Monday, June 27, 2016

What do you need to solicit a quote

Whether you are hiring an architect or a general contractor, in order to ensure you receive a good comparable quotes, there are certain key pieces of information you must include with your solicitation.  If you are missing any of these items you could find that your quotes have a wide pricing spread.  Don't just assume that the high number is wrong, make sure that the basis of all bids is the same.  You can do this in hindsight after the bids come in, but best practice is to ensure that your initial quotes are all on the same basis.  Ensuring that your solicitation includes the following elements is a good way to make sure you get comparable bids.

Scope of Work
The most obvious piece of information is the scope of work.  Your scope of work depends greatly on what type of services you need and what phase of work you are in.  If you are just starting your project, you might need to have some preliminary work done in order to help document the scope for your Architect.  In later phases of work, your Architect's drawings become the scope of work. 

Scope of Services
Another piece of information you will need is the scope of services.  The difference between the scope of work and the scope of services is that the scope of work reflect what you want to build, the scope of services reflects how you want the services performed.  For your designer, this document should address how many design milestones your require, how drawings are to be presented to you, and what level of interaction your Architect is expected to have with the local building department.  For the GC, this should address, site clean-up, working hours, and parking.  These are just a few examples of the topics that should be included.  

Schedule
Another key piece of information that you will need to solicit a quote is your project's schedule.  It's important to let your consultant or contractor know what kind of time you have in mind for the work.  This could impact the amount of resources needed and how quickly they will need to mobilize.  When you are communicating your schedule you don't need to be very detailed.  All you need to have is your key milestone dates identified.  For example, you may only know that you want to start design on a particular date.  You may not know when construction will start or when construction will end.  Alternatively, you may have a specific need date in mind.  If so, communicate your intended end date and allow the bidders to plan the intermediate dates accordingly. 

Contract Terms
Contract terms are another key piece of information when soliciting a quote.  Make sure you know what form of agreement you expect to use before you even asking for numbers.  This will ensure that everybody is meeting the contract terms or at least they're aware of them.

Bid Form
Another key component of a good solicitation is a bid form.  This is less about information for the bidders and more about your ability to compare quotes.  It's not a good idea to allow bidders to submit their quotes in any format they choose.  There is no standard way to quote a project.  Invariably, what will happen is that you will be forced to try and reconcile the differences on the back end.  That can sometimes be impossible and you may find yourself working harder to confirm details with each bidder.  In the end, you may still be left with uncertainties and may be making an uninformed decision.

There are a number of best practices that go along in creating each of these documents.  I'll tackle each of these individually in future postings.  Regardless, the main idea here is that all of your bidders should have the same complete information on which to base their quotes.  If you are not clear, the bidders may make assumptions which could be reflected in higher or lower quotes.  This could lead you to bad award decisions.


Monday, June 20, 2016

Why you need a budget

So you have decided to take on a construction project.  You have a clear vision of what you want and you have a dollar limit in mind for the work.  Are you ready to move to the next level? 

If you have not sat down to estimate the cost of your vision the answer is no.

It is important to note that an estimate and setting a dollar limit are two different things.

Your budget should not be based simply on how much money you have available.  Your budget should be based on a well-developed estimate that meets the scope of work you want.  

You will need to do a little legwork in order to be ready to develop your budget. 

Make sure to invest in preliminary studies and conceptual designs to document your vision. 

Don't be discouraged if your first concept comes in higher than you expected.  There are a number of design options to help lower costs without compromising your vision.  Work with your concept designer to modify your concept until the design has been optimized. 

If your optimized design still exceeds your available funding you have three options:
1. Shrink your program.  If your vision was too grand, you might want to consider a smaller version of your vision.  Perhaps you can do with less square footage or one story instead of two.

2. Phase your project.  Do you need everything all at once to operate, or can you build a portion now and the rest later?  Consider a phased approach which allows you to begin operating while you generate revenue and save for phase 2.

3. Can you secure financing?  There are a number of financing options that can help you reach your dreams.  Perhaps you can finance the cost of the project and actually hang on to more capital.

