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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