Hero’s Journey

I got lots of credit for when the government business was expanding like mad. Once we were awarded seven new federal projects in one day. My entrepreneurism, hustle and my extensive contacts were all paying off handsomely. Wow, that was a blast. I got all the credit and quickly became the hero of our firm. At this time the rest of the office had very low volume, and it was like clients were asking me to do more work volume than the rest of the company could even find leads for.

What I didn’t know then but know now, is that no one should take credit for a natural business cycle, in this case expanding federal work. True, I hustled the work with my connections, and sold the work and did the work, but doing my job through good days and bad – persevering – should never be confused with possessing magic. But we all take the credit, don’t we? It‘s hard to turn down praise.

Just in the same way that I don’t think anyone should get credit for when the cycle is rising, I don’t think anyone should get blame (other than Congress) for a declining federal market cycle, which is where we are in 2014. This is a problem with many businesses, which only have the attention and the resources to react to the immediate, short-term business environment. The business cycle is an endless series of large waves and we are on a boat at sea. We are all much better off with a realistic, long-term perspective about our environment, so that we can figure out how best to move forward.

The navigator will strive to see further; to understand the marketplace cycle better, and so be positioned to lead with prescience.

I hope we always are the heros of our stories, though all market cycles. I hope everyone in the federal marketplace can remember that the next wave will soon be upon us.

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The meaning of TRUE Design/Build Delivery

If you have read the previous blogs, you have already heard me grind my axe on this subject. This subject is complex, a bit controversial and certainly there are a “thousand shades of grey” when it comes to design/build delivery. I am NOT splitting hairs; the difference is important, and sometimes critical.

While I am opinionated I do not intend to be judgmental about the use of the term design/build. Many of the largest and highest-quality design/builders will occasionally use a faux design/build delivery (design/build in name only) due to their sophisticated analysis of market conditions. The great majority of inexperienced, small and low-quality design/builders consistently use faux design/build delivery because, on the surface, it seems like an easy way to enter the design/build marketplace. On the surface, faux design/build is, in fact, pretty easy. Like an iceberg, under the surface it is plenty risky.

The intention of this particular blog is to create clarity between true design/build and faux design/build. Honestly, I write from the perspective of the designer – specifically the architect – in the design/build project.  Let’s start with one key definition; the “design/builder” is the builder that holds the prime design/build contract from the client. The design/build contract puts one legal entity, the design/builder, responsible for both the construction and the design. Typically a design/build contract includes a maximum guaranteed price, which the US Government calls a “firm fixed price.” One key distinction is the designers work for the design/builder, not for the design/builder’s client. 

These days design/build is frequently used as a delivery strategy for Government projects, but it is also popular with many other client types. Design/builders that bid on design/build projects can produce the project in either true design/build or faux design/build. Many clients don’t seem to care, or even know which is used, so long as they have only one entity (the design/builder) that is responsible for both the design and the construction. The differences between true and faux design/build can be significant to everyone concerned with the project, however.

There are two steps to create true or faux design/build. The first step occurs at the bid stage.  The design/builder may choose to estimate the bid, using a variety of technologies and/or historical data. Estimates vary in their ability to replicate actual market conditions. If the design/builder is estimating all or part of the bid, they aren’t talking with construction subcontractors or designers to get the most accurate bid numbers, and they are well on the way to faux design/build. If they win the project based on estimates, they are betting the market conditions and their estimates will match each other. That bet creates risk for the design/builder, the designers and the project client.

Again, there are many shades design/build, but the true design/builder will bid part or all of the project by discussing the project in great detail with construction subcontractors and the design team, to figure out the best/most efficient/least expensive way to create the project. Often, parts of the project will be negotiated or hard bid to subcontractors, so the bid isn’t a “guestimate,” it is an actual, hard price that the project could be designed and constructed with. There is less total risk by using this strategy, but it takes much more effort, street smarts and sophistication from the design/builder, the design team and the construction subcontractors.

