When approaching a tenant improvement or remodeling project, a very common method of selecting a project team is the traditional competitive bid approach -- the general contractor and subcontractors bid for the project all at once after project plans have been finalized.
An alternative approach to project team selection is to bring aboard the general contractor and subcontractors in phases. With a two-phased approach, the owner selects the general contractor based upon specific experience, reputation, integrity, cooperative spirit, financial stability and fee. Once project plans are finalized, the subcontractors can be invited to bid on the project, with all project team members involved in the selection process.
Following are some key reasons why owners may want to consider a two-phased bidding approach.
Quality and cost
One downfall of competitive bidding is that it automatically creates an environment in which a project is executed by the least expensive means possible. As a result, quality can be compromised.
In order to ensure quality, owners inevitably may be subject to costly change orders and "extras." This in turn can lead to price gouging, delays, and a much more expensive project in the long run.
On the other hand, a two-phased approach provides the owner with the input and control necessary to make intelligent compromises between "cheapest" and "best" so that the final plans are representative of the owner's requirements for quality.
Two-phased bidding also allows the contractor and owner to select subcontractors on the basis of their reputation and qualifications, rather than on the basis of the cheapest price. This is critically important to the success of the project, as well as to the protection of the project owner.
Further, the owner is provided with a bottom-line figure at the outset that is comprehensive and that best represents his requirements for quality.
The competitive bid approach is based on the notion that bid documents are complete and present the most efficient solution to the owner's needs.
In contrast, the two-phased approach takes into account that bid documents can -- and almost always do -- change.
A two-phased approach supports a team-oriented atmosphere, allowing the contractor to provide the owner with savings options through alternative construction materials and method solutions during the planning stages.
The owner benefits from the combined input of the architect and contractor, and the allocation of construction dollars may be made using an organized, managerial approach.
With some projects, the competitive bid process is accelerated to make up for working drawings and/or the building permit process taking longer than projected.
Contractors then do not spend the appropriate amount of time qualifying subcontractors and obtaining optimal coverage in order to produce the best prices. This can result in a price that exceeds the construction budget, forcing the owner to redesign, re-permit and re-bid the project in an attempt to bring the price within budget.
With a two-phased approach, budgetary-related delays can be avoided because the contractor is available to provide accurate estimates on the impact of each building element and its component parts during the planning stages so that the owner is constantly aware of where the project stands in relationship to the construction budget.
Two-phased bidding also allows the contractor to solicit bids early and begin construction prior to the date the permits are pulled. The net effect is that the facility may be occupied earlier, increasing the owner's cash flow while decreasing soft costs.
Errors and omissions
The competitive bid approach distinctly separates the responsibilities of the contractor from those of the architect.
In contrast, a two-phased bidding approach allows for the general contractor to provide input during the early planning stages, thereby reducing the likelihood of errors and omissions. If involved early on, the general contractor can assist in the preliminary planning and scoping stages to assure minimal change orders; as well as perform value engineering, which produces tighter cost estimates.
A two-phased approach also can yield better control, ensure quality, and avoid the use of unnecessary "extras" on a project team.
The bottom line is that a two-phased bidding approach can prove to be very beneficial to owners. It reflects a mutually agreed-upon business relationship between owner and contractor, tailored to the requirements of a specific project.
The contractor essentially becomes a cohesive member of the owner's team, thereby eliminating an adversarial relationship and instead creating a strong, teamwork-inspired synergy.
Jennings is president of Johnson & Jennings General Contracting, a San Diego-based general contracting firm. More information about the company can be found at www.johnsonandjennings.com.>