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Who Should Own the Contingency?

A good contingency plan requires continuous thought and planning, whether you are going on vacation to Mexico, climbing Mt. Everest, or tackling a capital improvement project–things go wrong. As a father of three, and a business owner, I find myself commonly swerving through what could go wrong next and how to circumvent potential obstacles and recover from bumps in the road. I am not being pessimistic; I am being a survivalist.

When it comes to navigating a project budget, proper management of the contingency is an area that can influence a successful project outcome. Who manages it? Who carries it? And, how do you make sure it doesn’t get inflated to the point of stopping your project? While there are many discussions on the subject of contingency we could hash over, this blog addresses why an owner and general contractor would want to have a portion of the contingency in the GMP.

1)  Does it exist?
Having the contingency in the GMP as part of the budget gives the general contractor, and the other consultants, confidence. They are able to adjust their risk management by being informed and not operating with a blind spot. Owners can tell a project team the contingency exists, but many have been burned by having those funds removed when there is a change in leadership or poor budget management.

2) Can I access it?
Just because a contingency exists in the master budget, doesn’t mean that the owner will release it. Having the contingency in the GMP prompts the necessary conversation of how it can be used and when; this communication often leads to smoother approval processes.

3) Trust.
By setting up the contingency in a transparent manner, the hired team members appreciate [...]

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    Myth #1 Busted – We Have Long-standing Relationships With All Clients

Myth #1 Busted – We Have Long-standing Relationships With All Clients

Last year I was honored to be selected to serve on a panel of owner’s representatives at the 2016 AIA Symposium. While the discussions that ensued were informative and thought provoking, it was the dialogue that occurred off stage that stuck with me most. I was repeatedly approached by inquiring architects who wanted to know “Why don’t Owner’s Representatives issue better RFPs and guide their clients through a more refined selection process?” While I am not the owner’s representative industry spokesman, I defended myself (and our colleagues) by explaining that owner’s representatives are not always the culprit of these poorly crafted RFPs.

Upon returning from the conference, I was curious, what percentage of RFPs do we help owners generate? While it is true that owner’s representatives sometimes have a long-standing relationship with certain clients, we aren’t always involved in the procurement of architects, or even general contractors for the matter.  I inventoried the projects we managed in the last three years and determined that 55% have the architect in place before we were brought on board. Of the 45% that had not yet procured the architect, over half had already begun the process and our first tasks were to assist on the shortlisting and interview processes. The fact is that over the last three years we led the procurement process, and thus the writing of the RFP, for the design team at a rate of 18%.

While these statistics might come as a surprise to some, it sounded about right to me; there are certain causal scenarios that we see frequently playout. Master planning, for example, often leads to the procurement of the already contracted design firm for continued services. While the budget might be in [...]

A Look Back at 2016

John Glenn passed away, Donald Trump is President Elect, and developers are turning Nazi camps into luxury resorts; 2016 appears to be the year of “What just happened?”

More close to home, I have reviewed the AIA, AGC, and the Deltek reports, spoken with numerous industry professionals, and analyzed trends on the projects we are managing to conclude the following opinion: generally speaking, there continues to be skeptical optimism related to continued growth and architects feel less positive than general contractors; this makes sense since much of the design work associated with the uptick in 2016 is complete while contractors are still riding the delayed wave of new work. Companies hired more staff in 2016 than in previous years and we saw a trend of professionals changing companies at a higher rate than previous years.  Many seasoned professionals are retiring and the absorption of smaller firms by larger ones, although slower than the 2015 record of 234 sales of U.S.-based A/E firms a 5.4% increase over 20141 is still occurring.

Size Matters
We experienced clients basing project decisions on the continued escalation of design and construction costs. We saw trends of projects increasing in both size (square feet) and programs of work (i.e. large school programs). Clients desire for risk mitigation increased and owners defaulted to the large-sized, resource rich companies. These larger firms didn’t just win the large jobs in 2016, they won jobs of all sizes; it seems significant portfolios, robust teams and the ability to quickly generate designs was the winning strategy in 2016.  As the big guys continue to absorb small firms, albeit at a slower rate than the 2015 record-year, you would think they would depart from the recession mentality of chasing [...]

By |December 23rd, 2016|Uncategorized|0 Comments|

2016 – A Look Back

John Glenn passed away, Donald Trump is President Elect, and developers are turning Nazi camps into luxury resorts; 2016 appears to be the year of “What just happened?”