Preparing an estimate will arm you with the information you need to anticipate your funding needs.   You don't want to start the project unless you know you have the funds to finish the project and you wont know this without an estimate.

Let me know your thoughts and write me if you have questions.

Monday, June 13, 2016

How to avoid change orders on roof replacement

A couple recently came to me upset that they were forced to accept a change order on their roof replacement project.  The value of the change order was 50% more than their initial quote. 

The contractor presented them with the change order only after their existing roof tiles had been stripped off the roof.  He told them that the change order was for extra unknown work required by the local building code.  He said that he could not install the new roof without first replacing the existing plywood decking.  A local fire ordinance required fire rated plywood that was installed prior to 1992 be replaced with new fire rated plywood.  The house was built prior to 1992 and the code requirements did apply.

The couple argued with the contractor which caused the contractor to call his men off the roof and stop the work. 

The couple stood their in front of their home with their roof exposed and a pile of old roof tiles on the front lawn.  The contractor produced his contract which excluded replacement of the decking and another document that cited the code regulation.

For anyone caught in this situation, this can be gut wrenching.  You have no choice.  The contractor could charge anything he wants and you would be obliged to pay.  The alternative would be to go back out and find someone else, but you would have to deal with an exposed roof and maybe even have to cart away the debris the first guy leaves behind.  Basically, there is no choice but to accept the change order and move on.

So what went wrong and how could this have been avoided?

First let's see what the couple did right.
This couple did solicit multiple bids, so they were not relying on a single proposal.  They did solicit quotes from local contractors familiar with local regulations.  In this case the couple also had unit pricing for new plywood, so the contractor had to honor that rate.  One would say they did go about this the right way.  They claimed that all of the solicited contractor's excluded replacing the plywood decking.  They all stated that they could not know if the plywood needed to be replaced without taking up the tiles.

There are a number of subtle changes that this couple could have made which would have resulted in better results.

1. They failed to request the proposal on the same bidform.  When they solicited proposals they did not present the contractors with their own bid form.  This gave the contractors freedom to present their quotes in whichever format they chose.  In turn this made the homeowner's work of comparing the quotes more difficult.  Before you solicit a quote always create a bidform and require that the contractor presents their price on your form.  Ask for as much detail as possible.  I will post an article on how to build a bidform in the near future.

2. They failed to ask for a fixed price.  All of the contractor indicated that there was a chance that the plywood would have to be replaced.  In hindsight, it seems obvious that they all were aware of the local ordinance and simply were not forthright with the owner.  Anytime you have a potential for a change order, the way to deal with this is to ask for a fixed price (this is called an add alternate price), in this case the couple had a unit price.  Fixed prices are better than unit prices because a fixed price is more predictable.  Make sure your bidform includes a line item for add alternates, but make sure you describe the scope of the add alternate in as much detail as possible.

3.  They failed to invest in preliminary studies.  It may seem unreasonable to spend money on an architect for a simple roof replacement, but for a few hundred dollars, an architect could have informed the couple of the local ordinance and could have inspected the plywood from inside the attic to determine if it needed to be replaced.  In this instance the Architect's cost would have been less than 5% of the total cost of this work (inclusive of the change order).  The Architect could have also advised the couple on how to breakdown pricing on their bidform and helped draft the description for the add alternate.

These simple subtle changes would have saved this couple the gut wrenching drama they experienced.  I also think that they might have paid less overall (including the architect's fee).  Soliciting prices from contractors is more than picking up the phone and asking for a quote.  Even the simplest remodel or repair work deserves some level of investigation and preparation.

Tell me your stories.  Have you experienced similar circumstances?  Do you think these simple changes would have helped you?






Monday, May 2, 2016

Why Honesty is critical to a successful construction project

In the construction industry you have a lot of stakeholders and partners to work with.  This makes teamwork really important.  In order to foster a good team environment, trust is priceless.  Trust is built over many weeks and months of good will and cooperation, but trust can be broken in a single moment of weakness. 
Our human condition is inherently defensive.  It's common to behave evasively or defensively when we make mistakes, but in order to retain trust, we have to avoid reverting to this basic instinct. 

