Construction Management World Articles and Newsletter_1976CONSTRUCTION
[V AN/' GEMENT
WORLD
THE OBJECTIVE
P
NT'a1
0 I ayT"""TER
U - {., _.tt' !ids �1.
The objective of this issue is to provide helpful guidance for
owners embarking on new construction projects of a commercial,
industrial or public nature. The comments are directed primarily
to owner's that build infrequently or rarely, and therefore may
not possess an adequate understanding of the overall process of
obtaining facilities in today's market.
Owner's that build on a regular oasis probably have an in-
house building department or an individual responsible for
construction projects. We trust some of the information con-
tained herein may be helpful to those owners; however, subjects
of interest to frequent builders requires discussion beyond. the
scope of this guide. Knowledgeable owners and those involved in
various segments of the construction industry will probably have
some strong opinions regarding information in this guide. We
would appreciate your comments for publication in future issues.
There are many ways to accomplish successful projects. We
do not believe that all methods are best suited for all owners or
projects. Of the construction approaches available to owners, we
believe each method has a unique situation for which it may be
best suited. This Newsletter supports some type of construction
management (i.e., the integration and management of design,
construction technology, and owner objectives — see Page 2).
However, the success or failure of a given project has more to do
with the owners management and the level of competence excr-
eized by the participants, than the actual method used. The end
of the story is that we favor any metha! that will best accom^iish
an owner's objectives and serve his interest, most effecdveiv.
If it were possible, we would like to sit down vith each
owner and understand his needs, abili,.es and constraints. Given
that opportunity, one approach would easily be identified as best
for that situation. Since that is not possible, we trust this guide
will be helpful as you navigate through our project.
017NER'S RESPONSIBILITY
In most projects, it is obvious the owner has the final
authority for major decisions. Therefore, he is responsible for
the success or failure of the project. We are continually amazed
that owners do not want to accept responsibility for the pro-
iect outcome if it is not successful. One of the`mijor subjects
not adequately addressed by owners is his management of the
individual construction project. Someone must insure that
adequate planning, organizing, leading and contio!ling is hap-
pening. This management may be performed by the owner
himself or his employees, architect/engineer, contractor or
other consultant. But, in any case, someone must be identified
as the overall manager of the project.
SELECTING YOUR APPROACH
How can I get an overview of the.entire construction
process?
We suggest that you talk informally with firms from each
of the following segments of the construction industry.
Owners
General Contractors
Architect/Engineers
Construction !11anagers
Design -Build Firms
An owner embarking on a project of ary ;i2nificancz
would be wise to talk to at least one firm of each of the varet;cs
above, just to broaden his understanding of the process and the
various viewpoints.
The risk here is that you as an owner may not be adequate-
ly prepared to evaluate and sift through the information voe
receive. We are not prepared to celiev=_ that an owne• should be
protected from obtain;ng information, and therefore feel that
the advantages of obtaininz information on the various view-
points outweight the disadcanta�cs. Our emphasis is that t110
best aocroach for an owner is to have as good an uni-rstardin:
as possible of the methods available to him, and then select the
method best fitting his needs and objectives. All of tho approaches
have advar rages and disadvantages. The owner mus. match the
best approach to his objectives.
PAGE 1 r1ARCF11976
CONSTRUCTION MANAGEMENT WORLD is a monthly newsletter Global .Manegernenl Company, W. Marvin Ferrell. publisf cr. Su1>- 1
deigned to contribute tothe expansion -J the consuucliun maneye- scriptions: U.S.A. $10 per gear, Canada 540, Al other coumL"s $50,
ment profession by presentin^ current acnwues, future trends and Forward address changes (with old address and zip Codas,=w)+rrip-
e•mphasizing the basic pimciples tor sound conslrucnun manage- tions, renewals and undeliverable roprc+ to Y.O. Box 2612. Cnlum-
tnent. Construction Management 14orfd Newsletter is published h'9 bus, Ohio, 43216. Copyright (D W. ,Marvin Ferr•II 1976.
J
TItF OWNER'S OBJECTIVE
The best approach for an owner for
a specific project
tinclude
object d
jeets; namely, the owners
his situation (see next article). In several
terms, t.'-.e ubiectives for most owners are
for ssa�- tiro z n oc a, . .. .
jin
terms of specific description and in terms
of their relative importance to the owner.
What arc the objectives? We believe most
owners will end up with the following
five.
1, A FUNCTIONAL FACILITY. A
facility, whether an industrial plant,
school or office that can be used by the
owner for his intended purpose. A facil-
ity that would maximize and contribute
to the operation or use. Too often,
owners sacrifice function for cost when
the same function could have been ac-
complished in a different manner for the
same cost.
2. A REASONABLE COST. The owner
wants to end up with a cost that is con-
sistent with his other objectives. The
word reasonable is used to imply an opti-
mization of cost with the other ob.ectiv'tess
of the owner. It is always possible
build something at a lower cost given
THE O'i..AER'S SITUATION
enough time, effort or sacrificing of other
objectives. Too many owner's are lead
into achieving lower cost at the sacrifice
of other more important objectives-
3- A WOti`,k3l F SCHECQLE_ >
.,?btdole that viil-Prodar
,desired in time to accomplish the owner's
use objectives. Also, by reasonable
schedule, we mean a schedule that will
incorporate the owner's and other man-
power resources on a palatable basis.
4. AN APPROPRIATE IMAGE. The
character of the facility
world, employees,
community, business
or when applicable, one that is responsive
to the desires and requirements of the
community or environment within which
the facility must be, located. Even for
facilities where the owner has no primary
interest in this area, we are sure the
governmental requirements or con;mun-
itv standards will continue to require
serious consideration in this area. QUALITY. A
5. A REASO., -_
quality consistent with the other objec-
tives. Included here are quality consid-
erations that encompass maintenance and
long-term operating costs of the facility.
What are the problems or d,-ficult
areas faced by today's owner? We s-iggest
the following for owner's that build
infrequently.
