If you’ve ever built a house or a lake cabin or even just a backyard deck, you’ve probably had the experience of opening an invoice that’s for a lot more than was originally promised.
“Cost overruns are just an unfortunate reality of the building process” is what we’re always told.
But what if they weren’t?
For years, McGough Construction, a general contractor based in the Twin Cities that opened an office in Downtown Fargo in 2015, has been giving its commercial clients another option.
The collaborative delivery model, as it’s referred to most generally, is a stark departure from the construction industry’s other, more common delivery system—known as design-bid-build (DBB)—and as we learned from the head of McGough’s Fargo office,
Nate Wood, the collaborative model has become the preferred option for an increasing number of McGough’s commercial clients.
Here are five reasons you should consider the collaborative approach for your next commercial project
Nate Wood, regional operations manager for McGough’s Fargo office, is pictured at the site of Concordia College’s Science Facilities Project, which will be completed in 2017. Concordia opted for a collaborative delivery model for the major expansion to its science buildings.
1. The collaborative delivery system delivers optimum value for the owner.
The best opportunity to positively impact project costs occurs at the earliest stages of the project: during the design phase. Early contractor involvement positively impacts the accuracy and quality of the project’s design, budget, value engineering and constructability.
2. Net project cost is usually lower.
Although the first cost estimates using the collaborative delivery approach are usually greater than DBB, the final cost of the project generally ends up being lower. These are just a few of the reasons:
• Materials and subcontractor components of the work are competitively bid, which generally makes up more than 90 percent of construction costs. These are charged at actual cost without markup.
• A collaborative approach returns 100 percent of any cost savings to the owner. Under the DBB approach, 100 percent of the cost savings are retained by the contractor.
• The contractor operates according to an open-book process. The owner has access to actual project cost information at all times. As unused portions of the guaranteed maximum price (GMP) are identified, adjustments can be made to project scope.
3. Projects are completed more quickly.
Several key factors enable the contractor to complete projects faster under the collaborative delivery process:
• The early involvement of the contractor allows fast-tracking and accelerated scheduling of the project, which is not possible in DBB projects. Similarly, site work, including footings and foundations, can be completed before design is finalized.
• The flexibility of this approach permits phased design packages throughout the process. Conversely, with the DBB approach, design documents are generally done in a single bid package, which means that design packages cannot be phased and construction is delayed until design is complete.
• The contractor can anticipate requirements that are not shown in incomplete documents and can respond to changes as the project design evolves.
4. Owners are afforded maximum control and higher-quality results.
Under the collaborative delivery approach, an owner maintains project control for the duration of the project. The owner can choose the level of project involvement they desire through each phase and is able to clearly outline project goals— budget, schedule, quality, etc.—and can influence those goals and make informed, incremental decisions from the commencement of the project through project completion.
As an example, the process allows the owner to have significant involvement in evaluating and making decisions regarding the key building components that influence final project cost. These include site work, structure, building envelope, and mechanical and electrical systems.
The key characteristics that ensure maximum owner control and flexibility:
• The system is owner-focused rather than pro t-focused. Owners may choose their degree of involvement during each project phase, which aligns owner goals with project results.
• It produces early and credible cost information for owners so that they can estimate final project costs and balance these against other project goals.
• The collaborative approach places a significant emphasis on achieving high-quality results. The team manages the trade-offs between quality and cost to ensure an optimum balance is achieved.
5. Communication is enhanced among project participants.
Through all phases of design and construction, the contractor partners with the owner and design team, as well as project consultants, subcontractors, material suppliers, and vendors to review project progress and make adjustments as necessary.
Some of the advantages:
• Collaboration is characterized by shared expectations and project goals, resulting in a trusting environment that is established early and maintained throughout construction.
• It improves team communications regarding budget and design and delivers earlier and better cost management direction to the architect and engineer, which reduces the project’s design cost.
• It eliminates adversarial relationships and reduces the likelihood of litigation among project participants that typify the design-bid-build model.
Some Background on Collaborative vs. Design-Bid-Build (DBB)
Design-bid-build (DBB) requires completion of the project design before the contractor is selected. As Wood explains, this is a significant disadvantage because the contractor is not involved in the pre-construction process. This means that the contractor does not participate in value engineering, budgeting, constructability or design review. DBB also lengthens the project schedule and precludes fast-tracking of projects.
Conversely, with the collaborative delivery approach, a contractor is selected early on in the planning phase of the project and works intensively with the owner and design team to provide budget estimates, value engineering and scheduling input. The contractor establishes a Guaranteed Maximum Price (GMP) for the project when the design scope is well understood. This GMP includes some level of contingency to cover unanticipated changes in scope or unknown conditions that may exist when the GMP is established.
When documentation for each major section of work is complete, the contractor competitively bids the work to the subcontractor community.
As with most growing companies, McGough always has their eyes on the horizon for new opportunities, Wood says.
“We’re always looking for that next and most sensible place to go,” says Wood, who spearheaded the effort to establish a McGough office
in Fargo in 2015. “If you look around the country—especially the Upper Midwest, which we’re very familiar with—per capita, there are more startups in the state of North Dakota, especially in the Fargo area, than anywhere else in the country.
“It’s a growing area and a growing economy, and when you have a growing population, what’s going to grow? Your institutions, your healthcare, all of those things to support your population. So for the types of projects we do—hospitals, clinics, higher education—this was definitely the first next step.”
What The Numbers Say
According to a 1999 study done by two researchers at Penn State University in State College, Pa., there are measurable differences with respect to project cost and schedule when utilizing a collaborative delivery approach, as compared to design-bid-build. The figure below summarizes their findings.
About McGough Construction
McGough Construction is a sixth-generation commercial general contracting firm headquartered in the Twin Cities. From a wide range of healthcare, higher education, and institutional facilities to downtown office towers, they complete projects of all scopes and sizes. In addition to their flagship location in St. Paul, they have seven branch offices—three in Minnesota, two in Iowa, and one each in North Dakota and Arizona.