Although the repercussions of a mistake could be difficult to bear, the impact of obfuscating or deflecting responsibility has far greater implications.  Here are a few reasons why being forthright is the best policy.

Promotes problem solving
All projects encounter problems, the ability to promptly and effectively solve problems is critical to success.  When the team communicates honestly and completely with each other, problems can be mitigated.  Often when problems are revealed early, the impact of mistakes can be minimal.  Conversely, when problems are ignored or hidden, the issues becomes more difficult to overcome.  Communicate your mistakes promptly.  You may be pleasantly surprised when your team rallies behind you to mitigate your mistake so they have no impact at all.

Avoid conflicts
Nothing raises ire and frustration on a job site more than failing to own and acknowledge mistakes.  Conflicts on the job result when one person appears to make more work for others.  Revealing a mistake and owning the resolution of the mistakes is an effective way to avoid conflicts.  When others see you've been honest about your mistake, they are likely to respect you.  This helps them trust you and also promotes honesty from others.

Promotes good will and cooperation
When mistakes happen and you take responsibility for it, others appreciate you more.  Most can empathize with someone who makes mistakes because they know that one day it could be them.  When you own your mistakes, others are likely to help with its resolution.  The act of recognizing your error and then working to correct it shows you are honorable and trustworthy.  People naturally gravitate towards trustworthy individuals and makes them want to work with you.

Enhances quality results
The combination of good will and trustworthiness resulting from your honesty simply leads to higher overall results.  When people enjoy coming to work their work products is better.  An honest and cooperative work environment produces good results consistently. 

Regardless of whether the news is good or bad, being able to rely on accurate honest information is paramount.  Maintain your integrity throughout every project (even when things go bad).  Team members and colleagues will stick by your side when they know you can be trusted.  No one is expected to be infallible but honesty throughout breeds a positive and nurturing work environment that can overcome most problems effectively and with minimal impact.

I have communicated the benefits of honesty in the context of a construction team, but I think these benefits hold for all aspects of your life.

What do you think?  Are there times when you shouldn't be honest?  Were there times in your life where you were honest and wished you hadn't?

Monday, April 18, 2016

Design and Construction Work without a contract. The reason why Owner's should never allow it

Today I want to address the reasons why Owner's should never allow any work to be performed without a fully executed written agreement.

In Today's HGTV world where entire room renovations happen "While you were out" and "Restaurant Impossible" rebrands failing eateries in a weekend, the notion that construction should happen quickly is all too prevalent.  These shows don't reveal the pre-work that goes into performing these miraculous transformations and they don't account for the incredible amount of man-power that goes into these feats.  The most critical component of all of this work is the written agreements that must be in place for any of these projects to happen. 

Aside from the magical transformations that we are treated to on TV, it is all too common in the construction industry for Architects or Contractors to jump right into the work without taking the time to negotiate an agreement.  There are various reasons why these pros are so eager to get started.  For starters, you may have expressed a desire for a very aggressive project schedule, which they are all too happy to demonstrate how responsive they can be.  Maybe the scope of the work is exciting and they can't wait to get started.  Maybe they are short on work or coming off another project and they need the work.  Whatever their reason for wanting to jump right into your project, your reasons for not allowing this are stronger.  Take time to negotiate your agreement and don't skip any steps.

First, when you allow a vendor to start work you give up all of your leverage to negotiate.  Leverage is most important for negotiating pricing and favorable legal terms.  Without this leverage the Vendor has almost complete control over you.  This means you could be pushed into unfavorable agreements that limit your recourse when things don't go well. 

Written agreements are the prevailing document protecting both parties in the event of a dispute.  If you allow a vendor to commence the work or even perform the entire scope of the work without a contract you are relying on verbal communications between yourself and the vendor.  Verbal agreements are not only subject to interpretation, they are also prone to selective recollections.  Problems can arise at any stage of the project including very early on.  Don't allow any work to happen until you have things in writing.