�. DEFINITION ASSISTANCE. Assist-
ance is often required to define real needs
in a way that can be translated to a physi-
cal facility. We stress that this is an area
where professional organizations can
assist owners; however, many times the
owner is not sufficiently involved in the
definition or programming of his facility
needs. Too often, the owner assumes the
professionals are able to rdequately
understand his needs and consequently
he short-cuts this initial step.
2. THE BUDGET. The second problem
that the owner faces is a limited budget
and the inability to determine reason-
able budget objectives. Public agencies
often are required to determine budget
information for bond purposes prior to
adequate definition of the intended use.
3. TIME SHORTAGE. It is difficult for
the infrequent builder to forecast long-
term facility needs adequately prior to
the required start -date. After the need
has been perceived, the owner is struck
that there will be a considerable time
lag between perception and compietion
of the financing, design and construction
activities until he is able to use the
facility.
4. MANAGEMENT ABILITY. Most Of
us, by the time v a arrive at the positions
in which we are responsible for a con-
struction project have learned a fair
amount about management. Whether we
admit it or not, there probably is a gap
between our knowledgement of manage-
ment and our ability to apply the knowl-
edge that we have. The construction of a
new facility is a complex proposition.
Obviously, it involves definition of the
owner's needs, land, location, acquisition,
financing, design and construction. The
list of items is sufficiently complex by
itself for the infrequent builder, but
associated with almost every item is a
host of other alternatives. At each turn in
the road, different drummers are beating
a different tune to the owners concerned
car. "Many of the different drummers have
a legitimate tune, though they are all not
equally appropriate for a given owner or
situation, but the drummer,, may be
reluctant to say so since the an obvi-
ously affects their economic future.
So the owner is faced v.ith gather-
ing information and safely navigating he
project through the decision maze whilt
listening to the constant cry that time i
running out. Too often, the :ounselor
available to the owner arelookingthrougl
tinted glasses and offer tined advic
while not adequately comprehending th
owner's viewpoint.
WHAT IS CONSTRUCTION
MANAGEMENT?
Wise and able individuals have put
forth many definitions of construction
management. Most have been nplicaht:
LO sttcc,ific si'.•aa:,.QM or have gwpb_sia:
list 7adt tTat a tartsa u t on mana.rr m �;
start from a certain background (i.e..
architect, en„ineer, contractor, etc.) Nor-
mally, CMW Newsletter considers con-
struction management as that process
which brings construction technology to
the design process to serve the owner's
interest. For the purpose of this News-
letter, a broader definition is intended.
Within -the following definition, a
number of types of firms (constructior.
architect, etc.) can perform eonstru tion
management. However, the definition is
stated in order that same of the major
needs of an owner can ba �atjsfjed for h:=
project. Others would call this definition.
one of project management or prc:xC
administration.
Construction management is tie
process through which all the cctiv;ti=s
of a project are managed and integrar_:i
to best serve the owner's interesr
f, TOTAL MANAGEMENT- A
central overall responsibility is required
for management (pian, organize, leas art
control) of t'ie entire project includir;
the owner's ::,.ff, the architect, con-
tractors, legal, aecounur^, ctc. The owner
that builds infrequently may be wise to
assign this responsibility of total manage-
ment of the project to an individual e'
firm that understands his interest and the
project requirements. There are ccnsult-
ants , architects, engineers, construction
managers, contractors, desim-build orgar,-
izations, etc., that will include this area as
part of their service. Thou�h the number
u provide this service
Of firms that say they is relatively large, the number that actuai-
ly do it effectively is small.
2. TOTAL INTEGRATION. All the
various aspects of the project roust ce
adequately integrated and coordinate:
throughout the project: Particular atten
Lion should be given to ensure th_t t.".
design process and construction'ech^c
eac
ogy are meshed to comliement
other throughout the Project. The!
responsible for the purchasing and col
struation of the project should be i.
voivcd and contribute during the dasi;
process and vjce-versa. Twenty years at
very few projects Permitred coordinati,
of design and construction. Tod:
probably over 50 per cmt of Unit
States construction involves some sort
design and construction coordinati
through the use of construction mana
ment, design -build or other methods.
y CST APPROACH?
This table is reproduced from the
June, 1975 issue of cMRr Newsletter and
indicates the author's opinion of the
advantages and disadvantages Of various
approaches. The table assumes firms of
above aver;lgc ability, eornpctence and
integrity. Since different contracting
methods may be able to respond to the
same factor, the level of response is
judto
ten (ten is best). The table is a simplified
ged by the author on a scale of one
statement of complex issues, but it is
DFCsented to assist Owners evaluate
far:r is -aproaches.
�. c must state that factors can be
guilt into the contractual relationshio of
each approach toovercome disadvantages.
For example, construction managers
under the team approach may guarantee
the total cost of the project simli it to the
design -build approach (though some con-
tend this may not be desirable).
In general, the author feels that
most owners will benefit by a
team, total
service or a design -build approach as op-
posed to the traditional approach which
would involve design followed by con-
struction. Our opposition to the traoi-
tional approach is that first 0. is
PROJECT APPROACH ADVANTAGES
Advantage
Bondable price prior to design
Bondable price after design
Permits price competition
Permits early comPletion
Cost input during design
Reduces inflationary impact
Single responsibility to Owner
Minimum time involvement by Owner
Maximum Owner control
Maximum commitment to Owner
Lower total mark-up
Maximum cost control
Opportuntity for best design
A SELECTION PitOCEDURE
Traditional Total
project Team S-rvlces
Approach Approach ArPrOacn
10
10
10
10
10
10
10
10
10
8
10
10
10
10
10
10
9
9
10
10
a
10
sequential in nature. It proceeds from I
design to construction with responsibility
for the various phases transferring from
the architect to the contractor and re-
quries completion of design before going
to the next phase.
Second, minimum control is avail-
able to the owner. Under the traditional
approach, the owner is only able to
evaluate how the project is accomplishing
the objectives at two points, namely at
bid day and at the end of the project
Evaluation at bid day may force the
owner to move ahead regardless of the
cost because of complications resultinb
from redesign or delay in the completion
of the project.
