Owners, at the suggestion of architects and engineers in many cases, use the lengthy listing of alternates to keep the cost of the project within budget. Did you ever wonder why? Some would say it is to allow the owner to add features at an inexpensive price. I would postulate it is because the owners, architects, engineers and other decision makers do not know how to reliably estimate the costs before bid time. I would put forth that the use of alternates actually costs the facility developer extra money prior to bidding, at bid time and during the construction period.
Some types of projects are notorious for having lengthy listings of alternates. Schools come to mind immediately. Take a look at the design process in cases where there are a multitude of alternates. Because the designers historically cannot reliably estimate the project, they will hedge on the base bid being able to be within the budget for the project. They will recommend a reduced scope of features. The first step after this is the school personnel must make decisions on what they can live without – i.e. features that will be included on the alternate list. This takes time via committee meetings with parent, school and design personnel. These meetings are costly and delay the final design completion. The alternates will create more work for the designers because they must be incorporated into the documents in a seamless manner. Good luck there because where do change orders come from anyway! In the end, the owner ends up paying for this extra time and effort expended to create the alternates. They end up paying more for the change orders.
At bid time, whether owners understand this or not, one of two scenarios may occur. The first is rather benign, some of the potential bidders may decide the effort to bid the project is more trouble than it is worth. The alternates have lessened the biddability on the project. In a business sense, these are the smart bidders. They are looking for a better return on their time investment in preparing the bid.
This brings up the second scenario, which is dealing with the contractors that will “plug” numbers for the alternates, make a mistake in preparing the pricing or make the effort but not be the low bidder. After all, the low bidder is the one that makes the biggest mistake, right? The mistakes will then be paid for by the owner during the course of the project. The contractors will make sure of that! They know changes are coming just because of the lengthy list of alternates.
To get all of the desired project features and to avoid the use of alternates requires just one thing. All of this can be avoided by having a reliable estimating effort prior to receiving bids on the project. All it takes is a bit of professional effort.
Oh, By the Way… Estimating doesn’t cost, it pays. I see no reason why more projects can’t be bid within a +0% to -5% tolerance from the initial budget. I would also expect to see project reduce the amount of change orders by eliminating lengthy listings of alternates. On most projects change orders should be reduced to a large extent.
