When the Project Is Heading to the Toilet Sometimes Nothing Will Help

March 17, 2010 – 10:15 am

On a recent assignment we encountered a hospital project that will be headed for the toilet and likely end up in litigation or arbitration. We can see this coming prior to bid time. The problems could have been avoided if the owner only knew. I don’t know where it started. It could be with the owner, construction manger or the designers. I do know the bidders and owner will end up “paying for the pleasure” on this project.

The bid documents are some of the poorest I have encountered in a long time. One small example will serve to illustrate. Addendum One was issued a few days before the bids were due. The steel details show similar configurations for bent plates at the edge of the metal deck for the concrete pours on metal deck. Detail 6/S4.01 showed a shop welded 5/8” x 2’-0” long bar shop welded to the bent plate at 16” o.c. Detail 8/S4.01 showed a 5/8” x 2’-0” long bar at 24” o.c. shop welded to the bent plate. Detail 10/S4.01 showed a #5 x 2’-0” long rebar apparently attached to the bent plate but no weld symbol to show if it is shop welded, field welded, or if it is welded at all. Detail 11/S4.01 shows the same as detail 10. Detail 13/S4.01 does not show any bar or rebar attachment to the bent plate. Detail 2/S4.02 does not show any rebar or bar either. Detail 16/S4.02 shows a 5/8” x 2’-0” bar field welded, not shop welded and this is referenced as typical on detail 1/S4.03. To top it off, Detail 9/S4.03 has a #6 x 2’-0” rebar that does not have the center to center distance identified.

This addendum was to clarify the design details. The structural engineer has nine separate details on a similar configuration and the differences are amazing. Not only that, they do not agree with one another! This is not only confusing; it is driving up the price of construction! The problems associated with these details affect the steel and rebar fabricators, the steel and rebar installers, the concrete placement crews and other trades that need to coordinate in these areas.

The structural engineering group is part of a very well known ENR nationally ranked architectural-engineering firm. Their drawings and specifications are a disaster on this project. The construction manager, a regional firm, should be considered a joke for not picking up on the problems before the documents were issued for bid. They are compounding the problems with the design by continuing with the bid process. The construction manager does not know what is scope is being bid. The owner doesn’t have a clue as to what the designer and construction manger are doing to the project.

Sadly, the bidding and construction are proceeding on this project. My thoughts are it will take longer than scheduled, cost more than expected and require dispute resolution services to resolve the problems.

Oh By The Way…It is very refreshing to see a competent construction manager like M.A. Mortenson bring a project in under the scheduled completion time. It makes for better reading than what will come from this project!

By Don Short | Posted in Construction | Tags: , , , , , , , | Leave a Comment

Economic Recovery and The Construction Industry – What’s Your Solution?

March 15, 2010 – 6:00 am

The politicos keep announcing how the United States economy is recovering nicely.  Too bad the recovery in the construction arena means unemployment is rising.   A few months ago unemployment for construction was less than 15%.  As of March 2010 it is 27%.  The Economic Stimulus is still a bad joke for firms involved in construction.  Private work is scarce.  According to economists, the continuing and increasing debt load to GDP ratio will soon approach a point that can keep our economy in the doldrums for years.

The bright spots being pointed out by the government are great, but what does this mean for contractors, designers, vendors and others in the construction food chain?  With the high rate of vacancies in retail and commercial space, demand will have to pick up for 10 years for firms involved in retail and the commercial sections of construction.  Yes, there will be building at new locations, but there is still a glut of space in these markets.

We are told manufacturing is picking up its pace.  How well utilized is the existing capacity for production.  Reworking the tooling and replacing aging equipment is one thing, but what about expanding beyond the current capacities?  Is capacity so under utilized that new construction will be minimal for the next two to five years?

Financial investment and related firms, not banks, are making record profits.  The bankers that make money from lending for projects are being squeezed by the federal regulators.  Lending for private projects is down substantially.  From my understanding the FDIC is actually expecting bank failures in 2010 to be twice as many as 2009.  If project cannot obtain financing this year, when will it occur?

I can see a glimmer of hope in the private sector.  Companies are reporting profits.  The problem is they are keeping the profits and not spending them on expansions, renovations or repairs.  There see a great deal of uncertainty in the actions being taken regarding health care, cap and trade and other issues such as unsupported spending by the federal government.

What is the solution?  Good question. At my pay grade it is to take steps to hold on to my company assets (employees) as long as possible to continue in business.  It is to vote the people out that got us into this mess.  What is your solution?

By Don Short | Posted in Construction | Tags: , , , , , , , | Leave a Comment

Common Errors in Scheduling

March 12, 2010 – 6:00 am

1)      Not including logic in the schedule.