Lastly, evaluation of cost by those
representing the construction segment of
the industry does not happen during the
design process. Though many architects
and engineers are able to do a good lob of
evaivatin; the relative difference in cost
between two items, they are normally not
equipped to do accurate cost estimating.
This fact is borne out of the numerous
projects whose final cost varies signifi-
cantly from its estimated cost.
THE TOTAL PROJECT
The following list is intended to
serve as a guide to issues that may m:cd
to be considered for a project. The list
is dis ided into the areas where the respon-
sibility may lie in a traditional project.
ARCHITECT
Programming of Facility Requirements
Master Planning
Design Solutions
Construction Documents
Architectural -
Mechanical
Electrical -
tandsutpe
Food Service
Interiors
Equipment
Process Design
Site Development
Field Observation
CONSTRUCTION
Construction Plannindond Scheduling
Estimating and Value Analyses
Bic: Package Determination
Bid Jar Seiection
Bid ':ocurement
Construction Contracts
Field '•uparvisor
Coordination
Checking
Expediting
Construction Accounting
Safety Program _ -
Equal Opportunity
Affirmative Action
OWNER ISSUES
Oeslyn-
Definition of Project tobjeCti':es
Ap uI ach
Market or Owner ;deed Studies
Economic Feasii>ilily
10
Financing or Funu:ng
P"Itminary s j. _. atlny
10
Community Rc',ationa
Governmental Cosrdination
Location, La'_or, Tr; n5pOrli:,On Studies
10
Site LOGation and Erg luatlOn
3
Site Ne90MV ran and Acquisition
Project Legal 62rviCes
10
Project Accounting
10
Land Survey
Soils Investigation
10
Water Investigation
Utility Procurement
Operation Start Up
Training operating Personne;
Tenant improvements
Project Security -
Facility Lcc'.ing
Facility Mar..+9arTent
7 I
operational Pisnning
I!hlllillll!!!IIIIIIIII!IINII!I!I!!IIIIIII!!!IIIIIIIIII!NIIIIIII{III!Ilil{I{!illllll!':II!II{!IIIII!II!ill!!!II!I!I!I"UIIii1jC':I{
A review of the proposa•s recei'-ed
How should I proceed with the
selection of an architectjen?ineer, coo-
strueticn manager or design -build firrr. far
my project?
The following list may be helpft 1:
1. Interview as many firms as you like
(say five) that offer the type of servit a or
approach you want to pursue.
2. Select two firms you are comfortable
with and that can deliver the services YOU
desire, whether architect, construction
manager, design -build, contractor, etc.
3. Verify the references of the two firms
sele ted to insure that the rt..lts of past
projects correspond with .heir sales
prese•'.ation and your basis of selection.
4. Re:;uest the two firms to submit a
proposal for their services. The P`cPPcfl
should include a project apF o
sonnet t' be usedschedule,
foreyour project,
budget t king,
but exclut their fee.
J.
will more than likely emphasize the dif-
ferences between the two t irm<- and at the
same time increase your prosV'_'tiv' of
the project or services proposed. Not
requesting a fee helps the proposers
realize that you are interestzd in compe.
tent services and not just the lowest fee.
(continued on page 41
PAGE 3 MARCH 1976
Heery Associates reveals
its recipe for CPO fees
By Rita Tatum
Associate Editor
Most people associated with the
construction industry can figure out
approximately what percentage of
construction costs makes up fees of
architects and engineers. And they can
make fairly good guesstimates on the
size of the general contractor's
_contingency.
But construction management fees
are a different story. While many
guess them to be about three or four
percent of construction costs on a
project, CM is still too new and
nebulous to peg them with much
degree of accuracy. Even less is known
about how the fee actually is
determined. And no one seems
interested in unveiling his fee recipe
for fear of revealing trade secrets. No
one, apparently, except Heery Associ-
ates of Atlanta.
There's nothing magical about the
way we arrive at our CM fee," says
Heery Associates' new president Louis
N. Maloof. Whenever possible, the
80-man/firm's fee is one percent of the
project's estimated construction cost
for the first $10 million, and
three -fourths of one percent for any
amount over the first $10 million. The
fee covers salaries of the firm's
principals as well as a profit of
between 10 and 15 percent.
"That 15 percent is an ideal profit
margin," said Maloof. "Actually our
profit margin generally lands between
8 and 13 percent annually."
While the fee itself is set from the
outset of a project, the variable built
into the Heery Associates' approach is
the reimbursables. These include
manpower, computer time for pro.
gramming, and other essentials appli-
cable to the project.
"Currently, about 50 percent of our
work is done with this approach,
including a county building and three
schools in Cobb County, Georgia,"
explained the 40-year-old ,Maloof. "We
would like to do all of our work this
way. But some clients, either because
�p' a
r-
I
I
wlaloof: "There's nothing magical about
setting a CM fee."
,.
i
Heery: "The
owner needs the CM on his
side."
they are public and already have CM
formats they are bound by law to
follow, or because they prefer paying
CMs in another manner. want differ-
ant fee structures. Whenever pcssible,
however, we try to sell this approach
because it is really in the best interest
of everyone involved."
Chartered in 1969 as the construc-
tion program management subsidiary
of Heery & Heery, architects and
engineers, Heery Associates believes
the more flexible approach to setting
CM fees actually is in the best interest
of the client. Board chairman George
T. Heery, who also is president of the
parent firm, Heery & Heery, main-
tains that Heery Associates "doesn't
want to let happen to CM what
happened to architects. Production of
drawings and specifications is not
strictly service oriented. And while
some A-E firms presently are trying to
separate their fees from their over-
head costs, many still do not. That,
plus other things, often has made
owners and architects adversaries."
