by Mark Zilbermann
There’s no doubt that Design/Build remains the premier, high-quality delivery method in the HVAC industry. But that doesn’t mean there isn’t a place in your company for Design/Build’s offspring (Design/Assist and Design/Bid), or even plan-and-spec work.
Brandt Engineering was founded 51 years ago. We’ve been doing Design/Build HVAC work for all of that time, and we’ve seen it take many different forms. There are three basic types of delivery systems related to Design/Build.
The first is pure Design/Build. Like a marriage that just gets better and better, we’re wedded to Design/Build, and it’s still our favorite delivery method even after 50 years. Under this method, we negotiate either a lump sum price with the customer, or, more commonly, we propose a fee and general conditions. We set a guaranteed maximum price, maintain the price within that budget during the design process, and then build it.
We believe Design/Build is the best for the customer because there’s one source of responsibility. Because everything’s in-house, the project is seamless and allows us to utilize all of our company’s talents to do what’s truly best for the customer.
Although Design/Build is our first choice, we do a lot of Design/Assist Work. We have many general contractors as customers, and they believe in it. A great deal of the work in our area is bought by this method.
Under Design/Assist, a general contractor (GC) solicits a proposal from a group of qualified mechanical contractors, usually requesting qualifications, the project team, a fee, and a guaranteed general conditions. This is not unlike the way an owner selects a GC. The GC will either already have a budget set, or will request help in setting the budget. If we win the job, we’ll work with the consulting engineer and project team to keep the job within that budget. When the documents are complete, we then finalize the guaranteed maximum price and build the project for our cost plus a fee.
There are some problems with this approach. The engineer doesn’t always draw what is agreed upon and because of this it’s a lot more time-consuming than Design/Build. It opens the door for a lot of back-and-forth between us, the engineer, and the owner, until we get the design within budget.
Communication is also a problem because we’re not always communicating directly with the architect, so we don’t always get all the information we need to understand the intent of the architect or the program requirements of the owner. Also, there’s not one sole source of responsibility at the end of the day. We built it, but someone else designed it. If there’s a problem, is it a construction or a design problem?
There is one upside to Design/Assist: Because there’s an outside consulting engineer involved, we don’t need as much engineering talent on staff. So, from an overhead standpoint, it’s less expensive. We still need engineering expertise to do a decent job of Design/Assist, but we don’t have to spend as much time performing the detailed design of a particular project as we do with Design/Build.
In a Design/Bid project, a building owner and/or a consulting engineer publish criteria for the project. They’ll generally give you a few broad-brush items such as the load and the system type, and they’ll ask for a price. We then make a preliminary design that’s adequate for us to estimate the project cost, as well as to present the design to the owner.
Usually the owner wants a formal presentation of our design, together with our qualifications and price. They’ll then try to evaluate the proposals they receive based on price and completeness. If they pick us, we’ll work with the architect and owner to complete the drawings, and then we’ll build it. Generally, the owner will retain the engineer who came up with the criteria to do a peer review of the drawings after they’re complete.
We’ve been pretty successful winning Design/Bid projects. We think that if the owner has the capabilities of doing a good job of evaluating the proposals, then they can come up with a project that’s a good value for them. The trouble is, there aren’t that many owners who have the technical competence to make a good evaluation of all the aspects of a project, and so it can be a hit-or-miss thing. Even when they hire an engineer to help them evaluate a project, it still often comes down to low price. At that point, they may not have a clear understanding of what they are buying.
No matter how much Design/Build, Design/Assist, or Design/Bid work we do, we also think it’s important to do a fair amount of plan-and-spec work also. Why? Aside from the fact that we make money on the right projects, it keeps us competitive from a field installation and construction point of view, and actually helps us sell Design/Build. When we show an owner that we can compete in the bid market and get our fair share of work, they won’t feel that they’re paying a premium for us to do their project.
There are many Design/Build contractors who think, “Well, I’m going to command a higher price because I’m doing it Design/Build, so my costs don’t have to be competitive.” While in some cases they might be able to do that, they leave the impression that they’re more expensive and that the owner’s paying a premium. They may, therefore, lose out on opportunities they might otherwise have had.