More close to home, I have reviewed the AIA, AGC, and the Deltek reports, spoken with numerous industry professionals, and analyzed trends on the projects we are managing to conclude the following opinion: generally speaking, there continues to be skeptical optimism related to continued growth and architects feel less positive than general contractors; this makes sense since much of the design work associated with the uptick in 2016 is complete while contractors are still riding the delayed wave of new work. Companies hired more staff in 2016 than in previous years and we saw a trend of professionals changing companies at a higher rate than previous years.  Many seasoned professionals are retiring and the absorption of smaller firms by larger ones, although slower than the 2015 record of 234 sales of U.S.-based A/E firms a 5.4% increase over 20141 is still occurring.

Size Matters
We experienced clients basing project decisions on the continued escalation of design and construction costs. We also saw a  trend of projects increasing in both size (square feet) and programs of work (i.e. large school programs). Clients desire for risk mitigation increased and owners defaulted to the large-sized, resource rich companies. These larger firms didn’t just win the large jobs in 2016, they won jobs of all sizes; it seems significant portfolios, robust teams and the ability to quickly generate designs was the winning strategy in 2016.  As the big guys continue to absorb small firms, albeit at a slower rate than the 2015 record-year, you would think they would depart from the recession mentality [...]

Breaking Into a New Market

I was recently asked by a smaller-sized architecture firm how to win work for a project type with which they had no prior experience. Many of us have faced this quandary. It can be frustrating; but, with tenacity and smart business decisions it can be done. We went on to discuss some options.

1.  Hire for it. At one point, we had no school experience and wanted to break into the market. When we had an opportunity to add staff we didn’t hire our best friend, we looked for a resume that fit our strategic plan. The project manager brought along a deep rolodex (okay, CMS) and the market has been open ever since.

2.  Devise a creative teaming approach that provides a unique strategy or solution; it will almost always garner attention, if not win you a top contender spot.

3.  Start shaking hands.  Although it’s not typically an instant return-on-investment, a grassroots, relationship-based strategy can get you a foot in the door. Expect to start small and enjoy the inevitable growth.

4.  Remember the forgotten. When the urban markets heat up rural markets are often neglected. Go the distance.

5.  Take a risk. This is my favorite option as is can produce results quickly. Firms that are established in a particular market will play it safe submitting on RFPs often with pre-packaged proposals. Find a unique angle and go all in.

~ Paul Wember, Owner’s Representative

Building is Scary!

It all started with a spider—a giant 13-foot spider.  “Harold,” who lives in my crawl space all winter and summer, emerges every Halloween in our front yard. He holds a special place in my heart as my kids and I designed and built it together. Halloween, more than any other holiday, reminds me of how design and construction engages a community and impacts all involved.

Since the birth of Harold the neighborhood kids have requested to get involved; we decided to design/build a haunted house in my garage. Like all our projects we began by drafting a solid design. It has been an adventure being part of this Halloween construction evolution.

1. The first year was a simple room with games. It was ok.
2. The second year was a two-room-scene–one with an outdoor cemetery and on the inside a day-of-the-dead dining room.
3. The third year we created a crime scene complete with a digital ghost projection. Although it was cool it did not have proper flow and the result was less than scary.

Then the fourth year came along. The design team of three (my children) decided a maze was the ticket to scary; it solved the problem of year three’s single pathway flop and would allow each design team member an area that they (and their friends) could focus on. The designers brainstormed, researched and eventually decided on the design for each space as follows: click-here-to-view-wember-scareville-plan

1.  The first space was the infinity hallway
2.  The second space, a brilliant glow room
3.  Third space, “something funny”
4.  Fourth Space, creepy chamber
5.  Fifth space, science lab
6.  Sixth space, spider hallway
7.  Seventh space, psychedelic hallway

But, the real first scare? Building seven spaces with children [...]

What Not to Say in an Interview

As Owner’s Representatives we have participated in hundreds of interviews witnessing some engaging, educational and enlightening presentations from an impressive list of architecture firms and general contractors. That said, every now and then we observe professionals fold under pressure and say things they might regret. Here are a few things we advise not saying during an interview.

“Sweetie” Nothing is as impressive to a woman as using terms of endearment in a professional setting.
“How are we doing?” There is no way an Owner can answer this question honestly when you are halfway through an interview. It’s an obviously awkward question with an even more awkward response, yet we hear it often. We cringe every time.
“Who are you?” Basic rule – know your audience; if you missed a name, fake it.
“Estimate prediction” Be careful on using imaginative terms in your response; it may sound like you answered the question but follow up questions probing for details can get pretty tricky.
“We are the best.” We all appreciate confidence, but generic boasting does nothing to set you apart.  Stick with “We have been established longer,” or “We have completed ___ amount of sf for this project type.”
“When we were putting this together last night…” A statement more common than you think. Nothing says you care like waiting until the last minute to prepare. You are providing a sneak peak of how it will be to work with you. Don’t leave the client wondering how focused you will be on their project.
“Your budget will allow for modest design.” Owners know when the budget is tight, don’t rub it in. It’s the team that communicates they can [...]

