Low Bid or Best Value Methods to Use for Building Delivery

Low Bid or Best Value Methods to Use for Building Delivery

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With the population growth of the twenty-eight counties, making up the Metro Atlanta area, projected to grow at a rate of eighteen percent (18%) in the next five years, many health-care professionals are considering adding new locations or relocating to better serve their clientele. Many of these healthcare professionals are interested in owning their own facility. Due to the complexity of a medically related facility, many existing buildings are not acceptable due to the cost to renovate a non-medical building into medical. The choice then becomes build a new medical building. Every construction project goes through five phases after a need is determined. These phases are planning, design, pricing, construction, and occupancy. For the purpose of this article, two building delivery systems will be explored. The first is the “low bid” system of design, bid, and build.

This is where the health professional determines a need, selects architects for Requests for Proposals, analyses the proposals, interviews architects, and makes his final selection. At that point, the planning and design process can begin. When this process is complete, the healthcare professional must develop a list of qualified general contractors to prepare proposals and bid his project based on the bid documents prepared by his architect. Typically this bidding process would take anywhere from two to four weeks. At the end of this bid process, the healthcare professional would need to analyze the proposal and make a selection of his general contractor. The general contractor would be hired based on “low bid” to provide the facility per the quality and scope described by construction documents. Should the construction documents lack scope clarification or owner requirements, the owner would be required to sign change orders to have his requirements added to the project scope and more than likely adding cost and duration to his project.

This process may become adversarial should there be more change orders than the owner expects. Far too often through this design-bid-build process, the project develops “scope creep” which is nothing more than adding small changes to the building scope from the original intent through the planning and design phases of the project. For example, the healthcare professional sees an existing building with custom elevator cab finishes and wants to replicate that level of finish in his building. The architect follows his wishes and designs accordingly. Custom elevator cabs cost more than standard finishes; therefore, the cost for the project increases. The project is bid and the costs are higher than the original budget by adding what may have been considered small changes. At this point, the project would have to be redesigned and re-bid or the owner would have to pay the increase from the original budget.

The second delivery system is “best value”. This system still has the same process as design-bid-build, but the general contractor is added to the design team to provide pre-construction services (reference Chart 1). These pre-construction services include reviewing the project requirements with the owner and design team to prepare a conceptual estimate based on historical cost; review various construction systems and products to determine the most cost effective and timely means of construction; provide and help maintain design and construction schedule; prepare and review life cycle cost analysis of potential systems and products and provide value engineering to the design team to ensure the design conforms to the healthcare professional’s budget, providing the best value.

Through this process, the general contractor would also be able to pre-qualify subcontractors and vendors to ensure the quality exceeds the owner’s requirement. If the healthcare professional has schedule constraints, the general contractor could place orders for long-lead materials to expedite the construction duration of the new facility. These are some of the highlights of the “best value” process. This process becomes a collaborative process by information sharing during the design and construction phases of the project. The team is developed to ensure a balance of high quality, efficient schedule and low cost are achieved.

There are other building delivery systems, but they are combinations of the two discussed in this article. Many consider the “low bid” an adversarial process and the “best value” a collaborative process. The building delivery system the healthcare professional elects to use to build his new facility should be made on the construction experience he has or his team has and the amount of time he can dedicate to the construction process. The healthcare professional also needs to determine if low bid or best value is the criteria for constructing his new medical facility.
Eric Schoppman, President of Schoppman Company, Inc., can be reached at (770) 693-9000 or visit http://www.schoppman.com.
This article was originally published October 2007 in the Atlanta Hospital News.

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