COMPREHENSIVE DRYWALL BIDDING Making Exclusions and Clarifications for Strategic Bidding

1. COMPREHENSIVE DRYWALL BIDDINGMaking Exclusions and Clarifications for Strategic Bidding Gerald H. Williams, Jr., Ph.D., P.E. Construction Research, Inc., Portland, Oregon Stephen L. Iriki, Esq. Otis, Canli & Iriki, LLP., San Francisco, California

2. Introductions Gerry Williams • Estimator 1980’s & 90’s Donald M. Drake Company, bid over $2.5 billion commercial buildings • Worked on more than 50 drywall claims Steve Iriki • Construction Attorney • Negotiated several drywall contracts • Worked on more than two dozen drywall claims and more than 100 construction disputes

3. Overview • Structure of a Bid • Philosophy, Strategy, and Tactics • Style or Content? • Examples of Exclusions and Clarifications • Questions from the Audience

4. Why is this important? • The Economic Conditions/Climate require Strategic and Tactical Bidding. • Profitability of your project will be established by your bid and your contract. • There are a lot of common mistakes that bidders make. • Bid Clarifications and Exclusions can be tricky. • What the NWCB can do to help you:

5. Structure of the Bid • Structure of the bid is determined by the customer • Government owner versus Private Owner • Contractor versus Owner • Government Owners: • Responsive and Responsible Bidders Objective Criteria • Private Owners/General Contractors: • Responsibility and Responsiveness is Subjective • Post Bid Negotiations and Modifications Possible • This is where bid clarifications become very important

6. Can You Modify the Bid? • Public, competitive bids? Generally NO • Private, bid or negotiated procurements? Generally Yes/Perhaps/Maybe … • What do the bid documents say? • Hard bid versus negotiated versus hybrid • Subcontractor to General Contractor bids? • General Contractor makes the rules • Multiple GC’s versus single GC (CM/GC)

7. Legal Considerations for Modifying the Bid • Anti-trust Issues • Broad Agreements and Price Fixing • Anti-bid-collusion Issues • You bid low on this one; I’ll be low on the next • Contract Law Issues • What does the Information for Bidders say? • Does it Exclude Modifications and Clarifications? • What is the impact of Modifications in light of such contractual requirements? • Ethical Considerations • Bid Shopping

8. Philosophy, Strategy, Tactics • What is your firm’s bidding philosophy • Why are you bidding the work? • Bidding Profit? • Bidding for Work? • Bidding Risk? • Risk – is about minimizing uncertainty and the things you can’t control. • Profit – is about taking maximum advantage of uncertainty or lack of clarity • Work – lowest acceptable price to the bidder

9. Basic Strategies of Bidding • Lowest Possible Bid • Most Accurate Bid • Most Profitable Bid • What tactics are associated with each strategy?

10. Tactics • Lowest Possible Price Strategy: • Exclude and Omit (Active and Passive) • Obscure your bid the most • If it’s not shown on the plans – you don’t have it, but you may not wish to actively announce that you don’t have it • The intent is to provide only pricing for what is clearly shown and argue about it later • Risks associated with these Tactics and this Strategy is you may lose

11. Tactics • Most Accurate Bid • Clarify, and actively Exclude work that is not clearly shown, and provide Alternate Pricing. • Provide the most definite and defined scope of work in the bid possible. • Let the GC’s know something is not clear and raises the question whether or not other bidders have included it? • The intent is to leave little to question or fight about. • Risk is that your bid will be high and not used.

12. Tactics • Most Profitable Bid – (uncommon) • Fundamental theory of competitive bidding: competition drives price to cost; lack of competition drives price to replacement. • Highest possible bid that the owner/GC will accept without balking • Cover all possible costs, no financial risk motivation • Provides a complete lack of transparency – this is the bid. • Risks balking by the GC or Owner.

13. Types of Modifications • Scope Modifications • What are we going to do • Management Modifications • Under what conditions are we going to execute the work • Schedule • Administrative Modifications • Safety Programs • Dispute Resolution Provisions • Payment Terms

14. Evolution of Scope Clarifications • Plans and Spec’s Sections 5400 and 9250 complete… • Fax and Internet • More opportunity • Risks Rejection • Timing

15. Language • What is the goal of a Modification? • Go back to the Strategy • Generally a Clarification should Clarify something, right? • Clear or not? • “This quote is based on reasonable and productive stocking and clean-up access and egress.” • What about: contractor shall have no less than 4 hours of unfettered access for stocking prior to scheduled commencement of work

16. Language • Modifications should deal with one single issue. • Reference to other documents and standards should be specific and identify with particularity • Simply ASTM is not good enough • Should be internally consistent • Exclusion or Clarification – call it what it is

17. Examples • “The General Contractor shall be responsible for providing access.” • Why is this a good or not so good clarification? • Ambiguity and definiteness?

18. Examples • Which is better? • Bid is conditioned upon the work being performed in accordance with the schedule provided with the bidding documents. • Bid assumes all work is made available in accordance with typical industry scheduling practices.

19. Example • This bid is subject to mutually agreeable contract terms • Pros? • Cons? • This bid is subject to subcontractors standard terms and conditions • This is from an actual bid • So which is it?

20. Example • Subcontractor shall have 3 complete sets of the plans and specifications prior to starting the work • What are we asking for? • Who are we asking it from? • What medium are we asking it to be delivered in? • Is this really a clarification • Is it binding on anyone?

