Responses to “Price vs. Change Orders”

The recent CNR website article "All Low Price Buys is Changes Orders" has served as a catalyst for lively discussion both online and in person. The article was an interview outlining the viewpoint of author Bill Black, who came to St. Louis to share his perspective on the current price-focused bid market with commercial real estate and design industry representatives. While it may be uncomfortable at times, we believe that continuation of this discussion about what is right and wrong with the current bid process in the St. Louis construction market is important and necessary. The following are ideas that have been exchanged thus far - we welcome your comments.

J.C Reardon of Ittner Architects wrote:

I have to say that I am disappointed that CNR, a publication that I have always appreciated, has chosen to feature a program such as "All Low Price Buys is Change Orders." It has been a long time since an article has outraged the architectural community, but my email and phone has been alive all morning with other architects shocked and disgusted with this "feature" article. At the very least, you should have reviewed and considered the speakers credentials more closely before feeling compelled to jump on the architect's bashing bandwagon.

My disappointment is with CNR. You have a choice in what and how you present news to the public and you chose to take a very trashy detour. Please consider raising your standards in future publications.

CNR Publisher Tom Finan replied:

JC,

I'm sorry that the article was construed as focusing on any supposed shortcomings in the architectural community. Black, who works for Haworth and speaks on this topic nationally, is part of an ongoing debate — of which we at CNR are very much a part —on the shortsighted and dysfunctional approach to buying construction focused on price that is currently taking place.

FMI (formerly Fails Management Institute) refers to the current atmosphere in a recent article as "retro procurement". In 2008 we were evolving toward an atmosphere of collaborative behavior—where a team could be selected and all of the cards laid on the table. In that scenario all of the tools that members of the team, including architects with powerful new technology, have to offer could be used to design the best project, resolve constructability issues, and deliver the most value for the dollar.

With only the price card laid on the table and owners not willing to pay for complete drawings and scopes, the current market has become a "game," where ethical contractors point out the holes in scopes and specs and in doing so miss the job, while the "smart" contractors (or those who have run out of cash in this current market) bid the job as it is scoped and specified and plan on making it up on change orders.

To your point regarding the example of architects, it could have just as readily been engineers, or maintenance managers, or plant managers.

I shared your comments with Peter Downs, and he sent me the following:

Black just happened to mention architects in that example, but he also is sympathetic to their plight. Owners often buy architects on price, too, even though every architect will tell you they shouldn't. Short articles can't encompass everything. Black also talks about how architects' fees have been flat for a decade, even though their costs were going. Pair flat fees with rising costs and they have to cut somewhere and one place where they cut is in the detail that goes into drawings. He cites a figure that typical drawings lack 25% of the information that contractors need to make informed bids. Another place they cut was in construction administration, which means they've had less to do with actual construction so that newer people coming into architecture haven't been getting training in construction, which leads to constructability mistakes.

Finan shared his exchange with J.C. Reardon with Pat Kozeny, CEO of Kozeny-Wagner. Kozeny wrote:

Great dialog Tom. I re-read the article and cannot see why the architects would be so hot. It is reality and firms...do not get rewarded for doing the right thing with most owners in this economy.

But, then again, "doing the right thing" is the basic foundation of our firms and will ultimately get us through these difficult time

s. And, the "crafty" contractors will get theirs reward with a lack of repeat clients, a crappy reputation, a reduced bonding capacity and a lack of a solid business plan.

Those "crafty" contractors are not builders, they are manipulative and unethical folks that give our industry a bad name.
We just need the Owners to dig deeper and truly understand the "apples to apples" process. This dialog will help move the subject top of mind.

Jim Konrad, principal at Mackey Mitchell Architects wrote:

Hi, Tom,

I read your article entitled "Winning the Bid Wars" in the May-June 2010 issue of CNR. It was interesting to read how contractors are responding to the current "cutthroat" construction market. Some are finding tools and methods necessary to work within the competitive bid system. Others are working on the other end of the spectrum, educating owners on the long-term benefits of quality-based and relationship-based delivery systems.

Publicly-funded projects are still required to be publicly-advertised and competitively bid. Our firm recently provided design services for one such project. It was an interior renovation project (not-for-profit client not identified out of respect for confidentiality) with an estimated construction cost of $80,000. Regardless of the hungry market, I was skeptical as to how much interest there would be from contractors. On bid day, we received bids from fifteen general contractors!
Architects normally aim for bids to be tightly clustered around the cost estimate. In this case, the bids ranged from approximately $40,000 to $98,000. We are proud of the quality of our bid documents. Since there were very few questions from construction during bidding, we attribute this wide range of bid amounts to the uncertainty in the construction market.
Time will tell if the low bidder will provide acceptable service, deliver a quality product, and realize a profit.

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