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PRINCIPLES AND BEST PRACTICES
OF DESIGN BUILD
Faculty of Civil EngineeringDepartment of Economics and Management
CZECH TECHNICAL UNIVERSITY IN PRAGUE 2011
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Design Build• Introduction and Overview of Design Build
(Understanding the risk of Design Build• Procurement and Contracting for Design Build (What
makes it different?) • Selection Process for Client Success (Solicitation,
Evaluation, and Selection)• Creating the Right Team (Collaboration)• Creating the Right Performance Criteria (Creating the
project that the owner wants)• Responding to the Request for Proposals (Having a
successful process for reviewing and complete RFP's)• Overview of Conceptual Estimating (What cost
information is needed and controlling the cost risk)• Project Management for Design Build (What makes
Design Build different?)
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Why Design Build ?Background and Motivation
• Increased level of project complexity• The need for increased interdisciplinary interaction• Early involvement of participants• Levels and methods of communication• Compatibility within project teams
Introduction and Overview of Design Build (Understanding the risk of Design Build)
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Four major Shifts occurs in Today’s Design/Construction Industry
Organizational Integration and Collaboration in Design and
Construction Technological
Building Information Modeling, Collaborative Technologies, Interoperability Standards
Environmental Green Design, High Performance Buildings,
Sustainability, LEED Economic
Availability to obtain financing, high unemployment,
Large number of firm down sizing or going out of business
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Design Bid Build Construction Management (agency)Construction Management (at risk)
Design BuildIntegrated Project Delivery
Procurement and Contracting for Design Build
(What makes it different?)
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Project Delivery Defined
A comprehensive process including planning, design, construction and other services, necessary for organizing, executing and completing a construction project.
Three fundamental owner decisions• What project delivery system should I use?• Which procurement method would be best?• Which contract format is best suited for this
project?
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Project Delivery Process Framework
ProjectFeasibility
ProjectPerformanceCriteria
FacilityOwner’sProfile
CriticalOwner
Decisions
NOTE: Chart shows logic flow, not timing or sequence of steps, which vary depending on methods used.
Programming& Scope Definition
ProjectDeliverySystemSelection
ProcurementMethodSelection
TeamSelection
ContractFormatSelection
Design & Construction
Operation & Maintenance
ProjectFinancing
Confirm ProjectScope and Program
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Project DeliveryAlways 3 or 4 major parties involved in the
project delivery processOwner (public or private)Designer (Engineer or Architect)ContractorConstruction Management Firm (can also be
one of these parties)
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The Method Selected will:
Determines the contractual relationships among the parties.
Establishes when the parties become engaged.
Influences impact of changes and modifications on project cost.
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Project Delivery Types
• Design-bid-build (Lump Sum or Unit Price)• Multi-prime (often under CM)• Construction management-at-risk• Construction Management agency• Design-build (DB, EPC, etc.)
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“Procurement is the procedures and the process used to buy design and construction
services.”
Procurement Defined
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Construction Contracts
Method of award (Procurement) Competitively Bid
contracts With designer doing
Project Supervision With CM – agency CM at Risk Design Build
Negotiated contracts GMP Design Build Negotiated Lump
sum CM at Risk
Method of pricing (Project Delivery)
Fixed-price Lump sum contract Unit price contract
Cost-plus Cost plus percentage
of cost Cost plus fixed fee Cost plus fixed fee
with a targeted maximum cost
Cost plus incentive fee
Guaranteed Max Price GMP plus percentage
of cost GMP plus fixed fee GMP plus a fixed fee
plus share of savings - incentive
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Procurement Options
Sole Source/Direct SelectionNegotiated procurement Competitive
• QBS – Qualification Based Selection• BVS - Best Value Selection • Low Bid
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Market Penetration of Major Project Delivery Systems
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Design-Bid-BuildContractual Relationship
Characteristics Three linear phases:Design, bid and build
Three prime players: Owner, designer, constructor
Two separate contracts:Owner to designerOwner to constructor
ResponsibilitiesOwner
Designer
Constructor
Program, finance, managementPrepares plans & specs, normal servicesPrime and sub construction
Owner
Designer Contractor
Subcontractors
Sub Consultants
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Project Delivery Options
Design-Bid-Build(DBB)
Construction Management at Risk (CM@Risk)
Lump SumDesign-Build
(LS)
“Progressive”Design-Build
(GMP)
Design-Build- Operate/
Finance, etc.