Another reason Owner's should not allow work without a contract is that the scope of work needs to be carefully written and agreed to by both parties.  Without a well-written scope of work, you and your Vendor may have different interpretations of the scope.  Not only does this cause tension between the parties, but then it also opens the window for the Vendor to ask for more money.  

These three critical concepts illustrate the reasons why you should never allow anyone to perform any work without an executed written agreement.  It is too easy to get caught up in the urgency of a project.  Owner's need to take disciplined measures to ensure that they have all the protections possible before any work begins.  Expediting or skipping the contracting process puts Owner's at great risk.  Projects that are allowed to go on without written agreements tend to be more contentious, they cost more to complete, and can actually take longer than projects that are contracted.  Take the time up front to agree on the scope, schedule, cost, and legal terms and your project will run more smoothly and if you have any issue, you will have a basis for resolving whatever comes your way.

Tell me about your experience.  Have you done work without a contract?  Was it successful?  

Monday, April 11, 2016

Building Rules and Regulations for your home construction project.

I've just published my first Article for the year.  The topic I'm addressing this quarter is rules and regulations for a construction project.  I hope you find this helpful.  Here is an excerpt from the article check out my website to read the full text.


There are multiple level of clean-up required during a construction project. Each phase of construction should have clear rules about what you expect.

While construction is ongoing establish expectations to keep the floor free and clear of tools, screws, nails, or other tripping hazards.  Construction debris will be piled neatly until it is ready to be removed from the premises.  Appurtenances that are suspended above the work area will be safed and secured at all times.  Exposed wiring and plumbing lines to remain will be deactivated and safely secured in place.

Rules for daily end-of-day cleanup are also important.  The area of work will be broom swept daily.  No construction debris will be allowed to remain in the area of work overnight.  Tools will be collected and stored in a secure tool chest or carried off the job site daily.  Construction materials will be stored neatly in designated areas.  All electrical equipment will be unplugged from it's power source and stored in a secure designated location.


Check back next week when I return with my weekly blog.

Monday, March 21, 2016

Should you hire an engineer directly or through an architect


Just about every project requires the services of both an architect and an engineer.  In some rare exceptions you might be able to do a project with an architect and not need an engineer.  Such projects are generally simple alterations that don't impact any building systems, but If you are building a new house or adding a substantial addition to an existing house, it is likely that an engineer will be required.

Once the decision to hire an engineer has been made, you will need to consider how to contract the engineer.  Some might suggest the engineer should be hired directly by the owner, while others recommend contracting the Engineer as a sub-consultant of the Architect.  There are pros and cons to both options.

Acknowledging my bias as an architect, I hold a pretty strong view that the architect should always be the lead designer and the engineer should be subcontracted to the architect.  It is true that you will pay some amount of mark-up to the architect in order for them to subcontract the engineer, but for most projects the risk vs reward evaluation does not support hiring the engineer directly.

To fully appreciate this statement it is important to know that the coordination of the building systems is an essential part of the architect's responsibility. 

It may surprise some that architects are responsible for coordination of building systems, but the only licensed professional in the design team that is educated in all of the major systems of a building is the architect.  Engineers are specifically trained in their respective disciplines and tend to know their part very well, but they are generally not familiar with the other systems of the building.  It's critical that you have one central figure responsible for coordination of the design to avoid a large amount of costly coordination during construction.

If your architect does not have a contractual relationship with the engineer and the engineer does not have to answer directly to the architect, the architects authority over the engineer will be limited.  This may put the burden of coordination on to the owner and the owner could take on a needless risk and expense. 

We also need to recognize that the mark-up added to the engineer's fee will be minimal.  Also, most architects are generally willing to negotiate the markup, so if you are concerned about how much you are paying you can discuss this upfront.  Generally a 10% to 15% fee is common.  The lower the value of the engineer's fee the higher you should expect the percentage mark-up paid to the architect.

You may pay a bit more allowing the architect to hold the engineer's contract, but empowering your architect to coordinate the various parts of the project will pay dividends well into the construction phase of work.  What do you think?  Is it worth the additional mark-up for design phase coordination or would you prefer a lower design fee?


For more tips on how to manage your project, check out my articles on www.luisgile.com.