July 21, 2016

As labor gets more expensive, owners return to hard bidding

Roy

After being rejected as an irreconcilably flawed process and discarded in favor of other project delivery methods, the traditional hard bid process has resurfaced in recent years, especially with public owners such as school districts.

While it can be argued that hard bid is not as efficient or collaborative as other delivery methods, the traditional process could have some merit in today's market.

Construction activity is accelerating to new post-recession levels. In such busy times and with labor resources being stretched, owners may not actually be experiencing the much-lauded benefits of more popular methods such as general contractor/ construction manager (GC/CM) or construction manager at risk (CMAR).

GC/CM can incorporate a contractor's A-teams to help bring perspective and input into planning and design decisions, while CMAR can enable owners to fast-track early components of construction prior to full completion of design. But when schedules are tight and labor is scarce, these benefits seem to diminish, if not vanish altogether.

Newer technology-driven methods, such as integrated project delivery, can produce a collaborative overall effort, but in the end may not necessarily produce the best fiscal value.

Perhaps for these reasons the hard bid seems to be making a comeback. However, the process is still riddled with issues that newer methods are meant to address more effectively and efficiently.

Bringing a trusted advisor, such as a quantity surveyor or cost manager, into the project early on can help address these issues, maximizing the benefits of hard bid while minimizing its shortcomings.

An experienced advisor can assist owners by carefully managing the cost and time aspect of projects at the earliest pre-concept and pre-bid stages. They can assist with more traditional milestone estimating, value engineering and life-cycle costing, and provide necessary constructability advice throughout the design process.

Hard bid challenges

As with every method, using the hard bid model provides benefits but also poses challenges. Let's look at some more complex challenges related to hard bid and strategies to address these issues.

A significant challenge with the traditional model is that contractors, as well as their subs, are often unfamiliar with important details of a project and its documents prior to submitting a bid.

Frequently in the hard bid process, general contractors don't have the time to give their due diligence to really understand the project, identify issues, ask questions about the design, and discuss certain aspects of the project that may require clarification. This creates an environment where making seemingly simple decisions — such as a paint or mortar color — can become confrontational, bog down project momentum, and waste time, effort and money.

To address this, work directly with a dedicated owner's advisor at the earliest stages of the project.

An experienced, knowledgeable advisor can vet bidding general contractors, confirm their knowledge and understanding of the project, and ensure that the chosen contractor has done its due diligence with regard to any potential design questions. They can also create accurate, benchmarked construction and project budgets and schedules to keep the project moving forward when legitimate questions arise.

One of the most attractive benefits of the hard bid process is that it allows greater control of the project, including increased flexibility in managing time and budget overruns. Unfortunately, this power can create potential drawbacks as it can allow for some contractors and subcontractors to be inappropriately confrontational and fail to act as team players.

While this is not the case for all general contractors and subs, some have been seen as opportunists who bid low, win the project, and then focus their attention on creating as many change orders as possible, leveraging those changes to increase contract fees and costs.

In other instances, the hard bid contractor may be less prepared for project initiation, and slower to start. Even though most contracts stipulate that a construction schedule be submitted early on, some general contractors do not provide work schedules until after the project has been underway for several months.

Tackle these issues by conducting a thorough risk analysis to help mitigate budget and time overruns. Create a process whereby the project is designed within the budget. Similarly provide accurate and realistic initial scheduling and subsequent updating throughout the process. Review documentation and work as a team to clarify and/or modify any issues toward a mutually beneficial solution.

Responding to BIM

Another challenge to hard bid involves operational issues, which can endanger the project because the contractor is not a part of the team prior to construction. For example, in other project delivery methods when BIM is used, it is a collaborative tool applied by all team members. Many hard bid general contractors are unprepared to respond to BIM-related changes in documentation because they have not integrated it into their workflows.

With BIM there is an expectation that everything is shown in the plans, detailed, perfectly coordinated, and in ultra-high resolution. While the majority of contractors today have likely worked on BIM projects before, many are not prepared for how BIM can affect their workflows and information exchange. Some must engage third party consultants to manage BIM-related changes to documentation, such as RFIs.

According to a study by researcher Peter S. Jensen of Brigham Young University: “While BIM (offers) significant benefits to estimating, there are also limitations that must not be ignored, particularly when dealing with detailed construction estimates.”

This is especially true when the contractor is brought on via a hard bid process and is not a team member prior to commencing construction.

It is crucial that operational challenges be discussed and resolved early on. Expectations with regard to experience and proficiency with building technologies such as BIM, and how it affects workflows and information exchanges, must be clear and confirmed during the bid process before the contract is awarded.

A dedicated advisor can provide oversight, guidance and a clear plan of action to ensure that the general contractor is compliant.

When correctly managed and applied to an appropriate project and scope, the hard bid process can yield multiple benefits that other delivery methods may not provide, especially in today's busy construction market.

Graham Roy is executive vice president at Rider Levett Bucknall in Portland, where he oversees the firm's West Coast offices. He joined the company in 1995 and has more than three decades of experience in construction cost management. He also is a professional quantity surveyor.

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