Making the case for early CM selection with a robust preconstruction process vs the traditional design / bid / build project delivery method.
At Callahan Construction Managers, we have over 65 years of experience serving customers as a full-service construction management company. With this article, I would like to take the opportunity to make the case for bringing a qualified Construction Management (CM) firm on board early in the design process. By doing so, I also hope to underscore the leap in value that this approach can offer the developer. Over the course of my 19 years in the business, I have certainly worked on both sides of the fence, (i.e. hard bid scenario vs negotiated work) and will draw upon direct experiences with both delivery methods. What I personally, and Callahan as a company, have witnessed as a better blueprint for success for the entire project team, is the negotiated open-book GMP process with a robust and collaborative preconstruction process.
The types of projects Callahan builds for our clients is intrinsically linked to our outlook and belief in this delivery method. It is important, therefore, to share some examples of our skills and expertise. Callahan is a relatively large, non-signatory, CM firm based in Bridgewater, MA, with a regional office located in White Plains, NY. We build multifamily / mixed use, affordable housing, senior housing / assisted living, lab and life science, industrial, hospitality. In addition to this, we also do a fair amount of corporate tenant interior work.
The Precon Process and Team
By bringing a qualified CM such as ourselves on board early, clients get the added value of being able to utilize our in-house expertise. This ensures that at all stages of design, the budget is under constant monitoring, allowing us to course correct at any stage. This can be achieved with value engineering, product substitution, or other cost reducing methods if the design starts to get out of balance with the proforma. However, this is just the tip of the iceberg. We also have a team of civil engineers on staff, an in-house architect, quality assurance / quality control department, an MEP/FP engineer (mechanical / electrical / plumbing / fire protection), BIM (building information modeling) team, and safety team, in addition to our estimating department. While this may seem cumbersome and unwieldy, it ensures that the project can run smoothly and efficiently, ultimately mitigating risk for our clients and their lenders.
Through a careful review process that takes in each stage of development through multiple lenses and backgrounds, we catch as many potential issues with the overall design as possible. Simply put, once it is time to put a shovel in the ground, we’ve got a tight set of plans and we’ve “turned every stone”. In our view, it is better to ask questions and raise issues early on, than to be asking them when we are under construction. From our wealth of experience we know that coordination issues uncovered during construction can lead to costly changes and schedule delays.
I should stop here just to say that my intention with this piece is not as much to promote Callahan as it is to make the case for the process. There are a number of highly qualified CM firms out there. My point here is whether it’s Callahan or someone else, there are considerable benefits…
The precon agreement itself –
low risk, high reward
While I cannot speak to how other CM’s handle the agreement, it is typical at Callahan for the preconstruction agreement to be non-binding, meaning it is a signed contract with stipulated costs. However, if at any time the client feels that we are not providing a high level of service, they can go in another direction, no questions asked. At Callahan, we believe in the skills and level of service we can offer to such an extent that this is not considered a risk. About 95% of the projects for which we enter into a preconstruction agreement eventually convert to GMP. This means they underwrite at the end of the day and get built.
“As a 65-year-old family owned and operated business, we are fortunate to have strong and longstanding relationships throughout the subcontractor industry.”
Better sub coverage / greater interest
As a 65-year-old family owned and operated business, we are fortunate to have strong and longstanding relationships throughout the subcontractor industry. We also understand our most important assets are our loyal employees and sub-base. Especially given the current boom we are experiencing, most notably within the suburban life sciences sector, we all look at our hit rates, and subcontractors are no different. It is a simple analysis for them in determining which projects to bid on and which ones to pass on. It is within this context that many subs will prioritize bidding our work over the competition. We are a known entity who will treat them fairly. When we go “out on the street” to the subcontractor market for pricing, it makes a huge difference, especially during these busy times. Being able to say that yes, “this is a Callahan job” versus, “no we are competing with 4-5 other CM’s for this project” ensures that there is real value and opportunity to drive better competition for the client.
The ability to plan properly
Planning is an integral aspect of any project and another benefit of the precon phase is that it allows us to do so in a more streamlined and efficient way. This process allows us to tap into past experiences and skill sets of our in-house staff, matches them to the most suitable project and sets the team up for success. In such an active market this is vital. An additional benefit is that It also allows the project to remain ahead of schedule by smart planning around site logistics, phasing, municipal particularities, and any early release packages, if required.
The right approach and mindset
When we are afforded the opportunity to work alongside the project team throughout the precon phase, this sense of mutual ownership carries over into the construction phase. For example, if, having spent the last 16 months working with a team through design, we uncover a coordination issue with the plans or an existing condition that presents a challenge during the construction stage, the first question we are going to ask ourselves is “should we have picked up on this during precon?”. Rather than simply laying blame with the design team, we believe that the project is a mutual undertaking and issues are identified, and rectified, in an honest manner. Edward J. SanClemente, Vice President, Property and Development, at LCB Senior Living, echoes this claim. ‘’Your team’s diligences, commitment, focus, professionalism, and integrity were evident throughout the duration of our projects. There is no doubt that this team-centered approach led to the projects’ timely completion and financial success.’’
Low bid versus final contract value
As is the case within the industry, developers are free to make choices that work for their project. It makes sense that, as part of a hard bid delivery, value is a huge consideration. However, in our hard won experience, the end result may not always match the bid. Anecdotal evidence suggests that the value we offer at the outset tends to remain consistent, particularly in comparison to deceptively low bids where costs spiral and lose sight of their original budgets.
In closing, I believe that the benefits of having a good CM partner early in the process far outweigh the perceived costs. At Callahan, we truly believe that this approach is the best way to bring the entire project team into alignment with a common goal for the benefit of the customer. I think that the greatest testament to this process is to highlight the fact that almost 85% of our year over year sales volume comes from repeat business. Sean D. Sacks, Director of Hines, believes that the ongoing relationship between our two companies is testament to the level of service we provide our clients. “Our experience with Callahan has been at the very top of the list. We have enjoyed open communication, effective value engineering, quick responses and transparent pricing. It made the development and construction processes seamless and produced an effective partnership throughout. It was a pleasure working with Callahan for the third time in the past few years on another successful project.”
It is without doubt that I say that, at the end of the day, the truest measure of a project’s success is whether or not we are building the next one together with our customer.