21. Example • “This bid is based on only the documents as received from the General Contractor; any other documents or agreements are not applicable.” • Sounds good and clear – what do you think?

22. Example • “This bid is based on only the documents as received from the General Contractor; any other documents or agreements are not applicable.” • What I meant to say was: Plans dated D/M/Y, Revision XYZ …

23. Example • “Floors are to be free of water that is not part of the fireproofing operation” • “Floors are to be scraped and swept broom clean, excluding grinding, sanding, covering, or mopping of floors.”

24. Example • “All products to be purchased and used by the manufacturer of the subcontractor’s choice.” • What is bad about this?

25. What are the Bare Minimums? • Time limitation of the bid price • Subject to mutually agreeable terms and conditions • Subject to a mutually agreeable schedule • Cost escalation • Acceptable payment terms • Code requirements for the work are determined by the date of the bid for the jurisdiction • Environmental controls by others • Proportionate indemnity • Insurance limits defined • Design responsibilities clearly delineated

26. Conclusion • To Modify or not – not always an option • Bidding of work is a strategic and tactical process – know your firm’s goals and philosophy • Most bid Modifications should be uniform, unambiguous, and drafted with care • Some Modifications are optional, others are indispensable

27. Impacts to Labor Productivity in the Metal Stud Framing, Drywall, Tape & Finishing TradesGerald H. Williams, Jr., Ph.D., PETimothy R. Anderson Ph.D.

28. Author Biographies Gerald H. Williams, Jr., Ph.D., P.E. Ph.D. Systems Science: Engineering Management, Portland State University Master of Engineering Management, Washington State University B.S. Civil Engineering, Oregon State University 28 years of Engineering, Government, Construction, and Consulting Experience Registered Professional Civil Engineer, since 1985 California, 1986 Oregon, 2004 Washington, and 2008 Idaho Timothy R. Anderson, Ph.D. Ph.D. Industrial Engineering, Georgia Institute of Technology M.S. Industrial Engineering, Georgia Institute of Technology B.S. Electrical Engineering, University of Minnesota Engineering Faculty at Portland State University since 1995

29. Importance of the Construction Industry 11% of US GDP is accounted for by the construction industry Drywall work makes up about 10% of most commercial building projects Generally drywall will be a critical path activity through the middle portion of the job life. Excavation Foundation Structure Framing & Drywall Finishes Labor is approximately 75% of the cost of drywalling

30. Principal Tasks in Drywalling Wall framing Putting up 2x4’s or (more typically metal studs) to support the drywall Hanging boards Putting in place and securing the drywall panels Taping & finishing Sealing the seams between drywall panels

31. Contractors are Selected Lump sum bid competitive bid based on a predetermined set of plans and specifications… Variables: Estimate of labor productivity Material pricing/financing Bonding and insurance costs Overhead and fee

32. Distribution of Wall Framing Rates Mean=35.6 LF/MD σ=14.4 Mean=35.5 LF/MD σ=16.6 Measured in terms of linear feet per man-day Average rate is 35.5 linear feet per man-day but some jobs are much easier (over 80 LF/MD) or harder (under 20 LF/MD) How good are estimators at predicting difficulty and incorporating this into their bids?

33. Wall Framing Productivity Varies Widely Production rates vary widely for wall framing Estimators are able to account for less than half of the variation in actual production rates Actual rate (LF/man-day) Estimated rate (LF/man-day) What explains the rest of the variation?

34. Taping and Finishing is Similar… Taping and finishing tasks from one of the largest drywallers in the US Actual rate (SF/day) Estimated rate (SF/day)

35. Research Project Two projects Pilot Project involving one firm Final Study, presented here Sponsors: Northwest Wall & Ceiling Bureau Northern California Drywall Contractors Association NW Wall & Ceiling Contractors Association Associated Wall & Ceiling Contractors Western Wall & Ceiling Contractors Association

36. What are the Factors that Negatively Affect Productivity Expert Panel was assembled from the members of the NWCB Factors included: Trade Stacking Labor and Material Congestion Overtime and Added Shift Work Out of Sequence Work, Go Backs and Ramp-Up/Ramp-Downs

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41. Survey of Projects A survey of projects was conducted 255 responses received Projects under $100K were excluded along with exterior work only Projects reporting 200% or better productivity were examined and found to be subject to scope change thereby making them inappropriate 218 valid responses were used for the analysis

42. Survey Instrument 4 pages First page asked for project characteristics Next three pages asked about effects observed on the work site. List of 38 potential effects developed by industry experts.

43. Survey Instrument Pages 2-4

44. Core Idea – Finding Sources for Productivity Loss A framing production rate is generally measured as linear feet per worker-day. (i.e. higher values are better) 50 means 50 linear feet per worker-day Key variable: Framing Relative Prodactest This stands for framing productivity as measured by actual rate/estimated rate. Therefore, framing productivity as measured by actual rate/estimated rate > 1 implies your team worked faster than estimated (expected) < 1 implies your team worked slower than estimated (expected)

45. Projects Represented 2/3 of the projects were private

46. Types of Projects

47. Project Size

48. Trade Stacking Trade Stacking was experienced by contractors as shown to the left but does it affect productivity?

49. Labor Congestion Too many cooks spoil the soup… Frequently there is labor congestion but does it affect productivity?

50. Congestion Due to Materials &Equipment Stuff getting in the way of getting work done