2)      Constraining activities that should not be constrained.

3)      Including too many activities.

4)      Not including enough activities.

5)      Not putting in the correct duration for activities.

By Justin Short | Posted in Friday Tips | Tags: , , , , | Leave a Comment

Profits? – We Don’t Need No Stinking Profits!

March 10, 2010 – 6:00 am

Contractors are violating one of the basic tenants of business. They are bidding work without any profit added to their bids. Not only that, they are bidding projects without fully recouping their costs of doing business. This is nothing new, just more prevalent and in larger sums.

On a recent assignment we prepared the independent estimate for the owner to use to evaluate prices on the bids. This estimate included the materials, equipment, and labor to perform the work. It included the indirect costs associated with the work – supervision, mobilization, utilities, etc. It also included profit. We provided the estimate, along with backup to the client. We advised the client that with current conditions the bids could be the amount we estimated less the cost of the construction equipment and overheads. When the bids came in, the two low bidders were at our estimated amount minus the construction equipment, overheads and profit. These two were bidding the project for the only cost of labor and material! A third bidder was reasonably close to our estimate and fourth bidder about twenty percent higher.

When a situation arises where the low bidders are bidding work below cost like this, it poses major risks to others involved with the project. The bonding company is now at risk for a default, as is the owner with a deadline for completion. The material and equipment vendors should start being concerned about being paid. The same can be said for any subcontractors and the employees. When equipment breaks down or wears out, there is no money for replacement parts or equipment.

The two low bidders have one thing in common with our estimate. They had to have a detailed estimate in order to know how much to eliminate from their bid. Unfortunately they are bad businessmen by making decisions to take work below a cost that may cost them their companies. They are also screwing up the market for the contractors putting in responsible bids – as I have written about on prior occasions.

Oh By The Way…When the owner has a detailed estimate and can make determinations such as this, they can judge their own exposure to the risk of a contractor failure. This way they have the knowledge of a potential problem.

By Don Short | Posted in Construction | Tags: , , , , , , , , , , , , | Leave a Comment

So You Think You Have It Bad

March 8, 2010 – 6:00 am

I just received a bid form for a project.  It is in a major Midwestern city I will not name but it sounds a lot like Chicago.  This bid form is for use on a project that is for a new building, not a highway or transportation project.  All of the bidders on the project are prequalified and invited.  The project is worth a bunch of money.  At least you would think so because the main part of the bid form contains over 1,000 items that require pricing for the bid.

The bid form doesn’t stop with the pricing of the 1,000+ items. Not only do the bidders have to price each line item, they have to develop the quantities to be priced!  And, to add a bit more complexity to the bid period, there are over 30 alternates identified by the owner for the contractor to price out with breakouts for cost, overhead, profit and contingencies. To add insult to injury the owner is also requesting voluntary alternates from each of the bidders.

There’s more but it is almost beyond belief!  Breakouts are being requested for the general conditions and indirect costs, prices for self performed and subcontracted work scope along with requests for any clarifications or exceptions to the project.  It will take two weeks to fill out the bid form information.

I wonder if the owner knows that the contractors will look at the bid requirements and fill in the blanks with less than meaningful information and pricing.  It is apparent this is an owner that does not know how to develop a project that encourages the best pricing from contractors.  It is apparent that the architect and engineer are not providing any meaningful input for a better bid form.  Little does the owner know they are setting themselves up for the job from hell and it is their own fault!

Oh By The Way… In better economic times it is likely there would be little to no contractor interest in bidding this project.  In these times there are seven major prime contractors pursuing this project.  It is a sad state of affairs in construction when bidding projects has come to this.

By Don Short | Posted in Construction | Tags: , , , , , , , , , | Leave a Comment

Stick To What You Are Good At Or Go Away!

March 5, 2010 – 6:00 am

Is it time for a few of the lower end contractors to fold up shop?  I think the resounding answer to the question is YES!  I have heard horror stories from all over the country about how the low bidder is taking the job for less than the material and subcontract costs.  Also the contractor that is 3 guys and a truck, bidding the waste water treatment plant and they think they are qualified and capable to do the work because they drove by a waste water treatment plant once.  Both of these situations are very bad for the construction market and to the projects. 

For the benefit of the construction industry either stick to what you are good at or go away!

By Justin Short | Posted in Friday Tips | Tags: , , , , , , , , , , , , , , | Leave a Comment

Nuclear Power

March 3, 2010 – 6:00 am

New nuclear power has been receiving quite a bit of press lately especially since Obama has promised loan guarantees to a new facility.  The talk of the new nuke plants reminds me of a coworker who passed away a few years back.  He was involved in the construction of several plants back when the NRC actually allowed new plants to be built.  I always enjoyed listening to his stories of the “good ole days” and what was involved in the construction.