Creating flexibility —Maloof believes a
CM must be able to bend with the
situation. And by eliminating the
possibility of a fixed fee that could
cause the firm to operate at a loss on a
particular job, CMs are better able to
serve the client's interests rather than
their own. "As needs change, we an
add or subtract men from the job," he
says. "And both we and the client
know that were doing this for the
owner, not ourselves. We've alre.idy
made our profit margin in the
already -established fee. Now the
owner is paying only for the time spent
on the project. The client is reimburs-
ing us at cost, no more."
The approach has paid off for the
company which provides CM services
on projects where Heery & Heery isn't
the architect. Its 1975 billings sur-
passed the parent company's by more
than $1 million. "This past year we
have billed $4 million and Heery &
Heery has billed $3 million," said
Maloof. Nor does Heery Associates' fee
structure cause it to be non-
competitive.
On the recently -completed Cobb
Countv Administration Building in
Georgia, a $2.1 million, multi-s.ory
structure, Heery Associates' estimated
fee was'$67.000 or just a little more
than three percent. The actual fee was
$67.278. Of that amount, $19,270 was
the firm's fee and $43,008 ,vas
reimbursables.
66/9UILDING DESIGN 6 CONSTRUCTION MARCH. 1976
.n
y r:
t K } Al
r 1
d >> 11 I
Y
1 31, 3
:1
4 t
�6i.. '; �1�e iw'LR R-f9Wr-A9ye.-li�
FtY�s�vruYst:'�eth a He ryAssoci.t.s'CM-ee-p
The Dodgen Middle Schoo! is one of three Cobb County schools to use the Heery Associates CM fee-plus-relmbursables format.
For the $4.6-million Walton High r-
School in Cobb County, the Heery's
estimate was $199,884, with $43.662
being the fee. Actual billings totaled
$199,881. "Generally wecan estimate -
fairly closely what the total fee will
be," said Maloof, "because we've been
using this format for the past six or
seven years."
The one percent of construction cost
fee figure was established after the
firm studied several hundred projects,
including all the job cost data. "We
figured out how many manhours we
were spending and set up a matrix,"
explains Maloof. The company ana-
lyzed projects on which it made money,
and projects that were losers. After
studying the data carefully, Heery
Associates decided that the one
percent fee would cover principals
salaries and a reasonable profit on all
projects done under this approach. ;
Occasionally the initial estimates
for the total billings miss the mark. -
For example, the $2.6-million Do en
and the $2.5-million Tapp middle
schools in Cobb County ran into some i
problems that caused the estimated
MARCH, 1976 BUILDING DESIGN A CONSTRUCTION/75
.4
CM charge for services to exceed the
initial estimate. Heery Associates
estimated its total billings on Tapp to
be $127,000, but actual billings were
nearer $136,000. Dodgen's were esti-
mated at $113,000, but came in at
$117,000.
But it's important to remember
that what caused these additional
costs was not our fee," said Maloof.
"There were problems that had to.be
ironed out that we couldn't forsee. The
client paid only for the straight costs of
additional people's salaries and so on."
The CM fee for Tapp was $24.254
and for Dodgen it was $24.393. In
neither case did the fee increase
because of unforseen problems. As a
matter of fact, when projects go more
smoothly than expected, as was the
case on a state office and cultural
center in Nashville, Tenn., the client
ends up saving money. "Our original
estimate for the fee and reimbursables
on the Nashville job was $75,900,"
JOINT VENTURES
A-E firm finds
benefits in owning
piece of tb.e action
Maloof explained. "But because we
received excellent cooperation from
everyone involved and didn't run into
any major problems, the client paid
only $67,000.
No adversary relationship —"I must
emphasize one thing. We believe very
strongly that the CM has to be the
owner's advocate. With our present
format, the adversary relationship
does not crop up. But if the CM is
forced to bid on his fees or give a
guaranteed maximum price an adver-
sary relationship can develop through
no fault of the CM."
On projects where Heery Associates
uses the CM fee-and-reimbursables
approach, the company is paid five
percent of its billings during the
pre -design phase. By schematics, a
total of 15 percent is due. This
increases to 30 percent after design
development, to 48 percent when
construction documents are completed,
For anyone having difficulty inducing
developers to invest in building
programs, Kansas City -based archi-
tects and engineers Howard Needles
Tammen & Bergendoff (HNTB) have a
solution: Invest your own money.
If that seems somewhat obvious, it
also is apparently effective. HNTB
recently took a 50-percent equity
position in developing a 156,000
square -foot distribution center in
Milwaukee's Parkland Industrial
Park. The experience has convinced
the firm that partial -ownership ven-
tures have definite advantages, and
several similar projects are in the
works, according to Joseph H. Looper,
partner -in -charge of HNTB's Milwau-
kee office.
"We saw an opportunity to combine
the HNTB capabilities to sound,
functional design, and construction
management with the extensive ex-
perience of Realty International in
industrial development," Looper said.
HNTB had worked with the Rich-
mond, Va., developer on several prior
occasions, but never as an equity
partner. The venture was also the first
of its kind for Realty International.
Relying on Realty International for
marketing and site selection decisions,
HNTB set out to "bring new imaights
into this desig-
n, build, and finance
process," Looper said. Rough dra%vings
expressing the general layout and
and to 55 percent after the bids are
awarded. The final 45 percent is
spaced out during construction.
"We believe this approach is
advantageous to the owner and to us,"
says Heery. "The owner knows that we
won't be overstaffing or understaffira
his project, because we've already
figured the profit and overhead into
our initial fee. From then on he's
paying only our hard costs."
It doesn't bother me to reveal how
we set up our billings," Heery
continued, "because whatever fee
structure is used isn't what's impor-
tant. We aren't getting CM jobs
because of our fee structure. Time and
cost control are much more important
to the client than the billings for CM
services. If a CM cannot save the client
three to 10 times his fee by better
management of time and costs, then
either the project didn't need a CM in
the first place, or the CM wasn't doing
his job."
A 156.000 square -foot distribution center in Milwaukee was a joint venture by Realty
International of Richmond. Va., and A -Es Howard Needles Tammen and Bergendo.tf.
spatial relationships were made. With
the help of the project's supplier/
contractor, Inland Steel Building
Systems of Milwaukee, a number of
price -related structural alternatives
were developed.