Traditional Delivery
Alternative Delivery
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What Are the Design-Build Delivery Method's Potential Advantages and
Disadvantages?
Procurement and Contracting for Design Build
(What makes it different?)
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Potential Advantages of Design-Build
1. Potentially less adversarial and more flexible.2. Risks for design errors and omissions are shifted from the owner to the design-builder, who presumably can resolve them more efficiently.3. The constructor is involved in the design process and can contribute valuable insights as to constructability and value engineering.4. The owner or the design-builder can order long lead-time items earlier in the process with greater certainty.5. Faster project delivery. 6. In a market with rising material costs, the owner or design-builder can achieve earlier procurement at lower prices.7. The potential for claims, particularly delay claims, is significantly reduced.
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Potential Disadvantages of Design-Build
1. Less control by owner over design process.2. Owner no longer has architect to assist it in contract
administration.3. Ensuring scope and quality of work within a specific budget
much more difficult.4. Results may depend on design-build experience of constructor
and architect and their experience working together previously.
5. May limit field of contractors and subcontractors willing to compete.
6. Because of the more subjective method of constructor selection, the price at the front-end of a design-build project may be higher (possibly 3% to 5% higher) than the price of a design-bid-build project. However, the owner may make that difference up at the back end in reduced claims, value engineering, and other considerations.
7. Bond premiums and the design-builder's fee/profit are higher than under design-bid-build.
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What Are The Project Owner's Particular Concerns In Using Design-Build
• The Owner’s basic concerns are similar to any construction project and relate to quantity (scope), quality, price, and schedule.
• Some concerns, such as differing site conditions and environmental, are unaffected by whether a design-build or design-bid-build method is used.
• The Owner’s concern most affected by design-build is to obtain a project of a known quality and specific scope at a fixed price that is reasonable.
• A special Owner concern is that entities with substantial resources stand behind all obligations in the design-build contract. This is a particular concern with ad hoc design-builders who offer services through limited liability companies with no resources of their own.
• The Owner also has a special concern that professional liability insurance protects against errors and omissions and is for the benefit of the Owner, who is not in privity of contract with the architect.
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Review of Some Selected Contract Issues
1. Ownership of Work Product
2. Design Development Process
3. Waiver of Consequential Damages
4. Professional Liability Insurance
5. Changes and Payment for Disputed Changes
6. Compensation for Delay
In US there are many standard construction contracts: major one by the following organizations.
AIA – American Institute of ArchitectsDBIA – Design Build Institute of AmericaAGC – Associated General Contractos
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22
Ownership of Work Product
1. AIA provisions are the worst
2. Should modify all to give owner greater rights
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Design Development Process
1. All are too sketchy and give owner little control
2. Additional control to a point is good, but too much owner involvement is not good due to costs of administration, potential to create claims
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Waiver of Consequential Damages
Should always get waiver of home office overhead claims. DBIA document does not waive home office overhead claims.
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Professional Liability Insurance
Should always require. AIA and DBIA documents do not expressly require
Ensure coverage extends from beginning of project to sufficient period after project completion (e.g., five years)
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Compensation for Delay
Limit to owner-caused delays for which written notice given, that impact critical path, and that are not reasonably avoidable
DBIA and AGC documents require owner to compensate for some force majeure. Delete those provisions
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Changes and Payment for Disputed Changes
AGC and DBIA approaches not acceptable to owner. AGC is worst.
AIA approach more owner-friendly and reasonable
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How to attract the Best Design-Build Competitors?
• Ensure the impartiality and integrity of selection process
• Pay stipends• Make the shortlist short• Streamline the Phase Two proposal
submission requirements
Procurement and Contracting for Design Build
(What makes it different?)
