What You Need to Know Before Embarking on a New Building Program: What Really Happens on Bid Day?

1. What You Need to Know Before Embarking on a New Building Program: What Really Happens on Bid Day? Presented by: Robert L. Moultrie Chairman & CEO

2. Discussion Points • Trends in the Design and Construction Industry • Research Findings • Evaluation of Alternative Delivery • The Evolution of Project Delivery Systems Factors Leading to Alternative Delivery Methods • Critical Success Factors

3. 1st Design-Build Project - Macedonia

4. Design-Build Timeline

5. Trends in the Design and Construction Industry • A growing number of public and private owners faced with large construction projects and tighter schedules are using outside program managers to deliver projects. (ENR Magazine) • A greater acceptance of Alternative/Total Responsibility at Risk • All states, with the exception of two, allow alternative delivery • “Volume of turn-key projects expected to increase from 40% to 60% over the next two years” (Design-Build Magazine)

6. Research Findings from the Construction Industry Institute Regardless of delivery method, research showed that cost increases by the contractor were due to: • Lack of early planning participation by the contractor (constructibility reviews and value engineering suggestions) • Lack of previous working relations of the architect/engineer and the contractor • Contractor’s recognition of engineering errors during the bidding process, but there was no intercommunication

7. Factors Leading to Alternative Delivery Methods • Changes in Owner staff makeup • A focus on the Owner’s “core business” (and it’s usually not building large capital programs) • A need to downsize in-house capabilities • The business client and Owners have changed

8. Your Choices • Design-Bid-Build (aka, Traditional Approach) • Construction Management at-Risk • Design-Build The project delivery method defines the relationships, roles, responsibilities, and risks of all parties involved.

9. Owner Architecture / Engineering GeneralContractor S S S S S Traditional Approach: Design-Bid-Build Owner GeneralContractor BIDS OUT TO HIRES HIRES Architecture / Engineering

10. Owner Architecture / Engineering GeneralContractor Key: Contract Responsibility Communication Traditional Approach: Design-Bid-Build • Owner holds separate A/E & Construction contracts • Potential for adversarial relationships • Qualifications are rarely considered in contractor selection on public work projects • No assurance that design is within budget • No benefit of contractor input during design • No ability to accelerate project delivery • Owner has no input in subcontractor selection • Increased change orders • Owner does not share in savings: Contractor awarded Lump Sum

11. 2 Weeks Before Bid: Bidding Timeline 1 Month Before Bid: (In Today’s Market) Nothing happening, WHY? • Too busy on other bids • Plenty of time • Casual sub contact • All you are accomplishing is getting on the bid schedule • Manufacturers check specs to see if they are protected • Sub contact begins in earnest • Good contractors begin quantity survey or take-off • Bad contractors rely on subs for this and change order owner if quantities are wrong

12. Bidding Timeline Week of The Bid • Project execution planning and general conditions formulation • Alliances may be formed between subs and GC’s • Subs begin to look at the job and decide to bid or pass • Final Addenda is issued – subs begin take-off • Calls to subs from the GC get frantic • Manufacturers begin to look at the job • Bid packages are broken down Implications? • GC’s & subs are trolling for the right circumstances: • Holes in drawings • Weak / little competition • Good subs interest from their cadre • Where are the Owner’s interests in this process?

13. Why? Bidding Timeline Bid Day – Bid Time is 2:00pm • A good contractor will have a “box run” total price • Sub budgets + pricing + self-pricing + SWAGS • Before computers, this is where the cut & add sheet began • General Conditions & fees are set • Sub & supplier quotes start to trickle in • By lunch, should have a quote for each bid package except for mech. elect. & other specialties • Subs “shop” prices

14. Bidding Timeline Bid Day 1:30pm – CHAOS! • ½ price number is out that contains an alternate material • Should we carry it and hope we get it approved? • We only have 1 elect & 1 mech number out of 20 subs in each trade • Where are the sub quotations? • The low mason only has 85% of the block & brick in our take-off --and he can’t bond the job!

15. Bidding Timeline Bid Day 1:45pm – PANDAMONIUM!! All the mech and elect numbers have come in – including the 10 you have never heard of • You can not carry the low number – you can only shop it to someone you know • Do you have enough phone lines and people to get all the numbers? • We won’t use him again, unless he’s low!

16. Bidding Timeline Bid Day 1:55pm – DECISION TIME How much do we “discount” the project? • Getting all the sub quote numbers & tabulating them • Adding up all the numbers and addressing all the alternates and proposal technicalities • 1/3 Skill • It is difficult to win against “cheaters” / “shoppers” • How can we get unspec’d materials approved? • How will you buy-out your discount? • 1/3 Ethics • Did you get most of the right numbers? • Did you discount enough? • How “hungry” was the competition? • 1/3 Luck

17. What Really Happens on Bid Day?Traditional Approach with GC Bid What the Owner does NOT see. **Indicates lowest bid General Conditions, Site Supervision, Insurance, Fee and Bond costs are in addition to the above bids and included in the overall Lump Sum.