The distribution center was built at
a cost of $6.57 per square foot.
"I would guess that if Nye had just
gone out and arbitrarily handed this
building plan to a builder, we would
have been looking at something in the
area of $8.25 per square foot or
higher," Rowe said. "In fact, I know of
several projects that were very
similar, and one was done for more
than $10."
Ideal marriage —"This happened to be
an ideal marriage," Looper said,
noting that the combination of talents
in the two firms was well -suited to the
projects requirements. "But I don't see
why the same approach couldn't work
in commercial structures as well. This
just happened to be the way we got
started in equity building"
Rowe Looper and we both felt that the
"rather simple nature of the design" of
the Parkland project facilitated the
use of the design/build method. A
high-rise structure, for example,
might not afford the same flexibility
as an industrial building, Looper
pointed out.
"But even there," he emphasized,
"as an equity partner, you have the
ability to look at the total project from
beginning to end, and you're looking
with the developer —also your part-
ner —to reduce costs."
"I suspect," said Rowe,"that perhaps
the more complex the building, the
more the savings might be." Further-
more, lower construction costs won't
mean a substandard building, Looper
explained. "Since you're going to own
it, you're not interested in cost-cutting
that's going to add to your mainte-
nance problems later on, he said.
Taking an equity position in a
project is an obvious expression of
confidence in the ultimate success of
the project, Rowe noted.
"An architect," he continued, "can
be as proud of a $6.57 per -square -foot
warehouse that does its job as he can
of a building that wins a number of
design awards. It's a matter of
adapting his design skills and business
sense to the realities of the market-
place."
76/BUILDING DESIGN 6 CONSTRUCTION MAACH, 1976
EnB�e`�
revive
By %Va}'tte Siart
Associate Editor
In 1972. it seemed that New fork
City -based George A. Fuller Co. was
close to breathing its last breath in the
construction industry.
Founded in 1SS2 and contractor for
such landmark Structures as the
Lincoln Memorial in R'ashim-non. D.C.
and the Monadnock Bui!ding in
Chicago, the firm was facing a
Chapter 11 barikruptcv and outstand-
ing losses of more than S20 million.
But through efficient internal man-
agement and a caretui blending of
construction and ccn.;trcrcion man-
agcment work. Fuller ims turned
around to come back as one of the
indu=_try's largest -volume firms. Bare-
ly surviving on a backing of S72
million in 1972, the firm boasted a
volume more than S920 million in
construction and C\i services in 1975.
Orchestrating the turnaro,md is
Robert W. Page, Fuller president and
7-1
.t4
tK
ter
LM
Nil
rrl
chief executive officer. who has hence
the company since Northrop Corpora
tion acquired control of Fuller i+
January, 1972.
Page, 49. is a civil engineer who ha:
taught at the American Universirr o:
Beirut, worked for Bechtel Corp. .an
later worked with the Rockefelle
family on the development of hotel
and other facilities in the Caribbean
Ile said Fuller's problem was one o
mismanagement, the results of which
were aoparent.
According to Page, the firm had a
backlog of S72 million at one time,
enough to keen the 270-member staff
occupied for xis to ei;_ht^..on.:ha. After
that, sound management would dictate
a reduction of company overhead in a
lean neriod, including a reduction of
the permanent staff.
To survive, Page turned more
heavilv to CNI as the fastest way in
which the firm could employ its
expertise and keep its full staff active.
Under Page's new direction. Fuller's
Fuller President Hobert W. Page emphasized Gl1 to keep the company alive.
viewpoint is that "construction man-
agement" is simply a new label for an
operating method which has been
practiced for years as "negotiated
contracting "
f
d CM for Survival —Fuller was no
r stranger to this CAI process. According
s to Page, the firm had been practicing it
since the early decades of the century.
But faced with Fuller's weakened
condition, Page viewed Cif more
earnestly for its survival value.
"There was no way we could go out
and bid work and expect anvthing to
break locse in less than a ^e+* " o_
said. o we naa to go c -r CM' to
rebuild the company. It could happen
immediately, and it was a ':ow risk
area. I didn't want to take the comoa .v
into any risk area in a recover-v
posture. We began to come back n ith
low, but safe, profit margins that kept
our people fully emplove,d."
Page attributes the firm's abilit_: to
get work in 1972 to a sheer will to
survive and a tremendous effort by the
staff to obtain work, `The first six
months I was here, I couldn't get
anyone to answer our calls." he said.
"Hell, who wants to work with ,a
bankrupt company? It was rough, very
rough, but we managed to pull back,
and in 1973 we we're able to start
bidding work."
In the drive for survival. Fuller
obtained a construction eovivalent
volume of more than S'd`<& r•;n in
1972. Of this, $200 miil.on wa_ , CM
services. These services, in is,n. cad a
double benefit of stabilizing the
company while keeping ocerht.ad
down at the home office.
Page explained that the Bari_•: states
of CM involved estimating, design,
scheduling, legal, and purchas.ng
functions, all of which are cart of she
normal overhead for the construct on
function itself. But, since construct 3n
is not a steady volume husin,--.i. '.he
staff involved in the-e overhead
functions was not occupied for the I ull
12 months of the year. As the cocn,any
cycled through a low period, the CAI
]]/BUILDING DESIGN a CONSTRUCTION 'A". 1976
rcbuilding,phaec.
Ile said•thout;h.thatthc key to the
rebuilding was in th„ pn,per nu%ttvo
of construction and t')S work.
