Discussion about some common traps in the construction industry which tend to drive up costs yet not improve quality. Suggestions offered on how to do things in a better way

1. Quality Assurance/ Cost
Control for Construction
Maintaining a balance between
high quality and reasonable cost.
The construction industry needs
heightened awareness so that fear
of lost quality does not open the
door for extremely high costs.
This short presentation points out
some common traps to be
avoided.

2. Single branding or
standardizing
 “Standardizing” is a legal process for single branding on public
projects, usually the case is built with heavy influence from a
vendor.
 Spare parts argument: Frequently used even if the owner
stocks no spare parts. Two times zero is still zero!
 Inconvenience of multiple brands: Vendor builds up the fear
in the owner for lost time and added cost from having
multiple brands. This cost is often greatly exaggerated.
 Salespeople for vendors typically are compensated via
commission or profit based bonuses, incentives are high to
inflate prices under monopolistic buying conditions.
 Be very careful about writing overly restrictive specifications
as inevitably pricing goes up when competition goes down.
 Free market competition should be used as often as possible,
any bypass needs to have SUBSTANTIAL proof, not opinion.

3. Basis of design, or equal
 Performance based, rather than product based specifications
are encouraged.
 Be careful about “zingers” in the specification that are more
about limiting competition than about performance.
 Specifications should strive to list a basis of design and then
“or equal” rather than to list multiple vendors. Listing of
multiple vendors suggests explicit acceptance of those
vendors, and implicit rejection of others.
 Preliminary approval of alternative brands pre-bid is often a
good strategy so that contractors can use the most
competitive offering in their bid estimate. If a contractor has
less confidence in approval, some or all of the savings of an
alternative brand will go to the contractor and not the owner.
 Preliminary approval does not bypass submittal requirements.

4. Base bid with add or
deduct alternates
 For some system design components there is legitimate
concern that bid documents are strongly oriented towards a
particular brand or vendor.
 Even when an “or equal” is allowed for, review and approval
of an or equal by the design engineer can take a great deal of
time, and there is concern about additional compensation for
the value of that time.
 In these instances line item alternates can help to keep the
pressure on the base bid vendor to keep pricing fair, will allow
for alternative suppliers, and the designer can work out an
equitable compensation plan (probably best developed pre-bid)
for the added submittal review time.
 This plan is far more sensible than “locking in” a preferred
vendor.

5. Best Value discretion:
 Be careful of “mixed metaphors”. Detailed plans
and specifications, AKA “plan and spec”, bidding
processes lend themselves to a lowest responsible
bidder selection criteria.
 Using a best value selection process in an RFQ is
inappropriate. Best value logic belongs in an RFP,
where inherently more than just price is to be
evaluated.
 Scoring evaluation methods need to be pre-defined
and objective, and made available to all bidders.
 Best value logic can be abused for preferential
selection and cronyism, so be very careful about
how best value logic is applied.

6. Limiting post bid
shopping
 Suppliers and sub-contractors tend to hold back on quoting to
prime contractors until just before the bid deadline.
 A big reason for this is that pricing gets leaked, so the last
vendor to bid knows where the price has to be.
 Pressing for the naming of sub-contractors immediately after
a bid, a matter of hours (even 24 hours is too along and
allows for illicit post bid behavior), helps limit shopping, and
helps to encourage sub-contractors and suppliers to get their
best price out pre-bid.
 More ethical behaviors in this regard not only encourage
quality by limiting under-cutting by marginally reputable
suppliers and subcontractors, but also tend to get the best
pricing to the owner.
 Fewer bidding errors by prime contractors when their pricing
comes in earlier.

7. Over budget- value
engineering
 Sometimes a project goes over budget, and there is not
enough time for a redesign/rebid.
 A “Value engineering” negotiating process can be used with
the low bidder.
 Some designers are defensive about this process. Contractors
better know the costs for applying different systems and
technologies. A cooperative effort with the contractor can
help to get the owner the best cost/benefit ratio.
 The process should not be seen as a slight to the design
engineer. A team effort between owner, designer(s), and
contractor(s) will yield the best outcome.

8. Change orders – Cost
containment
 Changes to the original project scope, either due to
error/omissions or changes from owner requirements, can be
very costly.
 Dictating to a contractor extremely low overhead and profit
percentages encourages cheating. Allow for reasonable
overhead and profit.
 If a change is substantial and the work is separate enough
from the base contract, consider competitively bidding on that
extra work to avoid a monopolistic change order.
 Reputation for change orders should be something that is
tracked and evaluated, especially for best value (i.e.
design/build) selection processes. This can help to avoid
selection of “loss leader” suppliers who underbid the base bid,
then look for many, many changes for which to price gouge

9. The value of oversight
 Don’t underestimate the value of
procurement and other professionals
who are outside of the process and
have no conflicts of interest.
 When working for large entities such
as government, college campuses, etc.
cost metrics are helpful to see how
projects compare.

10. Accountability and
transparency
 Key decisions need to be documented.
 Time is money, reneging on a decision can damage many
parties. So no decision should be seen as trivial.
 Always err on the side of over-communicating. “Need to
know” communication strategies can often leave parties in the
dark who ought to be informed.
 When there is a complaint, especially if a party may have
done something outside of the law, an anonymous
whistleblowing process should be available, and an
independent investigation from an outside and impartial group
should be put to use.
 Secrecy is often about pride and power and not about the
desire to protect others from grief or burden. Be self aware
about this and honestly reflect on reasons for secrecy.

11. Thank you
 Prepared by:
Rich Purtell
Climate Control Technologies
Cell 607-425-9730
email rpurtell2@stny.rr.com