You can't build without the benjamins--bidding and negotiation, Part 1

I had a request recently to do a post on bidding and negotiation, and I'm embarrassed that I haven't done one yet (or if I have done one, I can't find it in the Intern 101 archives). Bidding and negotiation is probably the hardest category in which to get IDP experience, though it probably vies for that top spot with the on-site CA category. There seems to be some mystery involved in how the process works. That's due in some part to architects being cut out of the process more and more, which is a side effect of changes in how buildings get built in the first place. So in order to understand how bidding and negotiation works, we need to understand the three primary ways in which buildings get built. It revolves mostly around the role of the contractor, and at which point the contractor joins the party.

Design-Bid-Build

This is the way buildings have been built through much of the architecture/construction industry, though it's happening less and less these days. In design-bid-build, the architect develops a design with the client, then s/he completes the construction documents. At this point, a list of contractors is assembled. These are the contractors that will be allowed to bid on the project. However, up until the past twenty-five or so years, this process could simply be accomplished with a notice in a construction trade journal or even a public newspaper: "New 30,000-sf elementary school for Blank County, construction to begin in July 1970. Contact XYZ Architects for documents," or something like that. Bear in mind that the past quarter-century has seen a major increase in the number of architects as well as in the number of contractors and other construction tradesmen. In previous eras, the limited amount of contractors meant that they would self-select for projects--there weren't that many around that were big enough and skilled enough to handle a 30,000-sf elementary school, so the architecture firm would only get a few inquiries in a smaller market and maybe five to ten in a larger market (like Chicago). Now that there are so many contracting companies in existence, the owner will either have a few companies that they favor (if they've done projects before), or they'll look to the architect (if they have no experience with contractors) to come up with a list of invited bidders. This keeps every Joe Schmoe with a truck and a ladder from trying to go after work that they clearly have no business doing.

The architect traditionally handled the design-bid-build process, though now and then the owner would run it. At the start of the bidding period, the architect provided all the contractors with copies of the drawings, and the contractors were all given X number of weeks to review those drawings and create an estimate of what they thought it would take to build the project. During that time, if any contractor asked a question about the drawings ("what is this entryway made out of? there's a dimension missing on this elevation...? Can we substitute one material or product for another on the drawings?"), then the architect had to provide that information to all the contractors. Because of this, architect would sometimes provide a Q&A period, at the end of which the architect would issue a list of all the questions and answers to all the contractors. Then, no more questions--go price the drawings! At the end of the pricing period, all the contractors turn in their bids (their estimates for what it will take for them to build the building) to the architect, sometimes with the owner present. Sometimes, the bids were opened in front of all the contractors, and sometimes they were opened and reviewed with the owner in private. The architect then suggests to the owner which firm should do the construction based on the bids.

And it's not just the final number, mind you--if the contractor with the lowest bid also included a bunch of stipulations in his estimate, they may decide to go with the next-lowest company that had fewer or no stipulations. Also, the owner and architect may open all the bids only to find that all the bids are somewhat (or waaaaaay!) over the owner's budget. At this point, the architect and owner need to take a step back--were the drawings incomplete or unclear? Is the project underfunded? Are there too many bells and whistles in the project? It's at this point that a project undergoes value engineering, or VE, as it's known in the design and construction industry. The point of value engineering is to take cost out of a project without taking the purpose or usefulness out of a project, but I've seen it get pretty out of hand, to the point that finishes get really cut down to nothing, or even entire rooms get shelled in a project. (Note to self: VE is worth at least one post on its own.) Either way, after any budget issues are ironed out, a contractor is selected, and the owner signs a contract with the winner.

In design-bid-build, the architect works for the owner through the entire project (project planning through end of construction), and the contractor works for the owner throughout the construction process. Hence, the architect gets to know the owner a lot better than the contractor does in this process, and it's the architect's job to be an advocate for the owner and to watch out for their interests during the construction process. Some smaller projects are still done with design-bid-build, but more often these days we see CM/GC and design-build, especially with larger commercial, educational, and institutional projects.

In the next post, we'll talk about CM/GC and design-build construction processes. In the meantime, if you have a question you'd like answered or a topic you'd like to see discussed here, feel free to leave it in the comments or email me in the sidebar. Thanks!