1 jhc total op racon cannot Ir re
or lump sum either,' Yse said. "'S'here
istoomuchriskononchand ancithcre
isn't that much profit on the other. ;o
car, we try to anticipate what
ourryeve, ytotal contract acquisitions are
going to be. In 1973, we decided to
concentrate on cost-plus contracts and
' er
guaranteed maximum work• but nc
"-- percent of Our
to take more than 0 P' work.
total volume in lump sum
^With lump suns, there's too much at
' stake for the amount of profit
involved. So, we never have exceeded
1 20 percent of our total volume in lump
sum work. We're keeping our bacKkg
�T"
?� basically in CAS work. I th9uaranCeed
•,� -, , .,�• moving more into a
.e h{_�, ` maximum toped of w'o
fl\ It`' -•lam
The blending PP a arenthy has Paid
r
off. In 1975, Fuller enjoyed ,rn its nd. ItsecOns
Li-+ - year of profit since the turnaround. Its
r _ staff as been enlarged to . 1
-s-£:v _....�.�•=-_= permanent employees. and its fixed
--
t 1 price contracts -a mo` ePe about t100
_. J� of work than C.•I-
million. New domestic contracts were
.� about $400 million in euunalent
volume. Chi services. Page said• have
'. averaged '35 Percent c<. is o rao
Crowning the company's �orticron,
rovai by
-.� recovery was aPP
the parent co'PO t-or Fuller t t
[ ✓ p
move into the international mat k"t. it
has done so in joant venture with a
Saudi Arabian firm for the cor.-trx
tion of health care facilities in S3
c� d construction of a r
for Aramco an force
base facilities for the o er an'
Pp e
��--^ - -- - Despite the foreign operation
stressed that Fuller is and wui er a,❑
in outloo:1.
a domestic company
"Foreign work i a good thing for a bit
f us, he said. `It increases our
o
one,, but its not
_ volume and makes m anv to
all fe-saver. li'e rebuilt the comP.o
the domestic market. I'm not _^
F - 't an tern tional on, -
make i to a c
- - - ----_----- - - , -, Some day the demand aboard is gou:g
_ to falter, and I don't want a big .
- ' ; organization here that's to^r.^_ to
support half tiie organization there.
_J There is work here -you just have t0
• sorts comPt2x (above) included ootainipg critical steel supplies go out and find it."
i, - >
CM for the New Jersey P construe:inn rncving when a coal strike shut down steel
lrom a producer to keep
construction.
work helped to "fill out the '0"' Points.
It also allo+ved fuller to charge Off
some of the staff to these projects.
Page said that Fuller,
becC`SO more
its
background, can
realistically than can i .. offering
the services which are not acu;ally
involved in contracting.'1'hia is su. fie
said, because Fuller's apprcricl"!.pnialln
a.ate
monitoring a project with
in-house teams that qpe swith4e ill na
design or construction phase,
single manavc r who follows the project
fror,
.1 start to finish.
Bolstering profits -Although C`+l pro-
vided a relatively secure income ttor
it
Fuller, it did not provide the pr
ruIv
margin the Firm needed to be
viable. To add to the profit picture,
Fuller took about $6 million in fixed
price contracts in 1972. This Inw
profile ,was intended, Page said,
because the firm was still in the
New jersey project -The two
philosophies_ -that work car. be found
even in a depressed domestic ccn`r,. c-
tion market and that a c J`I ach.. e
approach is beat suited to
produced tangible results. A Prtt'0
example is a current project, ;0
million sports complex in Hacl:en.= i:k
�feadowlanda, .,ew der=ey, for v n.ich
Fuller is C+•S although it is ut
performing any actual construction
w•or K.
The two major elements of the
cz
+I }�I+ -~• ���.. - �. it �•_ —...1�
r
rrtx
,;,,:_'' '
i,
Even in a depressed New York City market. Fuller has been active and doing C:1 on the
Veterans Administration Replacement Hospital in the Bronx.
complex are a racetrack and a stadium
scheduled for occupancy in September
and November, 1976 respectively.
Owner is the New Jersey Sports and
Exposition Authority. Cousulting ar-
chitects and engineers were Ewing
Cole Erdman & EubankiClauss &
Nolan of Philadelphia.
Fuller's CAS on the 500-acre site
started June 1, 1974. Prior to that. the
firm had been engaged as a construc-
tion consultant during the design
phase. "This thing had to be fast -
tracked, and it had to move right
away." Page said. "Excavation and
clearing had to be under way :oa1,
before the drawings were completed.'
Even though Fuller had baen
involved with the project since the
design phase, getting the management
contract was not easy, according to
Page. He said there was fierce
competition from New Jersey contrac-
tors for the contract, but that in
rebuilding itself Fuller had developed
a staying power in -s search for work.
It paid off on the \'c:•: Jcrsep projt•ct.
"From the day we were first
contacted to the day we got the
contract, it took 14 months of agony,
negotiation, discussion, and resear.h,"
Page said. "That's how thorou\_h they
were in picking the C.M. And were
proud of the way the project has
turned out"
Although Fuller was CM on the
project, Page said the firm acted lCce a
general contractor in that it awarded
the construction in several packages.
However, working as a construction
manager rather than a contractor,
assuming a wider role. Krominr a
developer and entropreneur i the
sense of being a canllyst to
development. Thi. effort. he said.
would entail Lill' done6gm„•nt nt 'I
project from fea-:11,thty eUl;ic tl',r•+u 'lt
arrangements for financing. All that
would be needed would be th- r-oject
owner to put up equity monev.
To this end, Fuller is working on the
feasibility study for a hotel and a
theme park to be located on land
within the sports complex.
culler saved the client the fee that
vould have been needed to hire a
contractor, according to Page.
"We were not responsible for
guaranteeing the project cost." Page
said, "but were responsible for
awarding and managing the multiple
subcontractors, of which there were
more than 50 in the various trades. R e
audited the project on a month -to -
month basis with rigid, detailed cost
reports. We had about 65 people on the
site —almost a small company —to
monitor various aspects of the project.'
Page cited two examples of how h
believes Fuller was better prepared t
handle the material and labor aspect
of the New Jersey project than woul
have been a firm without an extensiv
contracting background. In December
1974! the project ground to a hal
because of a coal strike threat tha
halted steel production. Because it wa
a contractor as well as a CNf firm, Pag
said Fuller was able to get priority o
steel shinments to complete t
protect.
