How to make the right decision for your facility
As a lifelong resident of Brevard County, it’s rewarding to see and feel the excitement in our revitalized economy and the changing landscape of the place that I call home. With this renewed business environment, it is highly probable that many business owners (like you) are looking to expand or renovate existing facilities, or even considering building a new facility. It’s also likely that many businesses have never traveled down this path and business owners might be asking the question, “I think I’m ready to build…Now what?” Here are some best practices that business owners should consider when they are ready to take on a building project.
“I’ve decided to build. What factors should I consider next?”
You’ve got a vision and maybe a rough budget. Next, it’s time to select a contractor. Besides price, what are some of the questions that owners should ask upfront before selecting a contractor for their project?
- Relationships: Does this contractor stress the value of building relationships, and how much of their revenues come from repeat customers?
- Finances: Do they possess the financial capability for the project?
- Schedule: Do they have a record of successfully completing projects on-time?
- Safety: What is their safety record, including lost-time accidents? What type of safety program do they have? What is their experience modification ratio (EMR)?
- Team Experience: Ask specifically about the individuals that will be working on your project.
- Litigation History: Are they litigious in nature?
“What contracting method should I choose?”
Another important consideration is the type of contracting method to be utilized. Many projects involve the owner contracting separately with a design team and contractor in a traditional design-bid-build approach. This can be successful, but the owner is typically pulled in between the designers and contractor on issues that take them away from running their business.
Another option is design-build, where the owner engages a contractor who is also responsible for the design. This approach puts all of the responsibility for design and construction squarely on the design-build contractor and helps to insulate the owner from disputes between the two parties. This approach also invariably offers the shortest project duration.
“Does low-price equal best-value?”
Every day, construction companies invest time, energy and resources to bid projects that are based solely on the lowest price, only to lose those projects to companies less qualified simply because they were a few dollars less. Often these projects serve as a springboard for a continuum of problems. Time after time, these same projects end up encountering safety issues, late completion, poor quality, long term maintenance costs and expensive litigation. This scenario leads to the question, “Was it really a good value?”
When shopping for a new automobile, do we simply walk onto the lot and buy the vehicle with the lowest sticker price, thinking that we got a good deal? I doubt it. More than likely, you recognize that you are going to get what you pay for and will consider other factors like reliability, performance, and maintenance costs. It is perplexing to see business owners that wouldn’t dream of buying a car based on price alone employ that mindset when it comes to a significantly larger expenditure like a building project.
Years ago, the U.S. Army Corps of Engineers (USACE) employed “best-value” contracting where price remained a factor, but only one of many factors. In this concept, past performance, client references, safety records, and other metrics are combined with price to achieve an overall score. In many cases, projects were awarded to firms that were not the lowest priced, but that offered the best overall value. Through this method, the USACE reported that the safety, quality, schedule and overall performance of their projects were noticeably improved and their rate of litigation dropped dramatically.
It may be somewhat cliché, but it’s important to remember this quote today, “The bitterness of poor quality lingers long after the sweet taste of low price is forgotten.”
In summary, the decision to expand, renovate, or build a facility is often the largest monetary endeavor that a business owner will ever undertake. Making a sound decision and asking potential contractors the right questions is critical to avoiding a very costly mistake. Taking the time to research and interview potential contractors and basing your decision on a broad range of factors, not just price, is the best way to ensure that you ultimately make the right choice. ◆