About the Presenters John Robinson

General Manger/Illinois; Performance Services, Inc.

David Binkley Director/Business Development; George Sollitt Construction Co.

Tim Thoman Owner/President; Performance Services, Inc.

Program Outline

Introductory Remarks - Bob Lanzerotti

Construction Delivery Alternatives – David Binkley

Guaranteed Energy Savings – John Robinson

Questions?

Construction Delivery Alternatives Traditional Architectural Design Phases

Percentage of Architect’s Professional FeeProgramming (5%) – Information gathering and definition of building issues

Schematic Design (10%) – Transform building issues into a graphic solution.Ideally, the Construction Manager becomes involved during this phase

Design Development (20%) – Refine the design solution

Construction Documents (40%) – Convert the design into technical drawings

Bidding (5%) – By General Contractor or subcontractors (under CM) per Illinois Procurement Code

Construction Administration (20%) – Confirm building in accordance with Construction Documents

General ContractorAlso referred to as; Design-Bid-Build or Lump Sum

Construction Manager (2 basic forms)CM as Advisor (CM/a) – also referred to as “Agency”CM as Constructor CM/c) – also referred to as “At-Risk”

with or without a Guaranteed Maximum Price

Construction Delivery Alternatives

No Contract

MEP/FP EngineerStructural Engineer

Civil Engineer

Interior DesignerCost/Scheduling ConsultantAcoustical ConsultantTheatrical ConsultantRoofing ConsultantFood-Service ConsultantLighting ConsultantSecurity ConsultantTechnology ConsultantA/V Consultant

HVACPlumbing

Fire-ProtectionElectrical

MasonRoofing

GlazingPavingExcavatorLandscapeFlooringPaintingDrywallCeilingRough CarpentryMillworkElevatorSpecialtiesEquipment

OWNER

CONTRACTOR

Construction Delivery AlternativesRelationships – General Contractor

ARCHITECT

PROS Roles clearly defined - traditional and straightforward Best suited for well defined, uncomplicated projects Competitive – perhaps lowest cost depending on Change Orders One contract to administer Single-source responsibility

CONS No Contractor input during design Contractor and subcontractor selection based solely on cost Slowest delivery method Contractor may attempt to enhance profit with Change Orders Potentially antagonistic relationship with the Owner and Architect

Construction Delivery AlternativesPros/Cons - General Contractor

Interior DesignerCost/Scheduling ConsultantAcoustical ConsultantTheatrical ConsultantRoofing ConsultantFood-Service ConsultantLighting ConsultantSecurity ConsultantTechnology ConsultantA/V Consultant

HVACPlumbing

Fire-ProtectionElectrical

MasonRoofing

GlazingPavingExcavatorLandscapeFlooringPaintingDrywallCeilingRough CarpentryMillworkElevatorSpecialtiesEquipment

CM ARCHITECTNo Contract

Construction Delivery AlternativesRelationships – Construction Manager as Advisor (CM/a)

MEP/FP EngineerStructural Engineer

Civil Engineer

OWNER

CM’s Professional Fee and General Conditions are negotiated; subcontractors are bid (per Illinois Procurement Code)

CM is an “agent” and “advisor” to the Owner

CM provides administrative and management services during pre-construction and construction phases

Owner holds and manages contracts with subcontractors

CM does not provide a Payment & Performance Bond; individual subcontractors provide this bond

Advisable for complex, fast or phased construction

Flexible for projects of ill-defined scope or that are subject to change

Construction Delivery AlternativesDescription – Construction Manager as Advisor (CM/a)

PROS CM selection based on QBS process - Owner can choose their CM CM is District’s advocate throughout the process CM input is available during the design phase

Cost / Schedule / Construction Logistics / Constructability Flexibility with regard to scope changes Allows for “Fast Track” construction

CONS Owner holds many contracts – Architect, CM and all subcontractors More paperwork due to multiple contracts held by District CM may lack leverage over subcontractors CM makes no promises relative to cost Architect’s authority during construction may not be clearly defined

Construction Delivery AlternativesPros/Cons – Construction Manager as Advisor (CM/a)

Traditional Schedule

Fast Track Schedule

Design

Bid

Build

Bid

Bid

Time SavingsBid

Build

Design

Construction Delivery AlternativesTime Saved using a Construction Manager

No Contract

MEP/FP EngineerStructural Engineer

Civil Engineer

Construction Delivery AlternativesRelationships – Construction Manager as Constructor (CM/c)

HVACPlumbing

Fire-ProtectionElectrical

MasonRoofing

GlazingPavingExcavatorLandscapeFlooringPaintingDrywallCeilingRough CarpentryMillworkElevatorSpecialtiesEquipment

ARCHITECT

Interior DesignerCost/Scheduling ConsultantAcoustical ConsultantTheatrical ConsultantRoofing ConsultantFood-Service ConsultantLighting ConsultantSecurity ConsultantTechnology ConsultantA/V Consultant

CM

OWNER

CM’s Professional Fee and General Conditions are negotiated; subcontractors are bid (per Illinois Procurement Code)

You can essentially chose your GC utilizing this method

CM serves as an “open book” GC

Guaranteed Maximum Price (GMP) Option

Cost-Plus Option (no promises relative to final cost)