That’s why one reason plan-and-spec is an important part of our Design/
Build business; it shows owners that we’re competitive. It makes us develop the systems and people, not to be the lowest cost provider, but one who is cost competitive.
It’s also important to note that we bid a low percentage of available projects. We pick the ones in the right market that fit our strengths and give us the best chance to be successful.
The Value of Consulting Engineers
Keep in mind that while consulting engineers don’t necessarily get you a job, they can prevent you from getting one. Therefore, we’re careful to maintain a good relationship with our local consulting engineers. If a customer has already talked to an engineer about a project, we don’t try to convince them change it to Design/Build.
We might talk to the customer about how we might do a Design/Assist project, working with the engineer. Let the consultant do the engineering and have us do the drawings. That way, what’s drawn is what we’re going to build. Engineers generally don’t mind this because they make most of their profit doing the engineering and not necessarily the detailed drawings.
Just as manufacturers sell to us and compete with us, we have the same type of relationship with some consulting engineers, so those relationships have to be managed. Stay on good terms with consulting engineers by doing a great job and not costing them money. When you’re working on a project with a consulting engineer, help him or her work out any problems. Don’t take work away from them if they have a relationship with an owner. And keep in mind that even though they’re not your engineer, they’ll occasionally have a decent idea or two nevertheless.
Selling Pure Design/Build
When it comes to Design/Build, one of the biggest selling points we have is that we will guarantee the price early. We do a fair amount of Design/Build work for a number of performance contractors. One of the things they like about Design/Build is that the price is guaranteed early in the process, so when they’re making a proposal to their customer, they can count on our price being good.
From our standpoint this is a little risky, because it puts a lot of pressure on us to create an accurate budget estimate before the project is completely designed,. However, overall it presents a great business opportunity.
We also sell value. We find it a trend that many engineers design to avoid litigation, rather than designing to bring the best value to the customer. They have no downside for over-designing something. As a Design/Build contractor, we don’t think that way, because if there’s a problem in our design, we can fix it ourselves. We’re not at the mercy of somebody else giving us a price to go take care of a problem.
Finally, there is a single source responsibility for the performance of the system. If there’s a problem, the owner only has one call to make, and he knows the problem will be solved.
Advice For the Future
Overall, we’re optimistic about the future of Design/Build. We’re actually seeing more of a move towards it, as more customers begin to appreciate its benefits.
Design/Build is also gaining momentum within the general contractor community. For example, a general contractor here in Dallas recently bought an architectural firm. The combined firm is performing the design as well as building the work. That’s very forward thinking, and there’s going to be more and more of that. So I look at Design/Build as becoming a more common procurement method.
A few words of advice: To be a Design/Build contractor, you must be really good. You have to have a good engineering staff to do a solid, cost effective design. You have to have really good field people and systems to do a quality installation. You have to have some controls expertise, because, as we all know, if the controls are not right, the system won’t work. And, if you are the sole source of responsibility, do you want to leave your fate in the hands of a control contractor?
You have to do a great job of commissioning. If the job isn’t commissioned well, regardless of the quality of design or construction, the owner won’t get a system that performs. And that’s what he’ll remember.
You have to be able to service and maintain the system after it’s installed, and use that service experience to help you design the most easily maintained system possible.
Finally, you have to be ready to stand up and take your lumps. Nobody’s perfect, so when there’s a problem, you’ve got to be ready to stand up and take care of it, period. That’s’ what it’s all about. If you’re not ready to do that, you need to stick to plan-and-spec work. n
Mark Zilbermann is president of Brandt Engineering, a commercial contracting firm in Dallas, TX. Brandt Engineering had volume of approximately $80 million in 2002. The company, which was Contracting Business’ 1986 Commercial Contractor of the Year, celebrated its 50th anniversary in 2002. You can reach Zilbermann at 972/241-9411, or by e-mail at firstname.lastname@example.org.