Early contractor award based on GC's and Fee?

Question

Have any of you awarded a contractor based on GCs and Fee in order to award the contract earlier in lieu of waiting for full CD's to be procured? i.e. If you manage to get a grading and/or foundation permit earlier than full CD's, you can get out on site for this activity. If you have done this before, how did you then ensure you were then getting the best pricing possible once the remaining scope goes out to bid from the GC to the subs with the full CD's? I would assume you make sure its a GMP scenario to see all the backup. Did this work out well?

Jim Brown · Answer

Can't say I agree with this 100%.  Having language in the contract that basically states "you should have know better" always leads down a road to finger pointing and bickering between subs as to who is going to be responsible for whatever change order pops up.  It can turn quite ugly and turn a job upside down in a hurry.  Bidding off of incomplete CD's and the putting contractors on the hook because of gotcha clause in the contract can sour some relationships really quick.

Manolo D. · Answer

I would agree, I wouldn't sign anything that says something like that. It is like I'll give you 100 no matter what happens.

Jim Brown · Answer

How far along are the CD's?  When I worked as estimator, we often bid and won projects based on 95% docs and there was little to no change in design and/or pricing.  Anytime 50% CD's were issued it was differnent story.  Any price I put out the door, would strictly state "for budgetary purpose only" as pricing would change dramatically in some circumstances.

Emilio Ramirez · Answer

You can go several ways, but I would recommend CM as Agency or CM at Risk. I prefer CM as Agency for the reasons stated here.

Construction Management as a Stepping Stone to Collaboration

The CM delivery method serves to better align the Contractor’s Goals with those of the Owner.

1.Fixed Fee – no markups on change orders

2.Transparency – Open book bidding and accounting allows Owner complete access to project cost records.

3.Flexibility - Allows for multiple scopes to be bid and analyzed by the CM and Owner prior to committing resulting in huge flexibility on the project scope.

4.Collaboration – Owner can use the CM Agency as his “Right Hand Man” truly representing the Owner’s best interests.

5.Non-Adversarial – Because the CM is contracted on a fixed fee, there is no arguing over change orders. This results in the CM and Owner being able to maintain a professional, non-adversarial relationship.

6.No Middle Man – Agreements with Trade Contractors and Owner are direct. This limits the possibility of a GC not paying his subs. The Owner also knows exactly what he’s paying and to whom.

7.Savings – If the CM and Owner are able to bid the project for less than the budget, all savings stay with the Owner.

The key in your situation would be to decide if you need to hire them as Agency or at Risk.  If you hire them at Risk than the "transparency" can be a little cooked as they have to protect their butts in case there are mess ups or misses... and there always are. When I worked in CMAR we always drug out the GMP as long as possible. This would minimize our risk on the final cost and also the Owner's to an extent.

How do you know you are getting the best price? In CM work, every trade scope can be competitively bid including.... the CM. When the actual trade scope are bid, the CM is supposed to present the bids to you with his recommendation. Unless you are building a major project, I would not start construction without having the framing and MEP scopes close to under contract. Demolition ok, but not excavation. I've seen way to many cost run ups between drawing sets, even in this method, to tell me it is worth it. Sometimes it is good to be patient.

Julie Marquez · Answer

I see this happen in commercial construction all the time, and it works. In my contracts I like to always add the language "as required" so that they know that they own everything to get the job complete. Getting started earlier can save you the money that you might not get from bidding the full CD. I'm also interested in hearing how it works in your situation, and what others have to say.