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Resistances…
1. Model Ownership2. Design Creep3. Work Flow4. Level of Model Detail5. Release of Proprietary Information6. 2-D Drawings Required for Permitting7. Acceptance as Contract Documents8. Contractual Relationship Definitions9. Small / Non-complex Project10. Multiple Software Platforms11. I Don’t Want to be First
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Generally Two Type of Selection Processes are Used:
Qualifications Based Selection (QBS) and Best Value Selection (BVS)
Selection Process for Client Success (Solicitation, Evaluation, and Selection)
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Qualifications Based Selection
Qualifications Based Selection (QBS)
What Is It?
• Select a service provider through a competition based on qualifications rather than price
• Pick the provider who is the best and most uniquely qualified for the project at hand
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Qualifications Based Selection
Qualifications Based Selection (QBS)
Why Should I Use It?
• Best chance of success on your project• Higher impact on your project• Remove the “mystery” of the bid• Greater certainty that the project is priced
appropriately• Fewer disputes
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Qualifications Based Selection
Qualifications Based Selection (QBS)
Where Did it Come From?
• Long recognized as the preferred method for selecting A/E service providers
• On federal projects using traditional delivery it is allowed for A/E selection under the Brooks Act
• Numerous states have enacted “mini” Brooks Acts
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Qualifications Based Selection (QBS)
Professional Services• Not all professionals are the same • You wouldn’t select a doctor or lawyer based on “minimum qualifications/best price”• Even among highly skilled architects and engineers some are more uniquely qualified for a given project
• With traditional delivery, A/E services are usually a relatively low portion of overall project costs• Quality design services set the tone for a successful construction project when using traditional project delivery
Before the project is defined it is difficult to price• It is money well spent• Good planning and design result in few disputes and change orders during construction
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Best Value Selection
Best Value Selection (BVS)
• Most common strategy for acquiring design-build services
• Much more prevalent in public sector than QBS• Only authorized Federal process for design-build• Best practice: Two-phase process
– Phase One: Dominated by assessment of team qualifications– Phase Two: Dominated by assessment technical/management excellence
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–Phase One: assessment of team qualifications
–Phase Two: assessment technical/management excellence(How is the project going to be built?)
Two Phase Best Value Selection (BVS)
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Make Phase One brief and inexpensive, driven by qualifications –Qualifications-driven –Short list only 3 most highly qualified teams –Make past performance of competing teams predominant
selection factor
Use evaluators that are qualified, trained, and free of bias
Many acceptable Phase Two processes out there –Weighted criteria –Fixed price competitive design –Integrated assessment and trade-off (Federal model)
Establish the process prior to release of RFPDisclose the process to competitorsFollow the process as published
Process Best PracticesBest Value Selection (BVS)
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Collaboration to Integration• True integration is more than agreeing to
partner• Successful integration requires a commitment
to understanding how people/organizations work
• Teams must work from best practices to the benefit of the integrated project team
• Decisions based on what is right and fair
Creating the Right Team (Collaboration)
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Collaboration to Integration
Col*lab`o*ra"tion\, n.The act of working together; united
labor.Webster's Revised Unabridged
Dictionary, ©1996, 1998 MICRA, Inc.
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Overcoming the 5 Dysfunctions• Building Trust• Mastering Conflict• Achieving Commitment• Embracing Accountability• Focusing on Results
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Lessons Learned -Leadership
Formal and Informal Partnering Complex issues are easier to discuss Issues are not avoided Shared experience builds the “bank account” Focus on the needs of the person in the front line Solve problems first then how pay for it
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Lessons Learned -ProcessPerformance Based vs. More Prescriptive
Value Engineering After Contract Award with Shared Savings
Expedited Design Review Conferences
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Understand How to Assemble a High Performing Team
Need for a High Performing Team
• Urgency due to “fear of escalation”• Strict budget and schedule, but not specific scope• Maximize scope• Qualification-based selection of the most experienced, best qualified team
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High High-Performing Teams• Teaming based on competence AND character• Who works well with who; collaborative spirit• Productivity, collaboration and happiness skyrockets with positive team dynamics• Place high value on integrity, initiative, teamwork & leadership• Encourage creativity, productivity & accountability
Get The Right People On The BusMake Sure Everyone Is In The Right Seat
Design Build Is Not For Everyone
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Teams
Why do TEAMS fail?
