractor
at risk for not following the plans and specifications.
The low-bid process focuses totally
on price. In the best-value approach, both price and
performance are considered. In this approach, the customer
pays the right price to do it right. The right number
is provided up front, eliminating the need for change
orders. The high-performing contractor is then in a
position to protect the client. The contractor and workers
can look ahead and determine potential problems and
do what is necessary to eliminate them.
A proper best-valued program makes
its selection in a way that is fair to all contractors
as well as the customer. They only organization that
suffers under the best value approach is the low-performing
contractor. However, isn’t that the purpose? When
the construction industry promotes best value, it’s
protecting its customers from low-performing contractors.
The challenge is to overcome peoples’
resistant to change and their misunderstanding about
what best value means.
For example, ABC of Pennsylvania
is happy that they killed the Commonwealth of Pennsylvania’s
best value program. Unfortunately, they through out
the baby with the bath water. I’m not suggesting
that the Commonwealth’s plan didn’t have
flaws or provisions that should have been removed. However
to throw out the concept is the wrong approach.
The industry needs to use all the
tools available to deliver greater value to the customer.
After all, isn’t that our job? When we fight concepts
that work in the owner’s behalf, we say we don’t
care about them—and that we only care about ourselves.
In a speech at the Construction Management
Association of America’s leadership conference
in Philadelphia before the court’s decision, James
Creedon, Secretary of the Commonwealth of Pennsylvania
Department of General Services, reported that the use
of best value had reduced change orders from 36 percent
to 6 percent.
Obviously, the process must be doing
something right. Instead of fighting the concept, contractors
must find ways to create a fair and value-driven system
for the owner, the contractor and employees.
If contractors want to be considered
as professionals, then they must protect their clients
like true professionals. Giving the customer the greatest
value for his money is the right answer.
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