For example, one anomaly of a bid number is that subcontractor hard pricing may not accurately reflect actual market conditions if there is a long delay between the time of bid and the time of subcontract award, if the bidders aren’t sufficiently hungry to give the most competitive number at the actual time of the bid, or if the bidders don’t understand the project. If any of these conditions are present it is possible that the best price is the estimated price.

However, all estimated prices lead you back to a shadow world, similar to a casino floor or stock exchange – you are betting that you are smarter than the market, and sometimes you win on the market – sometimes you lose. Estimates usually represent a higher risk/reward ratio. (Higher risk of failure is proportional to a higher reward if successful.) Sometimes the design/builder with the lowest price has made the biggest math error. Sometimes the design/builder with the lowest price bids a number less than his actual known costs, betting that he can drive the cost lower during design or construction, and/or make up the difference with change orders.

The second step occurs at the design phase, after the design/build project is awarded, but before it is designed. No matter if the design/builder’s bid is estimated, negotiated or bid among subcontractors, there is still time for a faux design/build bid to become true design/build project. The difference is the interaction, or not, between the construction subcontractors and the design team.

If there is a high level of interaction between the subcontractors and the design team, if the primary subcontractors (mechanical, electrical, plumbing, civil, steel, etc.) are able to have firm fixed price contracts and order long-lead items prior to the completion of the design, if the design team is able to quickly get to accurate and well coordinated final construction documents on the first try, if the design/builder is able to buy much of the project out before the end of design, if the design/builder is able to shave 10% or more off the construction schedule due to the efficiencies of the design/build process – that is true design/build.

One sophisticated variation on the design/build process is to use multiple bid packages. Typically the first bid package needed is the civil and underground package. As the first bid package is being constructed, a second bid package might be nearing design completion. Design/builders need to expect to pay more for each bid package produced because each one increases liability and costs the design team additional effort, particularly for coordination.

In my experience, particularly with US Government projects, the majority of design build is faux design/build, or design/build in name only. To the design team, faux design/build looks just like traditional design-bid-build. To the design team there are no advantages and several additional liability risks with faux design/build. If the design team has to complete the design with little or no interaction with construction subcontractors – that is faux design/build. Faux design/build also has relatively few advantages to the design/builder or the project client.

mb

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More Time – For Free?

In most design/build projects, time is more valuable than money. Money is simply an additive problem. For example, liquidated damages (LDs) for late performance simply add up more every day. Due to the multiple, intertwined critical paths of a design/build project, time issues have a tendency to be a multiplicative problem. One example here is the late design for an elevator that in turn causes the elevator manufacturer to be late, which forces both the mason and the electrician to be late, etc. etc. The adage is that while a project can often fully recover from a slip in the middle of the schedule, the project will almost never recover from a slow start.

Why do projects start slow? Sometimes they start slow because the construction management team or design team is busy on other on-going projects and have yet to be reassigned to the new project. In the design business and in the construction business, anyone who is waiting for a project to start is reassigned or let go. Everyone is always busy, which is to say billable. So, if the design/builder starts slow, the architect will start after the design builder starts, the engineers start after the architect has started, and on it goes. Unless the design team can pull off a miracle, the schedule can be irreparably harmed by a slow start in the first 60 days. The harm is done and no one even knows there is a problem until months later, when the accusations start.

We can’t manufacturer time, obviously, but we can do the next best thing. Here are three things you can do that are deceptively simple and pay big dividends.

  1. The whole design/build team needs to start the project at notice of apparent selection. Negotiate the design contracts and kick off the whole design team immediately. Get the geotech and survey rolling out to the site immediately. Park someone at the Government office to collect all the needed information immediately. Get after it immediately because here, at the beginning, is where you can make your project a success or cause it to fail. If this initial time period is properly managed the design team can frequently pick up almost an entire free month of time before NTP (Notice to Proceed.) This is because the Period of Performance (POP) doesn’t start until NTP. If the NTP hasn’t been issued then the clock hasn’t started, hence – time for free.
  2. Have all the sub-contracts negotiated and signed, have the long-lead items purchased and have the sub-contractors mobilized and ready to park their trailers on the construction site the same day your project receives construction NTP from the Government client. This should buy you about another 2 weeks of free time. It is shocking how many times I have attended a construction NTP meeting, and then gone out to the site to see absolutely nothing going on.
  3. About six weeks from the end of the POP (Period of Performance) have a written plan in place to finish the project in time. Those last weeks can be a frustrating and reactive stop-start chaos if the final steps aren’t carefully thought out and choreographed. Yes, you do have to complete the touch-up paint, but no, you don’t have to do touch-up twice.