LACK OF TRUST
between the team members
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RFP Best Practices• Determine selection factors specific to your
project• Divulge all selection factors and order of
importance in the RFP• Use only the factors as published• Make technical/management excellence
dominate the selection—not price
Creating the Right Performance Criteria (Creating the project that the owner wants)
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More RFP Best Practices
• Use performance-based requirements • Use Build to Budget or similar technique to
enhance the focus on technical excellence• Best Value—talk the talk and walk the walk
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Tips for Best Value Selection (BVS) Competitors• Know the owner’s strategy • Know the process• Try to shape the solicitation, not the process• Be ready to identify & explain past
performance
Responding to the Request for Proposals (Having a successful process for
reviewing and complete RFP's)
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Tips for Best Value Selection (BVS) Competitors
More Tips for Competitors Make sure your proposal conforms to the entire
RFP• Many owners won’t consider alternate proposals• Big surprises may be fatal• Little issues can be just as fatal
Know what to expect from the owner during the process• Lingo—discussions, weaknesses, deficiencies• Why won’t they answer your questions?• Why won’t they call and ask questions?46
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Overview of Conceptual Estimating (What cost information is needed and
controlling the cost risk)
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The “purpose of conceptual estimating’ is to predict the costs of construction work before the
work is done.
Detail estimating has the same definition for estimating. All estimating is attempting to do the same thing. Predict the costs before the work is done. Mirror the cost of Construction.
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Types of Construction Estimates
Detail Estimates• Estimates from 100% complete plans & specifications
Conceptual Estimates• Any estimate from less than 100% plans &
specifications• Typically starting when design is 25% completed
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Estimate/Accuracy Curve Illustrates different Estimates and their
Occurrences.
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Conceptual Estimates
• Order of Magnitude Estimates• Square Foot or Cubic Foot Estimates• System Estimates• Unit Price Estimates
The previous curve names four Conceptual Estimates with the end result being a Detail Estimate
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Conceptual Estimates
An example is:
ACCE Order-of-Magnitude Budget Definitive
These four names are not the definitive names for Conceptual Estimates. DBIA has a list, ASPE has their list, and others also have a different list.
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Conceptual Estimating, always Define the Level of Accuracy
Individuals - client, the boss, or any other person hearing an estimate, generally remembers the number and often it is the first number quoted them.
When defining the level of accuracy, estimators also generally try to error on the high side because of the note above. It is much easier during the process to come down than ask for more funds or budget.
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Number and Timing of Conceptual Estimate
The number of cost estimates required will be project/owner specific, and will generally be linked to the various design phases of the project. A cost estimating approach to a typical project, which dictates the number and timing of cost estimates, can be summarized as
• Pre-Design Phase • Schematic• Design Development Phase • Contract Documents Phase
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Pre-Design Phase
Prior to the commencement of programming and/or design, the cost estimator prepares a cost model and budget cost plan for the project.
The cost model establishes a construction budget and defines how the project budget is to be allocated among various building systems.
The cost model also confirms the project scope and identifies any costs or work to be funded separately.
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Schematic/Design Development Phase
The cost estimator works as an integral member of the design team to evaluate design decisions made throughout the design phases against the pre-established cost model. This approach allows the cost management team to provide an integrated value engineering process throughout the design phase.
At the end of the schematic design and design development stages, the cost estimator produces a comprehensive cost estimate. The estimate is compared against the cost model developed during the pre-design phase of the project.
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Contract Document Phase
Further cost estimates are prepared upon completion of the 50% and 100% construction document stages.