By |October 12th, 2016|Interview|0 Comments|

Feedback Etiquette

The cursed proposal, and the hopefully-to-follow, nerve-inducing interview, are both part of what the A/E/C industry endures to win work. The process costs teams thousands of dollars in staff resources, printing costs, even on small projects. It is a serious decision and investment to submit.

When working with owners during the procurement process, we advise them to respect the efforts put forth by the submitting firms, particularly those who weren’t awarded the work. We communicate that they prepare detailed feedback to those who inquire. Typically, not all firms will place the call. In our experience, general contractors are more comfortable (1 in 3) than architects (1 in 5) reaching out to us or the Owner.

We provide the following list of dos and don’ts for our clients to consider:

Do

1. Collect relevant documents including notes from the process and the actual proposals during or immediately after the interview.
2. Record comments from the selection committee immediately after the interviews occur. Your opinion is nice, but, remarks like “I had you as number one,” are of little value when trying to improve.
3. Respect that this is a difficult call to make.
4. Express a sincere thank you to those submitting.
5. Be honest—provide specific information on how they can improve. If the person on the other end of the phone becomes hostile, simply and professionally, end the call.

Do Not

1. Feel threatened. The caller is looking on how to win future work, not burn bridges or overturn the committee’s decision.
2. Retrieve a voicemail and respond with a two-line text.
3. Ask, “Did you submit?”
4. Say, “I recycled your proposal, so I don’t have any feedback.”
5. Issue the scorecard by email as sufficient feedback. Getting a [...]

Here’s Your Fee

In speaking with a Principal of an established architectural firm that recently entered the Front Range market, I came to find out he and his colleagues were perplexed by firms’ common practice of sometimes using professional fees as a differentiator when submitting on projects. “What’s the deal with professional architectural fees in this market?“ he asked.

Not sure where he was going, I replied, “How do you mean?”

He went on to explain that his firm, established in other geographic markets, is not accustomed to deviations in fees between firms. It appears that in the Front Range market, fees carry weight in owners’ hiring decisions and teams are willing to set their fees to differentiate themselves. While our market has a common industry fee (by project type) and although the standard fee has never been corroborated, it is known by all.

My new colleague was clearly frustrated as he worked to adjust to his new region’s pricing culture. Was he implying fees should be established by region and project type? Should owners dictate what the fee is, or should firms, be it owner’s representatives, architecture firms or general contractors, have an understanding through professional organizations, albeit non-union, to advise on how to establish fees? It seems to me, free market tendencies apply the same to the A/E/C industry as they do any other industry; should that change?

In the recession of 2008, fee adjustment was common as firms worked to survive. It was also common to see — and exciting to witness — younger, independent architects striking out on their own, setting fees they could make a living off and hiring help or forming consortiums if and when needed. This set of professionals (myself and Class of ‘95 [...]

Amazon, Uber, Airlines, Toll Roads, Disney

Buy something on Amazon recently?  Purchased an airline or ticket and experienced upcharges for bags, seat selection, or a snack?  Want to drive on US 36 in the fast lane or been to Universal Studios in Florida and had the “fast pass” groups cut in front of you?  The current internet-generation is accustomed to this form of bidding and although many Gen Xs and older demographics feel nickel-and-dimed, the next generation of industry professionals currently accepts and sometimes prefers this pay-for-what-you-use approach.  What does this mean for the future of the industry?

Wember is often an integral party the discussion and final selection of the construction delivery method.  Over the first part of our last twelve years in providing Owner’s Representation to the public sector, projects in Colorado were primarily driven by hard bid.  As the economy picked up in 2003 negotiated work such as Construction Manager at Risk (CMAR) work became more accepted and gained in popularity. Currently the AGC and the DBIA are leading a push on Integrated Project Delivery.  What’s next?

As the next generation works their way up the ranks into executive leadership positions, I ponder what will drive their decisions? Data supports that Millennials are proven to be more frugal than the Boomers and Generation Xers that precede them. Strapped with exponentially higher college debt, they are often financially strapped, yet they are less prone to work long hours in the interest of life balance.  Culturally they are bombarded with pay-to-play options, value-added upgrades, and bidding environments for the goods they purchase.  They have also been presented with a pay-to-be-expedited culture.  We are constantly barraged with the opportunity to upgrade for the convenience of quick-serve. At Universal Studios, and pretty much [...]