Quality Over Quantity:
Working in Tough Economic Times

The construction market has changed dramatically over the past 12 months. Bids are coming in sharply lower, which should be good news for owners.

But what new risks are components of this market? As a public agency responsible for the construction of educational and institutional buildings, the Washington State Dept. of General Administration feels fortunate the current market can deliver more for the money, but we are looking closely at alternative project delivery approaches that may help us minimize the risks.

Across the country, owners responsible for capital projects are seeking answers.

• What responsible actions should be taken in the current market?

• Do we throw out schedule acceleration and collaboration to get lower prices?

• How do we ensure a focus on price does not distract us from maximizing value?

• Which procurement type should we use? Should everything be bid low?

Project managers must strive to achieve the optimum balance of price, schedule and quality. In the current market, prices are low but come with a challenge to maintain the project schedule and quality. The traditional design-bid-build approach can be especially risky in this market. Other procurement methods are still competitive and also allow you to achieve a lower risk while delivering the desired quality and schedule.

In Washington, we strongly encourage construction manager-at-risk or design-build for new projects in which there is a choice of delivery method. Not all projects require enhanced collaboration or accelerated schedules, but many do. While it is tempting to continue with the low-bid market, we believe that for the right projects, these alternative methods will deliver projects that are more cost-effective, schedule-responsive, of higher quality and more free of claims.

What can owners learn from previous downturns? In general, when the quantity of construction activity decreases, competition for the remaining work increases and public-works projects become attractive. In past downturns, owners learned the intense competition for public projects is accompanied by negative consequences.

• There is an increase in the likelihood the low-bidder has a bid price that is inadequate to effectively complete the work.

• Some contractors and subcontractors are likely to be economically stressed.

• With the financial stress on private-sector markets and bankruptcy filings, many subcontractors are having trouble receiving compensation for work performed. A subcontractor going out of business creates a serious problem for the project.

Collectively, these factors all lead to higher claim rates and legal actions that take valuable time away from an owner’s staff, not to mention the costs to address disputes.

Owners need to ask what the best process is to achieve a balance of cost, schedule and quality on a project.

John W. Lynch, assistant director, manages the Division of Engineering/Architectural Services within the Washington State Dept. of General Administration. Lynch has more than 30 years of experience managing design and construction projects. He is an active member of the Washington State Capital Projects Advisory Review Board and the National Association of State Facilities Administrators and represents NASFA on the AGC Private/Public Industry Advisory Council. E-mail: jlynch@ga.wa.gov.

 

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