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Common Elements of Conceptual Estimates that drive Overall Costs
• Time• Location• Size• Shape• Learning Curve (Repetitive Design)• Use• Quality• Materials• Other
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Time
Estimates are based on the cost of existing projects that were built in the past
Price-level changes over timeThe need to project costs of future projects
Many organizations publish construction cost data on regular basis: • US Department of Commerce• US Department of Labor• ENR• Turner Construction Company• Handy-Whitman Utilities
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Cost over Time
Cost Indices Published by R.S. Means and ENR Used to update old cost information
Uses 1.To update known historical costs for new estimates 2.To estimate replacement cost for specific assets 3.To provide for contract escalation
Limitations 1.They represent composite data, the average of
many projects. 2.They fail to recognize technological changes. 3.There is a reporting time lag.
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Location
Some factors affecting cost in different locations are: 1. Transport cost 2. Taxes 3. Labor supply and local productivity 4. Codes and local inspection
Construction costs also vary in different regions of the USA.
ENR and Means publish, periodically, the indices of local construction costs in the major cities.
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ENR Regional Index
City Cost Index
Boston 1120
Chicago 1400
New York 1700
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Size
As the quantity built increases, the unit cost decreases
As a building gets larger, its square foot costs drop
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Shape
10’ High Wall
Bldg. AWall cost = $10/sf x 160’ x 10’= $16,000
= $10.67 per sf floor areaBldg BWall cost = $10/sf x 180’ x 10’= $18,000
= $12.00 per sf floor area
Bldg A Area = 1500ft2
Perimeter = 160ft30’
50’
Bldg BArea =1500ft2
Perimeter=
180ft
40’
10’
15’ 15’
40’
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Use & Occupancy
Special Systems• Conveying Systems• Special Systems• Chimney Stacks & Shafts• Special fixtures & equipment
Occupancy• Hospitals• High Loaded Roads• Etc.
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Learning Curve or Cost Savings of Repetitive Design/Work
60
65
70
75
80
85
90
95
100
105
0 5 10 15 20
Number of Units
Tim
e p
er U
nit
Increased productivity by doing repeated work.
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Quality
• Economy• Average• Custom• Luxury
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Materials & Equipment
• Over the Counter or Mass Manufactured – Standard Grade• Designer – Medium Grade• Custom Manufactured or Fabricated – High End• Luxury – Out of this world
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Level of Design
• For the Masses
• For the Few
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Other
Hard to quantify but should be evaluated• Quality• Soil condition• Weather Condition• Competition• Productivity
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Planning for Conceptual Estimating
• Scope and Pricing Review• Estimating Trending• The Future of Conceptual Estimating and BIM
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Scope and Pricing Review
Scope Review happens at multiple levels• Overall Project• Individual Elements
Pricing Review happens at different times during design• At a minimum (4 times) during each of the major design periods• Trending costs is a generally accepted approach
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Scope Review
Project Review• Review of available
documents• Make a site visit• Review current market
trends• Begin review of projected
project schedule• Review possible staff
requirement• Begin generating
responsibility matrix
• Arrange Subcontractor input• Review Program requirement• Look for problem areas –
hazardous materials• Review costs of permits and
process• Outline all site conditions• Begin review of major system
requirements• What are the long lead equipment
and materials
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Scope Review
System Scope Definition• What major systems are needed
Material Scope Definition• Begin Outline Specification• To be used in trending
Quality Scope Definition• Set level of quality in systems and materials i.e.
exterior system/materials
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Pricing Review
Review Material Pricing – Use Unit Price
• Include the full value of all of the work
General Conditions Pricing • Can be defined early• Need organization and schedule
Contingency – begin setting amount
Fee and Margin – begin setting amount
Start trending log
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Pricing Review
Begin generation of quantities from square foot
Review of building square footage
Start comparison checks for “reasonableness”.• Floor covering material square foot match
building square foot. • Check ceiling material with both flooring and
building square footage.• Building area vs. number of floor times building
foot print.• Building perimeter is linear foot number that is
compared to cladding, parapets, etc.• Define floor heights and again comparing to
cladding, curtain wall, glazing requirements• Site requirement
• Parking area• Landscaping area• Etc.
