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Advice to Our Prospective Clients: What to Watch Out For To Maintain Construction Value



Construction is like a symphony when the Architect, Client, and Contractor are all adhering to a time-honored construction approach with a singular goal in mind; to produce a high quality building that meets the needs of the Client. However, it is worth understanding that although all three parties are looking to complete the projects, the motivations can be very different. These motivations can strain and even fracture any kind of potential alliance. So you must assemble a team that understands the following 1.) The Architect genuinely wants to produce an amazing building for their client but usually has design goals that the Client needs to monetize. 2.) The Client, just wants a high value end result that meets their needs as the lowest possible price. 3.) The Contractor, at the end of the day, wants the highest possible price and does not typically care about the outcome as much as the Architect or the Client, as long as the end result is satisfactory. And so the Contractor can put a serious strain on a project’s trajectory if their principles and professional commitments to the Client and their Architect.

We’ve learned a few lessons along the way and this is how you maintain order and value for the client:

1.) Transparent Schedule of Values. The Client must have the Architect involved in the review of the Schedule of Values. If the Architect is not involved with reviewing construction value, then the Contractor may believe they have an open checkbook, especially on Time and Materials (T&M) jobs.

2.) Dissect General Conditions. What is the contained in the General Conditions portion of the contract? Be sure to dissect this as this can become a slush fund that drives the overall construction price and in turn drives the profit margin.

3.) Is additional profit hidden inside other numbers? Is the Contractor making profit on the wages of employees? This is an added padding approach on a project where a skilled worker might be paid 45 dollars an hour but being billed out at 80. Mapping the “cost of the employee” to the Contractor with transparency, must happen to prevent driving over budget numbers unfairly.

4.) 100% Complete Drawings that are priced. We’ve done a lot of design-build drawings based on T&M with a cost plus (10%) markup. This has proven to be a way to move quickly initially, but I’m not convinced it is any faster in the long run. Make sure that you aren’t signing up for a financial Nantucket sleigh ride where you are building a project that hasn’t been fully priced.

5.) Mandatory RFI (Request for Information) dialogue between Contractor and Architect. If there are questions in the field, or something that need clarification in the drawings, a formal RFI process is required.

6.) Mandatory Change Orders. If the design is modified, then there must be an official Change Order that tracks both additional cost and modifications to the Construction Schedule.

7.) Mandatory Critical Path updated in Real Time. A Critical Path must be established, updated in real time, and available to all parties at any moment. If a contractor cannot accomplish this basic task, they are incompetent and should be fired.

8.) Contractor must lead. Contractors like to talk a big game about how they are in charge of construction. Well, then do it. Contractors should be leading weekly meetings, producing meeting minutes, and producing a weekly agenda. This is not the responsibility of the Architect or, gasp, the Client.

9.) Mandatory Documentation of Field Meetings. Again, not the responsibility of the Architect here but the Architect may elect to produce memorandums on field discussions in order to hold respective parties accountable. Any field meetings should be coordinate and documented by the Contractor just like the regular construction meetings.

These are all time-honored and structured ways to hold a notorious corrupt industry accountable. They are standardized for a reason. Don’t get we wrong as some of my best and most trusted friends are contractors. However, it’s a field where the Client can get taken advantage of. There is a reason why in all those Mafia movies the “Family” is involved in construction.

The good news, is that the Client can avoid these problems altogether, if they allow the Architect to hand pick a Commercial Contractor that they have built an alliance before in the past, and has a proven track record of adhering to these standard practices and protocols. Even on a residential project, you want a Commercial Contractor because they will offer the necessary project organization that is required for success. You must have a contractor that is proactive, organized, accountable, and doesn’t blame others. You need a contractor that adheres to standard Construction Management practices during construction where they produces a Schedule of Values, Lead Meetings, Meeting Minutes, RFIs, Change Orders, and curate a Critical Path.

Rest assured, there are Contractors out there that check these boxes, though these days it feels like you would have better luck trying to find a white rhino in the wild. If you find one, hold them close. Develop a strong bond with them, and feed them work so they can grow with you. Because these folks are an endangered species as the days of noble accountability are over. The principles of good conduct from our parent’s generation are eroding. The “blame game” is rampant and nobody admits wrongdoing anymore. Everybody is looking out for themselves and nobody cares about others like they should. Sad to say, but true. So stick to these approaches to keep money in your pocket and ensure your project is well built and delivered on time.

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