How Do You Stump A Project Owner?

Defining Contractual Scope for Design-Build 

One of my favorite quotes comes from Maya Angelou: “We do what we know”. This definitely holds true for our industry at the outset of a project.

3PQ Film Link; "Satisfying Scope"

For most owners, a project’s first step is establishing a budget based on a value-analysis. I use value because it speaks to an owners base business model. If an owner manufactures widgets, the cost of production contributes to the cost of the widget. Once one ascertains the total cost of delivery for each widget (including the acquisition cost of the widget-making-facility), they can in-turn establish a free-market price for said widget.

Using this example, what applies to the design & construction industry is the acquisition cost of the manufacturing facility. Since the widget price is set in a free market, the manufacturing facility’s acquisition cost is like wise set (or at least capped).

Let’s change the scenario. How about a hospital? If the owner provides the ‘sick’ a hospital bed, the cost of that bed (including physical support attributes for said bed) contributes to the cost of the hospital. Once one ascertains the total cost of setting in place a hospital bed, they can in-turn establish a free-market price per bed.

Again, what applies to the design & construction industry is the acquisition cost of the hospital facility. Since the per/bed price is set in a free market, the hospital facility’s acquisition cost is like wise set. This is why owners know their unit/cost to profit so well. I’ll bet hospital administrators can tell you the physical cost per bed at their hospital (or some other guiding unit/cost value measure).

In short, owners know how to measure value from their perspective; which is not the perspective of designer and builders. Owner’s set budgets based on business models. This is often translated to the design & construction world via cost/square foot; the “conceptual cost” approach that is used to set construction project budgets.

So the budget is set. What comes next? In most owner's minds, design come next. I think most owners believe that engaging a designer, informed of the budget, logically leads to a design solution compliant with budget. I believe owners cognitively think "design" is a process that yields plans & specifications that, followed by the builder, result in budget satisfaction. That "Proposed Solution equals Problem Solved."

Since the #1 expectation for every project owner is to “Be On Budget”, hiring an A&E is made problematic by the design-bid-build model used throughout our industry; an acquisition model that sets the solution without a guarantee of price. A strategy more rooted in “hope” than “governance”.

“Design-bid-build” is a misleading phrase. It should be called the “design-contract-build” delivery model. This is because we first conclude the solution (design) followed by competing a contract to build based on “lowest price” (thinking that lowest price somehow safeguards value). Being “shocked or puzzled” that the market place returns a “bid” beyond the budget or that change-orders usually follow, in current times and with knowledge at-hand, is irresponsible (I’m not sure by whom; the owner or the professions, or the industry at large).

Think about what this "tradition" means for a moment. Fix the budget, then fix the design (which sets the project cost, yet to be discovered), then expect that the builder will finish the project on budget (having no control over what drives all costs in said project; the design).

Ask yourself; why would an owner use a strategy that engages the entity guaranteeing the owner’s #1 expectation (i.e. the builder) , only after “establishing all the inalterable elements” that price is dependent upon (i.e. the design). If price (budget) must be fixed, then the design solution must be alterable within the acquisition process. We need a "Fixed Price / Variable Solution" acquisition model that allows a design-builder to "alter and shape" the design solution, ultimately meeting a set of performance requirements stated within a contract.

In other words owners: control the "outcome" rather than the "input" by defining the "problem" rather than the "solution".

So, How Do You Stump An Owner? 

To get to the title of this piece, “How do you stump an Owner: Defining Contractual Scope for Design-Build”, one of my favorite questions to pose when speaking or when conducting Design-Build education is, “How do you stump an owner?” Now, if I haven’t done so already, I’m about to offend many in our industry by stating and discussing these questions.

This question for the owner is third in a series of questions, beginning with, “How do you stump an architect?” Answer, “Give them a budget”. Followed by, “How do you stump a builder?” Answer, “Give them a blank sheet of paper”. So, “How do you stump an owner?”…”Ask them what they want?” If one considers the logical conclusion of this Q&A, it is evident that all 3 need each other.

In design-bid-build (and in other delivery models for that matter) owners address “what the want” through a spiritual, collaborative, transcendental, less is more, can’t-quite-put-my-finger-on-it-but-I-think-we’re-going-in-the-right-direction, process know as “design”.

A process in which the “search for solution” is disconnected form the “guarantee of price”, and the “decisions of resolution” are tested in drawings set before the users who use their “super high-tech imagination glasses” and their “what-if-I-were-in-this-place thinking caps” to evaluate the conclusion.