Dealing with labor was a matter
understanding its needs, he said."W
sat down at the start and talked v:i
the subcontractors and the lab
unions," he said. '"They understo
that you may be a manager today, b
a contractor tomorrow. They want
keep their people employed, and
need their services. They knew w
we wanted, how long we had, and w
the cost schedule was. We didn't p
anv surprises on them, and they did
pull any on us."
Page sees Fuller, as a contract
CM evolution —Page believes that C:t1
as it is practiced today, while serving a
useful function, is one step in a return
by the construction industry to a
negotiated contract and single point
responsibility. "I think well see less of
construction management per se in the
future," he said. "We've had too many
people involved in it that really don't
know what they are talking about.
There's really nothing mystical about
it.
"'There are owners today who have
been burned and disappointed by C-f,"
Page said. "They don't want charts,
gimmicks, or sales pitches. Thev want
someone to come in and tell them what
a thing is going to cost, and then
guarantee that it is cirg to cost that
much."
The problem with CAT today, as Page
sees it, is that many professional firms
have developed management arms and
that there a firm should not manage
itself in the design and construction
process. To this end, he said Fuller
would perform construction on one of
its own CJI projects only when there
was no other viable alternative.
The smarter and more sophisticated
owner is seeking a reduction in the
e "bickering" between architects and
o contractors and more control over his
s project, Page said. He said this will
d mean a push toward what he terms
e "turnkey" operation. n n This
means,
. according to Page, „
t sponsibiiity but not necessarily an
t in-house design/construct capability.
s "I think CNI is an excellent idea. but
e it has to evolve into something else
n and be put into terms that are going to
he pay for the client," Page said.
-Someone is going to have to
of guarantee something. and there ran to
5'e be a single point of responsibility, be it
t% architect or contractor. A lot or
o;- architects today agree with this, and
ad thev think the re:-ponsibility will fail
,t to the contractor because he is closer to
tT the firing line.
we "I can see the diminishing of one
hst type of CA with another type cominr,
ha*. out of it. IC will still be managing, but
u I it will have evolved into someth; i,
Lit newer and more sophisticated,
th
more controls and more responsibilii--
o:, ty.
i
3slalglolur DESIGN 6 CONSTRUCTION MAY, 1976
Architect finds that CM
isn't all it's claimed
Construction management purports always to act in the
best interests of the owner. But there are as many cons as
pros in the Cbf approach, in the experience of Marshall W.
Cavitt, Jr., of the Atlanta firm of Cavitt, Brownlee S
Milam, Architects.
As a result of the use of CM on two projects in the past
year —one a school, the other a county administration
building—Cavitt concludes: "Any future projects done
using a CAI consultant will require an upward fee
adjustment for our services. We cannot maintain a
reasonable profit margin using our normal fee structure.
General contractors and subcontractors we have talktd
with indicate they will also adjust their bids upward if a
CM is used.
"By using the CM approach, more work is required by the
architect and his engineering consultants to prepare phased
documents for multiple eackage bidding," Cavitt said. He
added that owners of the two buildings also have expressed
reluctance to use Cbf on future projects.
While Cavitt allows that his tirm's experience with CM
may differ from that of ether architects, he feels the major
savings afforded by CM is in "calendar" time and that. the
number of man-hours required to complete a project under
CM may exceed that of the traditional design -bid -build
process.
No money was actually saved on the projects in question
and the owners in effect traded building cost for the CM fee,
Cavitt maintains. This allowed for earlier occupancy, but
also diminished the quality and/or total area of the
buildings. "We were forced to reduce our construction
budget by the amount of the CNI's fee and thereby give the
owner less quality or less banding area." he said.
Cavitt also feels the use of CM puts a strain on the
relationship between the architect and his client.
"We find that decisions made to favor cost and schedule
are fine until a problem results," said Cavitt. "An owner
somehow has 'memory lapses' when his 'cost-sscheduie'
decision results in a problem. The architect must face this
condition with the owner; the CM seems to have no
responsibility at this time."
V110 outside,
or teX1LrDn0 UM 4.v'-oiact
The logistics of th,, Cniforraed Services L'ni,•e ity of
Health science!Bethesda Nat a1 Hospital project of Bethes-
da, Md., make it sound like it couldn't get along without
CM: $200 million of renovation and new construction, with
another $100 million in Tarious stages of planning and
awaiting funding from Cn' fires. Yet despite the fact that
the design contract is repertedly the largest ever awarded
by the Navy, no CNN was ret.tined to manage the job.
It's not that the Navy is skeptical ahaut the usefulness of
CM, but rather a question of semantics. Explained Com-
mander William J. O'Donnell, assistant officer in charge of
construction for the Naval Facilities Engineering, Com-
mand (NFEC), the agency which commissioned the project:
"The whole concept of CM boils down to getting the job built
in the shortest time, with the least amount of bucks. That's
what NFEC has been doing —in house —for years."
Initial planning for the project began in June 1974, when
the joint venture team of Eilerbe, Inc. of Bloomington,
Minn., and Dalton/Dalton/Little/Newport of Cleveland was
selected for architectural and engineering services. The
new construction will include both additional hospital space
and new medical school facilities.
NFEC considered employing a Cbf, but decided against
it, according to Commander David Bottorff, deputy officer
in charge of construction. He indicated, however, that
NFEC would continue to view the use of a private CM as a
possible alternative.
rc ?act conducted
Lo satibly Ca maestro
A lot of problems—inoicment weather, labor disputes.
rnaterial shortages —can come between a construction
manager and completion of a project. But the building team
for the Academy House project in Philadelphia may be the
first ever to have been restrained by a symphony.
Fortunately, everyone remained composed, according to
CM Edward Ackerman of Arthur A. Kober Construction
Co., and Otto E. Reichert-Faciiides, architect for the
project. Academy House is a 37-story, multi -use structure
which, on its lower levels, interfaces directly with F'iiladel-
phia's historic Academy of Music. As much as -ossible,
Ackerman and his team attempted to work ara.:nd the
concert schedule of the Academy, relegating the noisiest
construction procedures to periods when the Philadelphia
Orchestra was on summer recess.
