“All Low Price Buys Is Change Orders”

Owners have fooled themselves into thinking that low-price bidding equals low cost construction, author Bill Black said. It doesn't, he contends. "All the low price buys you is change orders."

Black, co-author of The Commercial Real Estate Revolution, is coming to St. Louis next week to discuss "the nine transforming keys to lowering costs, cutting waste and driving change" in commercial real estate and construction in a program sponsored by the St. Louis chapter of CREW (Commercial Real Estate Women) and the mid-America chapter of IIDA (International Interior Design Association).

Black, strategic business solutions director for Haworth, Inc., said the message of The Commercial Real Estate Revolution is aimed at owners. "The good contractors get it, but owners won't let them do it," he said. "Owners set the tone. They are critical in making the change," he said. And right now, owners are responsible for one of the critical problems in the industry: low-price bidding.

As a former construction estimator for a commercial roofing contractor, Black said, "I often knew what our first change order would be as soon as I knew who the architect was, because I knew from experience that some architects made the same mistake all the time and I always took advantage of that loophole. If I had to play the bait and switch change order game because you wanted the low price and your documents were flawed, I would, because contrary to popular belief, a contractor is not a charitable organization."

"The definition of the low bidder is whoever made the biggest mistake," he added, "but most 'mistakes' are deliberate and you make them because you have six change orders in your back pocket that you know from experience you will get."

In essence, there are two kinds of contractors in the market, Black said, "relationship based contractors and change order based contractors, and as an owner you have to decide which you want."

The commercial real estate revolution, according to Black: trust-based project teams, early collaboration among team members, built-in sustainability, and transformational leadership by owners.

"It is not about eliminating competition, but about intelligent bid selection based on more than just low price," he said. "When customers select teams based on knowledge and ability, they end up with better designs without spending more money.

"And there is a lot of knowledge and expertise at the contractor and subcontractor levels. When you bring the contractor and major trades into the team early to collaborate on the design, you get solutions that are constructable and inherently cost effective, because that is how they are trained to think," he said.

For contractors, he has this piece of advice: Identity customers who are fed up with the usual way of doing business and offer them a workable alternative. "They are the real opportunities," he said, "but if no one brings them a different menu they will continue to make unhealthy choices."

Doing the same things for the next 10, 15, or 20 years that the industry is doing now will drive capable people out the industry, worsen service, and hurt business competitiveness. "The industry has to change," he said.

You can hear Bill Black on Tuesday, September 14, at 5 p.m. At the Edward Jones Learning Center, 130 Edward Jones Boulevard in Maryland Heights. The cost of admission is $35 for members of CREW or IIDA or $45 for non-members.

Register at http://www.crewstl.org/PROGRAMS/2010/SEP10/SEP_IIDA10.html

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