I don’t fault designers or owners for embracing such a process. It’s fun to discover “what-ifs” when the budget is discussed only at the beginning and toward the end of such a process. Come on; be honest, everybody wants to be a designer. What’s more fun than solving a puzzle…we’ve been doing it since we were kids.

In this Twinkie-ology the “gooey goodness” filling contains such sweetness as “full-color renderings and BIM fly-thru models”. Does anyone ask the question, “Are we in budget?” “Sure we ask”, states the owner. “It was part of our 101 course on “how to make sure your project is on budget”. But alas, bid day comes and an entire subset of our industry is brought into motion: Value-Engineers.

 I, as many architects, was formally taught design with a focus on the “spiritual, collaborative, transcendental, less is more, can’t-quite-put-my-finger-on-it-but-I-think-we’re-going-in-the-right-direction” critique framework that dominates our schools-of-architecture still. I earned a MArch with only about 2% of the curriculum spent on “cost estimating” knowing that about 98% of my decisions in practice would establish the project price. And to think the title “architect” translates to “Master Builder”.

Back to the question at hand: owners must address “what they want” not by reviewing what something “IS”, but by what something “DOES”; not by stating what something must “BE”, but by stating what something must “DO”. Then make this the “Basis of Scope” in a contract, and not traditional construction “Plans and Specs”, or “bridging documents”, or any other complete or partial statement of the “solution”.

Owners don’t have to know “design”, don’t have to face the traditional questions of “how’s this” or “here’s what we’ve come up with, what do you think?” The risk transfer and liability of answering such questions astounds me. I guess those questions are why owners place former designers and builders on their payrolls. Owners don’t (and shouldn’t) resolve design. That’s what the professional practice of architecture and engineering is licensed to do.

I recently came across an online article titled, “Contractors Promote Design-Build” (a link at DBIA.ORG), by Patrick Gallagher, posted January 13, 2013:

“Bruce Bockstael, chief architect for Connecticut’s Department of Construction Services, estimated that three-quarters of all state projects are awarded through the design-bid-build process.

Bockstael said design-build often lends itself to projects like parking garages or college dormitories, where the design is often standard regardless of the development or project owner.

However, he said that with projects requiring significant input from the end-user, design-build is not the optimal method of delivery.

“The process works extremely well when you know that the client knows exactly what they want and will not change their mind,” Bockstael said. “You really want to take care when you go to design-build because it’s not a process that lends itself very easily to changes.” “

My question is this; can anyone name me a process that “lends itself very easily to changes”? With all due respect, this is what’s wrong with many owners trying to do Design-Build using inappropriate Design-Bid-Build tools and processes. This is the old “I’ll know it when I see it…as long as I understand what I’m looking at” approach.

I have yet to come across any owner, user, or owner’s stakeholder that cannot answer the questions, “What do you want it to DO exactly?” “How do you currently measure that?” and “What change in measured outcome (they way you are currently doing it) do you expect?” If one can’t answer these fundamental questions, I’d ask them, “Who are you and what the hell did you do with the owner?”

Owners can define what their expectations are in terms of performance. What they don’t know is what performance outcome (design solution) can be expected within their “Budget and Schedule” constraints. If owners could sign a contract with a design-builder, which obligates that any Design-Builder solution arising from such contract meet "the owner's performance expectations", what would that contract look like?

This “performance-based” approach leads us into “Problem-Based Contracting”. Part of an overall project acquisition strategy that establishes “performance metrics” that, within a contract, are the replacement for the solution (plans & specs). But more than that, it establishes unilateral “decision-making authority” for the design-builder and “performance substantiation authority” for the owner. It establishes the “responsibility” for performance satisfaction to the design-builder based on the owners “responsibility” for contractually established performance metrics.

Remember when I said “Design-Bid-Build” should be called “Design-Contract-Build”.

Well, this strategy is called “Contract-Design-Build”, in which the performance outcome (regardless of design solution) stated by metrics in the contact is established by the owner at the outset.

Are there any Design-Bid-Build owners out there that have ever "did that" before they hired their architect?

Of the 100,000 questions that are popping in your head about this details for this approach, the first seems to always be, “Won’t I get an ugly building?”  Answer: “Architects don’t design ugly buildings, now do they? ... Just look at their portfolio and pick me out a ‘ugly’ design”. Trust me, if your #2 goal is ‘cool’, you’ll get cool.