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Pricing Review
Compare to all conceptual estimate
Trend both small and large ticket items. Concentrate on the big items. (Both quantity, quality, and dollars)
Make sure the level, experience, and quality of the subcontractors you are relying on. They also must provide pricing reviews and trending.
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Pricing Review of Subcontractor Information
Complete with the subcontractor their detail scope of work.
Complete with the subcontractor outline specifications – these outline specs set quality levels
Complete with the subcontractor their first level of quantities (to be trended as design develops)
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Pricing Review of Subcontractor Information (cont.)
Review past project costs in these areas, make comparison to new project
Review pricing guide costs to subcontractor pricing for “reasonableness”
Ask the questions about contingencies in their pricing.
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Pricing Review Contingency
Balance Contingency and level of design
How much contingency is being built into other pricing
Have the subcontractor included contingency
Ownership and control of contingency is important
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“Contingency is to help correct problem, not to be used by the owner or designer to enhance or grow the project.”
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TrendingTools for trending conceptual estimates
during the design process Trend Log Trend Estimate Reports
Trending is needed to maintain control of the budget. It allows the design process to continue uninterrupted because of budget fallout.
Addition and changes in design can have a “domino effect” on costs if not trended.
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Trending and New Estimate
Trending should be an introduction to new estimates
New estimates are needed if major systems change or are expanded
New estimates are needed if trends show ever increasing changes to quantities, square footages, quality, and additions
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Trending and New Estimate (cont.)
New estimates are a way to get owner’s attention
New estimates are not intended to create shocks and if preliminary estimates have been accurate, and trending responsive, the new estimate will act to continue budget alignment.
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Presenting a Conceptual Estimate
“People tend to remember the first numbers you give them”
“The people you are presenting a conceptual estimate must understand at what level of accuracy the conceptual estimate is at.”
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Presenting a Conceptual Estimate
The Project Cost will be$ 5,295,933,18 !
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Presenting a Conceptual Estimate
“We estimate this project willCost approximately $ 5.3Million. We’re 80% confidentThat the final cost will be Between 5 and 6 million. TheEstimate is based on …….”
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“Under no circumstances should the Design-Builder use open bidding.”
“…by involving qualified Specialty Contractors during the design phase, the Specialty Contractor can contribute towards developing a scope that better represents the Owner’s actual requirements, which can lead to much larger saving and overall value.”
Project Management for Design Build (What makes Design Build different?)
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Optimize Owner Involvement
Formal design reviews occurred at 30% and 60%. The primary stakeholder had third party
representation at all design meetings. The Design-Build team presented regular design
and construction updates to the stakeholders Stakeholder agreements set the budget
requirements. The GMP was based on 60%(+) documents. The
D/B wanted 30%, but the Owner wanted 50% or even 100%.
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Optimizing Owner Involvement
• There was no loss of control because the team members were shoulder to shoulder –all on the same floor.• The design never got ahead of us; there were no surprises.• When we achieved cost savings, we redistributed the savings to add more scope.
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Design-Build Can Accelerate Schedules and Generate Cost
Savings
Generating Schedule and Cost Savings • Level of design effort
To bridge or not to bridge Multiple packages
• Scope definition• Purchasing• Phasing and scheduling• Processes
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Purchasing process Bid packages Prequalification of subcontractors Design schedule reflected process Design level varied Team review of bid results
Purchasing process
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Purchasing process
Don’t make process too complicated –Adds cost
Don’t make process too lengthy–Adds cost and time
Make process flexible and manageable –Allows for innovative thinking
Consider the intangible costs–Bureaucracy complicates
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Summary – What Makes Design Build Work
Get the right people on the team
Develop trust between all on the team
Gain and maintain momentum
Develop process to fit Budget, Schedule, and Quality
SHOW UP WHERE THE WORK IS BEING DONE Preplanning Design Construction Commissioning
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The End