The value of a free month of time is not the same as the value of the LDs for a month. Time is multiplicative, so time can effect project quality, customer satisfaction and the entire profit picture of the project. The value of a free month can be many times the value of the LDs. The taste that lingers in the Government client’s mouth will be the taste of the project finish. Therefore, plan your time expenditures with the same finesse that you plan your financial buy-out.

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WE – a revolutionary concept for Design/Build

A recent article by Dave Maney (davemaney@economany.com) posits that both Republicans and Democrats are wrong about how to fix our economy. Both major parties are highly reactive against each other and both are overly invested in solutions that solve the economic problems of the past. Many points out, “Real political leadership in times of change will involve three powerful things:

  • Identifying and communicating, over and over again to anyone who will listen, the difficult and world-changing nature of what is happening in our economy and in our society.
  • Laying the groundwork of skills, infrastructure and societal mechanisms that are supportive of and responsive to the best collective educated guess about what the world will look like post-revolution.
  • Asking, without demonization or blame-casting, for the attention and help of the able to comfort and bring along those hit hardest by the radical change.

This cry in the wilderness for ‘a third vision’ also applies directly to the practice of architecture.

There is some deep psychological need for people to find a villain when things go wrong – find that bad guy. Separate him out from the ‘good’ guys. The actual facts rarely support this villain making, however, and the emotional release is never satisfying. Admittedly, different people have different skill levels, but set that evaluation aside for the next project and deal with the reality of the project you are in right now. The problem is almost never that awful, lazy, stupid HE. The problem is almost always the imperfect WE.

The ‘third vision’ for design/build is that 1) perfection is never the standard when it comes to either building or design/building. There is no part of the design or the construction that is ever perfect, and 2) virtually everyone associated with a design-build project is imperfect. If you are intent on blame there is always ample blame to go around for everyone, and 3) demonizing and accusing doesn’t ever help a project, and in the end doesn’t even feel good.

The only thing that actually helps a project is everyone getting past the “he” and to the “we” attitude as fast as possible. The only thing that helps is moving forward as a team, working with the actual problems that present themselves now. Forget the blame; it is a complete waste of time and energy. Every instant spent blaming is time lost to making the project better.

In fact, if you hear excessive blame going on in a project, from any party, you are really hearing the symptoms of a dysfunctional team. Be warned – the functionality of the team working together is equally important as the productivity of individual team members. A good team can make up for a weak member. An awesome member can’t make up for a dysfunctional team.

In a recent design/build project the USACE engineer had forgotten (in his rush to blame someone) that his own Government representatives had not attended their own meetings and had not provided the information the design team urgently requested for months. The USACE engineer never knew that the design/builder hadn’t provided contracts to the design team for about two months, thus starting the design team two months late. The design/builder also hadn’t provided a considerable amount of essential information. The project was struggling, but the problem wasn’t HE – the problem was WE. Focusing on the HE only slowed the creation of new solutions.

A third vision is needed. We need to invent something different to go with all our new design/construction technology (on the national political stage as well as with the delivery of design services.)  We need to get back to WE.

mb

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Open for business!

We started this blog to provide real-world insights about the military design/build architecture business. Lantz-Boggio Architects has been immersed in this market since 1985. Like the rest of the architecture business, the velocity of change in this military marketplace has been astonishing – particularly during the past 3 years. We are mid-stream in this industry. Our stream is changing.

We suspect we are seeing just the beginning of even larger, systemic changes in architectural design services and in project delivery. Change is always disruptive, but for those with sufficient energy, ambition, creativity and the ability to find a path forward, change can be a tool for real success.

Welcome to the pursuit of that path forward.

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