CM assumes risk for construction

CM holds contracts with subcontractors

Construction Delivery AlternativesDescription – Construction Manager as Constructor (CM/c)

PROS CM selection based on qualifications - Owner can choose their CM Single-source of responsibility CM input is available during the design phase

Cost / Schedule / Construction Logistics / Constructability CM has “leverage” over subcontractors Allows for “Fast Track” construction

CONS CM’s allegiance may be divided between the Owner and profit, if under a

GMP Possible adversarial relationship with the Owner and Architect Architect’s authority during construction may not be clearly defined

Construction Delivery AlternativesPros/Cons – Construction Manager as Constructor (CM/c)

Definition and Characteristics GMP = Cost of Work + Contingency/Allowances + CM Fee/General

Conditions

GMP based on a specific set of design documents at a given time

GMP is subject to additions and deletions due to changes in scope of work. All costs above the GMP that are not approved by change order are absorbed by the CM.

Sharing or Return of Savings Unused contingency and/or allowances

Anything that causes the Cost of Work to be less than the figure used to establish the GMP

Construction Delivery AlternativesConstruction Manager as Constructor (CM/c)

Guaranteed Maximum Price

CONSTRUCTION DELIVERY METHODS

IASBO Annual ConferenceMay 16, 2012

Advantages to Guaranteed Energy Savings Contracts

• Sole accountability – no finger pointing• Integrated team• Guaranteed performance– Energy savings– Optimal learning environment– No “change orders”

• Lower costs– Lower soft costs– Lower overall construction costs

Plan-Spec Project Accountability

Lots of cooks in the kitchen – who is accountable?

Guaranteed Contract Project Accountability

One chef = full accountability

Contractual AccountabilityPlan & Spec Guaranteed Contract

Owner Owner

Architect Qualified ProviderConstruction Manager Contractors

Suppliers Sub-contractors

No direct accountability

Architect

Full accountability

Suppliers Sub-contractors

Integrated Team

Value of Team: Several brains are better than one

– collaborative synergy Contractors often know more

about what works best

Provider’s integrated team consists of architects, engineers, project managers and contractors working collaboratively together, shoulder-to-shoulder, to deliver the Best Value proposal. If this team doesn’t out-listen, out-think and out-work the other two teams, they lose the job. This collaboration and increase effort delivers better designs and more value.

Advantages to Guaranteed Contracts

• Sole accountability – no finger pointing• Integrated team• Guaranteed performance– Energy savings– Optimal learning environment– No “change orders”

• Lower costs– Lower soft costs

– Lower overall construction costs

Energy Savings Guarantee

• Monthly measurement– Utility bills– Equipment operating data

• Monthly collaboration with operators• Annual utility bill reconciliation• Goal: Energy Star certification• Hard guarantee

Learning Environment Guarantee

• Temperatures: +/- 2 degree F• Carbon Dioxide: < 1,000 PPM• Humidity: < 65% RH• Background noise: < 45 dB• Drafts: none• Illumination: 50 – 80 foot candles

No “Change Order” Guarantee• Owner can still add scope to project• Not a transfer of contingency accounts• Owner’s cost for errors and omissions are eliminated• Since PSI team pays for mistakes– Measure twice, cut once– Spend far more time investigating existing conditions– Persistent focus on processes that eliminate mistakes

No “Change Order” Guarantee

• No “value added” change orders• Very limited “unforeseen condition”

contingency costs– Only exceptions• Unknown below the ground issues• Unknown hazardous materials (i.e. asbestos)

• Examples

Advantages to Guaranteed Contracts

• Sole accountability – no finger pointing• Integrated team• Guaranteed performance– Energy savings– Optimal learning environment– No “change orders”

• Lower costs– Lower soft costs– Lower overall construction costs

Lower Soft Costs

• Architectural – engineering fees– Plan & Spec: 7 – 10%– Guaranteed Contract: 3 – 6%

• Contingency– Plan & Spec: 5 - 7%– Guaranteed Contract: 2%• 2% is for scope additions

Penn State StudyDesign-Build vs. Plan-Spec

Design Build delivered:• Quality: 10% Higher• Cost: 6% Lower• Speed: 33% Faster

Source: Project Delivery Institute, 1999

Integrated team approach is better!

Lower Soft Costs

U.S. Dept of Commerce Study Summary Results

“The use of the design-build delivery system tended to yield better performance outcomes for owner-submitted projects. These projects tended to have

better performance in cost, schedule, changes, rework and practice use. “

Source: U.S. Dept of Commerce Report. “Measuring the Impacts of the Delivery System on Project Performance – Design-Build and Design-Bid-Build,” Pg 49. November 2002

Lower Soft Costs

Other Contractor

Mechanical Contractor

Construction Manager

Architect

Suppliers

Insulator

Owner’s CostMultiple Layers of Compounded Markup

Owner’s CostFlat Markup

General Contractor

Control Contractor

Suppliers Subcontractor

Masonry

Plan-Spec Design-Build Cost Structure Comparison

Advantages to Guaranteed Contracts

• Sole accountability – no finger pointing• Integrated team• Guaranteed performance– Energy savings– Optimal learning environment– No “change orders”

• Lower costs– Lower soft costs– Lower overall construction costs