Owner / Developer – Are You A Contractor Friend or Foe?
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It amazes me how many times a wealthy individual who is involved in financing a project will get into the minutiae of construction when they have a contractor working for them that is a practiced professional in construction. In many instances, the construction professional holds an industry specific degree and has more project experience than the owner, yet the owner insist on micromanaging every aspect of the project. This typically puts the construction professional in the precarious position of keeping the owner happy without compromising on safety, quality, cost and timely delivery of work.

What drives this mindset?  Is it lack of trust or value in who they chose to hire?  Is it an attitude of being smarter than someone who chose a career in construction?  Is it vulnerability in what they don’t know or a possible interest in knowing while trying not to let someone know?

Whatever the reason the intention to save money, prevent the unexpected or to control, 99% of the time has the adverse effect. In addition, it is accompanied by antipathy from those that have no choice but to go along for the ride as “The man with the gold rules!”….or does he or she really?

Let’s take a look at how a successful in-house Owner/Contractor relationship works.
Owner initiates a project: (Office remodel, new ground-up project, build to suit etc.)

It may or may not have an official proforma tied to it, although the owner should have a budget in mind.

Owner or Developer side is responsible for funding, city/governmental approvals and how that will look.

Owner or Developer typically will work with the construction side to select architect or space planner.  The construction side typically is involved to make sure the architect is knowledgeable in the type of project to be delivered, to validate building schedule, cost and functionality.

Once schematics are produced, the Construction Management professional will then work simultaneously to prepare a preliminary budget which may or may not require preconstruction from a third-party contractor for accuracy.

A build-out that requires space planning can typically be priced by a knowledgeable Construction Management professional who can prepare a budget based on square footage and labor costs with the fit and finish of materials being the missing piece for a Guaranteed Maximum Price.

All projects involving any structural changes to a property require a set of plans to submit to the city for permitting. The architect would be who produces these plans, working with the owner for function and design and with the construction representative for schedule, budget, constructability and a second set of eyes to achieve desired function.

Your construction representative should be able to produce a schedule at this point with back-up as to how the schedule was determined.

Once a minimum of schematic design, budget and schedule are in place your Construction Management representative takes the lead.

They obtain proposals including qualifications and pricing from contractors and with you as the owner’s buy-in from their recommendation the contractor(s) are selected.  What you provide as the owner is how many proposals you would like (3 typically) and what you would like to see or not see in the proposal.  In addition you provide the parameters as to financing, release of payments and how you will communicate decisions that need to be made.

What you as an owner should not do:  You should not negotiate the proposal.  This should be the responsibility of your Construction Management Professional.  You should remain as the leader coaching as needed, but empower the contractor to do the job you hired them for.  You provide guidance, accountability and the goal.  Give them the rope and communicate so they don’t hang themselves or want to hang themselves vs live through your project.

Once an agreed upon budget, schedule and contractor(s) then you provide support to the unanswered design questions and items to allow them to complete the job, but let them do their job.

When I served on the board of the Construction Executives Association one of our speakers was Peter W. Schutz who was the president and CEO of Porsche between 1981 and 1986.  His presentation resonated with me to this day as he was a leader that understood he was not the expert on race cars.  He was the leader that asked questions and charted the course for the experts that worked for him to produce results.  It ultimately saved Porsche as a company and the 911 model which he credits the team for.

You have 86,400 minutes in a day.  You have a labor burden cost associated with that time and hopefully a bucket list. If you are a Developer it is probably in excess of $500 an hour. So, with that said, for every hour you are hands on managing construction you are spending at least $500 and realistically you are probably using that cost and time to prevent you from moving a deal forward that could make hundreds of thousands, if not millions of dollars, create more jobs and maybe even change a community. In addition, you may be intimidating to those less prosperous than you who may not open up to you so freely, thus combining that with your delimited construction expertise can take a project south fast.  So does the man with the gold really rule or does he just think he does?

The best money you can spend is the money to work with a coach to help you implement the communication (verbal and documented) process that will work to give you peace from anywhere in the world that you are not being taken advantage of in the construction process.

So, are you Owner/Developer – Contractor Friend or Foe? It has nothing to do with how nice you are to them. They need to be able to do their job.

 

 

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