The question I have after reading these recent articles is who will build these new plants?  After 30 years of basically no new plants, the knowledge and expertise has been lost to retirement and/or death.  The learning curve is going to be back at square one if several new construction projects start.  I have confidence that they will be able to build them, but the tips and tricks of the trade to increase productivity will be gone resulting in higher construction costs.  Even the few guys left will have to dig deep into their long term memory to remember what they had done.  I hope the answer does not involve bringing the expertise from other countries that have been building these plants.  I am looking forward to seeing new nuclear plants being built to help supply our nation’s energy needs.  I think it is about time the government starts promoting nuclear power again!

By markmentele | Posted in Construction | Tags: , , , , , | Comments (1)

It’s a Start But When and Will It Continue?

March 1, 2010 – 6:00 am

President Obama announced a loan guarantee of $8 billion for one new nuclear plant in the United States.  On the surface this is a great way to kick off a power renaissance in the power industry.  What this country needs is a reliable base load energy system and nuclear energy fits that bill!  However, one plant does not set a trend or make a policy that will foster these plants.

Now all we need is a reliable energy policy that is free of politics and interferences for the “renaissance” to continue.  This means the politicians and administrators involved in the process need to encourage and not hamper the development of these plants.  Once it is free of politics I believe we will see a surge of private money willing to back the building of more nuclear power plants.

Yes, ratepayers will foot the bills, but they are today for coal, oil and natural gas fired plants.  These same ratepayers, with federal and other subsidies, are paying a premium today for alternative sources such as solar and wind.  The costs to build the plants will come down as more are developed.

If the federal government is to encourage the development of nuclear power they must get off their anti-nuclear bias and develop a long term, sustainable plan that will not be revoked due to political changes.  These plans need to consider long term storage of wastes, processing of fuels and even the phasing out of the fossil fuels for power generation as the nuclear plants come on line.  Constructing more plants will benefit the construction industry and virtually all other sectors of the economy.

Oh By the Way… Think of how the cost s of home heating will go down if natural gas is phased out for power plants.  What about chemical feed stocks price declines with lower oil and natural gas consumption?  We will lose fewer raptors and desert tortoises without wind and solar farms.  It sounds like a winning program for the United States!

 

By Don Short | Posted in Construction | Tags: , , , , , , , , , | Leave a Comment

Denver Rails Project

February 26, 2010 – 6:00 am

How would you feel if you where asked to pay more taxes because someone could not properly prepare a budget?  Well if you live in Denver you already know how it feels.  With the project still at least 6 years from completion I would want there to be safeguards put in place to ensure that the budget over run would not happen again.  Now there is a proposed tax increase and a reduction in the scope of the project.  Talk about getting the worst of both worlds, more taxes and a project that does not have all of the features that were wanted!   Was there any budgetary tracking and forecasting done so this problem could have been identified as the design progressed?

By Justin Short | Posted in Friday Tips | Tags: , , , , , , | Leave a Comment

Let’s Be Fair

February 24, 2010 – 8:59 am

On a recent blog one of the responders to my blog thought I was picking on architects too much and not enough on contractors.  Actually I was pointing out a common practice by them, and engineers, that increases costs to their clients while shirking their own responsibilities.

Architects and engineers have the second largest impact upon projects costs.  Their ability to determine the right materials and components to meet the client needs is paramount to have a cost effective design. 

 Regardless of the fee amount, the designers are being paid to design the project.  I believe being paid for design services then farming it out to suppliers and vendors to do the design for free is at best unethical.  When they don’t know enough to develop the design details and go out to the suppliers for it, it also lessens their value on the project.  While there can be cases made for sole source suppliers and vendors, having a sole source vendor will drive the costs up.  I have seen this on project after project for my entire career.

  To be an equal opportunity blog and point out some practices by contractors that increase project costs, here are some pointers to watch out for.

  • Contractors that cannot schedule and manage their work will cost the owner more money.
  • Contractors than cannot evaluate the responsible low bidder at bid time will cost the owner time and money.
  •  The contractor that inflates costs on change orders and allows subcontractors the same opportunity will cost the owner more money.
  •  The contractor that shows a profit margin of 2% on cost plus work is hiding profit in other areas and defining it as cost.

 By this count I am being unfair to contractors since I have pointed out four areas of contactor operations that increase costs on projects.

 Oh By the Way… While an owner may be able to spot these problems, it is more difficult for them to spot a problem with the architects and engineers developing sole source specifications by using suppliers as “free” consultants to develop the specifications.

By Don Short | Posted in Construction | Tags: , , , , , , , , | Leave a Comment