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| NEW CONSTRUCTION
STRATEGIES ARTICLES |
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Southeast
Construction Magazine: May 2005 Issue |
Partnering With The Owner
By Ted Garrison |
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True partnering
will not work for everyone or in every situation.
However, in the right situations it provides great value.
Probably
the two delivery systems that best facilitate true partnering
are construction management and design-build. The problem
with both approaches is the owner’s, or buyer’s,
selection process is often flawed. Because many
buyers lack the ability to adequately evaluate a contractor’s
performance, they resort to comparing fees and overhead
costs. This often results in selecting the wrong
contractor and results in partnering getting a bad name.
Instead,
buyers need to be made aware that the general contractor’s
fee and the architect’s fee represent about 10
percent of the total cost of a project. Further,
when considering the lifetime cost of a project, the
construction cost only represents about 10 percent of
the total lifetime cost of a building. Therefore,
the general contractor’s fee and the architect’s
fee represent about 1 percent of the total lifetime
cost.
Despite this,
buyers too often buyers focus on these figures in their
selection process instead of focusing on value delivered.
Contractors
and architects must educate these owners that it is
more important to select the right general contractor
and architect than to worry about their fees, because
the right contractor and architect will save the buyer
in the long run. After all, even a 20 percent savings
in architectural and general contractor fees only saves
the lifetime project about .2 percent.
An
example is the recommendation to use the more costly
parabolic light fixture over an acrylic lens fixture.
While the initial cost is higher, the 25 percent savings
in electrical costs will reduce the property’s
operating expense significantly over its life.
Buyers need to understand the right contractor can save
them significant costs, and that selecting the wrong
contractor and design team can be a costly mistake.
While the buyer often blames the delivery system, the
real problem is the selection process.
Buyers always
worry if the got the best deal. Most contractors have
experienced a client switching back to bid work in an
effort to get lower prices. The problem is this individual
is focusing only on initial costs, not total costs.
This is the real world and the buyer establishes the
rules.
The answer is to educate the customer. The best way
to do that is by establishing trust and by delivering
high performance. In order to increase the stability
of the process, the contractor must demonstrate how
it is saving the buyer costs in other areas that help
deliver greater value. In order to do this convincingly,
the contractor must speak the buyer’s language
and help the buyer solve its problems.
For example, if the contractor specializes in hospital
construction, it must understand where there are high
operating costs and provide solutions that reduce those
costs significantly. This is about the contractor
knowing the current state of the art of hospital construction
– not just construction.
This expertise and innovation skill provides credibility
for your company in the negotiation process. For example,
if you can provide references from other hospitals that
proclaim that your company’s ideas and suggestions
saved that hospital thousands of dollars a year in operating
and maintenance expenses, that will increase your firm’s
credibility and value.
To be a true partner you must seek situations where
you can deliver greater value through your knowledge
or provide faster completion through a design-build
effort. if you can’t really bring special knowledge
or speed to the process, then don’t sell the partnering
concept because you are not acting like a partner and
will only hurt your credibility in the long run.
negotiated work is for the benefit of the buyer, not
the contractor. Of course, if the contractor does
it well, it will benefit, too. But if the buyer doesn’t
benefit, then the contractor didn’t do a good
job. Just like in any relationship,
if your attitude is to deliver more than you receive,
it will end up being a wonderful relationship if you pick
the right partner. |
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