The architect and C:vI recalled one occasion during a
matinee performance, however, when the builders were
suddenly confronted by a panic-stricken aide of the
orchestra's conductor, Eugene Ormandy. He inform A them
that the maestro simply couldn't continue with the noise at
its present level.
"At first, it was a little difficult to impress upon the
construction workers the importance of the situation, and
of Mr. Ormandy's reputation as a world-renowned figure."
said Ackerman.
The immediate solution, Reichert-Facilides said was to
terminate the day's construction activities. When the work
was resumed, the worker empioved a quieter but more
expensive drilling procedure to sink the heavy bEt:ms into
the grc and. And the music played on.
"The leading reason why we didn't employ an outside CM
was the funding arrangement," Bottorff said. �`ve found
that msj rr pieces of desiiin could be compkted prior to the
receipt of any dollars. This steered us more in the c'.irection
of large, lump sum contracts rather than a fast -cracking
technique, which is more geared to a private CM -type
operation."
SEPTEMBER. 1976 BUILDING DESIGN 6 CONSTRUCTION149
AGC survey finds
widespread CM use
The Associated General Contractors of America recently
polled its members to find out how widely construction
management is being used in the 50 states. A summary of
the questionnaire, now available to AGC members, re-
vealed that 12 states use CM extensively. ,.vhile the rest use
the management methods some or Tittle. No state indicated
that CM was not being used at all.
On private work. ACC members reported that only in the
District of Columbia was CM not used. On public work.
respondents said 16 states don't use it. Twelve states
require a guaranteed maximum price with the CM proposal
on public work.
In most states, contractors said they feel they are getting
most of the CM work in their area. But in Arkansas. Idaho.
Indiana, and North Dakota, architectural CM firms seemed
to get the biggest share. In Montana, contractors felt
engineering -based firms had the edge. And in the District
of Columbia, Hawaii, and. Pennsylvania, private consul-
tants appeared to win most of the CM contracts.
Arizona, Hawaii, and Virginia require competitive bid-
ding on public work. But they are not alone. CM contracts.
according to the survey, cannot be awarded or, public work
without competitive bidding in Alabama, D.C., Florida,
Kansas, Louisiana, Maine. Mississippi, Montana, New
Hampshire, North Dakota, Oklahoma. Utah, Vermont, and
Washington state.
The survey indicated that three states —Arizona. Califor-
nia and Minnesota —are currently attempting to clearly
define construction management through legislation.
A CM application
on 'Llie reservation
The Department of Health, Education & Welfare recently
awarded a construction management contract to Kitchell
Contractors, Inc. of Phoenix for several Title X projects on
the Navajo Reservation.
Designed by Hensley M. Lee, the projects will include
various Indian Health Service clinics and hospitals at Tuba
City, Kayenta, Chinle, Many Farms, Rough Rock, Pinon,
and Ft. Defiance on the reservation. Cost of the work will
be about 51.2 million.
The Title X program, funded by the Department of
Commerce, was initiated by the federal government to
stimulate employment for those who live in the project
area. Construction is sched aled to begin this month.
Grinding a pool
in on sciiedul�
Swimming pool projects gI nerally don't need construction
managers-. But Michigan'.: $1.5 million Waterford -Oaks
wave -action pool is a difterent story.
Detroit CM f;arG;n-Malcw Co. is coordinating construc-
tion of the unique pool for the Oakland Calnty Parks &
<For information circle 11
Recreation Commission. The project, scheduled for comple-
tion this summer, will have a footing built around it for
possible future enclosure.
Architect Swanson Associates Inc. incorporated a number
of features into the pool to allow handicapped persons to
make full use of it. Bathhouse entrances, toilets, wash
basins, drinking fountains, and a pool -ramp provide access
for wheelchair occupants. And a gradual slope built into the
shallow end allows youngsters, as well as the handicapped.
to enjoy a beach -like experience complete with waves.
The 180 foot -long pool will have a 3-foot-high surf
generated by 75 horsepower electric motors.
From evaluation to
production in 24 months
In 1972, St. Louis -based construction managers Sverdrup &
Parcel conducted a market and site location for Northwest-
ern States Portland Cement Co. S&P evaluated the market
potential and costs of three alternatives: building it new
grassroots plant, buying existing plants, or expanding the
company's Mason City. Iowa plant.
In late 1973. NSPC decided to expand its existing facility
as part of a $25 million growth program. ,%Inch increases
capacity by 282,000 tons and involves an additional ki'r, as
well as raw and finish mills with related buildings and
equipment.
S&Pprovided CM services during pre-design,design, and
construction phases. According to project manager, R.L.
Robbins, top priority was to order the kiln and milts before
escalation clauses became prevalent in the construction
industry.
The CM firm also monitored costs against a tight budget,
updated schedules as the job progressed, and coordinated
environmental and plant performance requirements.
As CM, S&P worked with six contractors, supervised
construction, and directed plant shakedown and start up.
Major increments of the expansion program were ready for
startup 24 months after S&P got the go-ahead.
;An extra 1.3 million
barrels —on sChadule
Althouvh it is still under construction. .Iil'.er Brewinz Co.
has decided to increase the capacity of its new brewery in
Fulton. N.Y., tBD&C, Dec. 1y74j from 2 million to 3.3
million barrels a year. According to construction manager
Gilba�e E wilding Co. of Providence, R.I., the fac lity is
proceeding on schedule and the additional LS-million
barrels will not delay the startup schedule slated for this
year.
Under Gilbane's CM guidance, Miller also will build a
$20 million aluminum can manufacturing plant just north
of the new brewerv, and is considering a glass bottle plant.
The brewery expansion and can plant will bring'•?iller's
capital investment in Fulton to an estimated $126 1 zillion.
compared to an initial $70 million.
The car plant will contain 150,000 square feet of space
and will produce about 500 million cans per year.
APRIL. 1976 BUILDING DESIGN 3 CONSTRUCTIOW59