18. S S S S S Key: Contract Responsibility Communication Construction Management At-Risk • Owner holds separate A/E and construction contracts • Higher degree of teamwork between architect and contractor • Qualifications based selection; negotiated fees • Pre-construction services during design to verify budget and constructability • Project acceleration may be implemented • Subcontractors may be competitively bid • Open reporting to owner • GMP late in design • Owner may share in savings Owner Architecture / Engineering Construction Manager

19. What Really Happens on Bid Day?CM At-Risk Pricing What the Owner Does See

20. S S S S S Engineering Architecture Design-Build: General Contractor Led Team • Owner holds single contract for total Design-Build delivery • Architect is subcontracted to CM because CM provides the bond • Contractor (costs) driven approach • Bid or Qualifications based on selection • Pre-Construction Services during Design to control budget and constructability • Subcontractors may be competitively bid • Enables “Fast-track” construction scheduling • Well defined program is essential to define scope • Owner may participate in savings Owner HIRES Contractor STAFF or HIRES BUILDING PHASE DESIGN PHASE

21. Design-Build: Integrated Firm • Owner holds single contract for Program Management, A/E & Construction • Highest Degree of Teamwork • Qualifications Based Selection; negotiated fees • Integrated design and pre-construction from the start • Subcontractors typically are competitively bid • Enables fast-track construction • GMP early in the design process • 100% savings returned to Owner

22. What Really Happens on Bid Day?Design-Build Approach What the Owner Does See D/B * Value Engineering suggestions can discount bids by 5%

23. Traditional vs. Alternative Design-Bid-Build Lump sum amount established Bid Planning Architecture / Engineering Construction CM at Risk 80%Complete documents; GMP established Architecture / Engineering Planning Bid individual trade packages Construction 13.3% Faster 60% complete documents; GMP established OneSource Integrated Contractor Led 80% complete documents; GMP established Architecture / Engineering “Faster Fast-Track” Planning Bid individual trade packages Realistic budget or confirmation of cost limitation Construction 33.5% Faster

24. Delivery Method Matrix Project Delivery Options (with basis for selection) # of CONTRACTS Design/Builder (1 combined contract) Designer & Contractor (2 separate contracts) SELECTION TYPES Competitive Sealed Bid (Low Bid) Total Construction Cost is sole criteria for final selection Design-Bid-Build Design-Build Competitive Sealed Bid Competitive Cost Proposal (Best Value) Total Construction Cost and other criteria are weighted factors in the final selection CM/GC Competitive Cost Proposal Design-Build Competitive Cost Proposal Competitive Qualifications Proposal (Qualifications Based Selection) Total Construction Cost are not a factor in the final selection criteria CM / GC Competitive Qualifications Proposal OneSource Competitive Qualifications Proposal

25. Delivery Method Comparison Comparisons CM@Risk vs. Design-Bid-Build OneSource vs. CM@Risk OneSource vs. Design-Bid-Build 6.1% lower 1.6% lower 4.5% lower Unit Cost 12% faster 5.8% faster 7% faster Construction Speed 33.5% faster 13.3% faster 23.5% faster Delivery Speed 5.2% less 7.8% more 12.6% less Cost Growth 11.4% less 9.2% less 2.2% less Schedule Growth Table shows average differences between project delivery systems

26. Making the Right Choice • No one method is perfect for every project! • Selecting a delivery method depends on factors such as level of quality desired, budget, and schedule • Regardless of delivery method there are other tools that can help you meet your quality, cost and schedule goals.

27. Industry Tools • A well-defined plan • The use of Building Information Modeling (BIM) • Early Cost, Schedule & Constructability Input

28. Critical Success Factors Two critical success factors for any project, regardless of delivery method, are: 1. A well thought out, comprehensive facility plan that addresses all of the client’s objectives and all of the necessary requirements of the project, and 2. A competent and skilled manager, knowledgeable in the project’s niche market, to manage the program and implement the plan - from start to finish

29. Approach Planning Implementation DECISIONS BOND APPROVAL Ed Specs Guide Specs Manage Architects Master Plan Manage Bid Process Manage Construction Master Schedule Cost Planning Manage Cash Flow PUBLIC Program Manage Information Master Budget Re-Allocate Savings Enrollment Projections Manage Move-In & Commissioning Concept Design COSTS Time

30. Building Information Modeling New approach to building design, construction, and management Virtual three dimensional model that offers continuous and immediate information Parametric building modeling technology Dynamic… uses a relational database together with a behavior model to capture and present building cost and schedule information. Components Views Annotations ParametricChangeEngine PLANNING CONTINUOUS IMPROVEMENT DESIGN IMPLEMENTATION ANALYSIS

31. South Paulding High SchoolDallas, GA • Part of an overall Program Management At-Risk program, which includes construction of a new 100,000 SF elementary school as well. • 240,000 SF, 1,600 students • Auxiliary facilities: gymnasium, dining hall, 500-seat auditorium • Athletic facilities: 3,000-seat football stadium, practice fields, eight-lane synthetic track, and baseball/softball complex