Last year I retired from the construction industry after 43-year-long journey that began in building materials, transitioned to residential construction, and then culminated with a quarter century as a commercial construction cost estimator and project manager. At the same time, I also managed to find some success as a writer for the construction industry, and—if that weren’t enough—I also taught evening building construction technology classes at our local junior college for little over a decade. I earned my retirement.
Small Worlds
But I’m not giving you my resume to boost my ego. I want to establish license—license to share my views and make you feel comfortable that they derive from a source that’s had more than adequate time, access and opportunity to experience the best—and worst—our industry has to offer. But there’s more. Over the years, I also manage to build a network of industry connections through my writing and teaching, and it’s through these ties where I often found myself on the receiving end of other’s stories and criticisms of (in particular) the commercial construction industry.
When hearing these tales, my first surprise was how often and how closely they mirrored my own sentiments, thoughts I’d always thought were singular to me and my own personal experience. But this wasn’t the case. Though we’d come from dissimilar construction markets and demographics, our complaints were remarkably similar. And let me tell you, in a “misery loves company” kind of way, there was something soothingly cathartic to learn there were others in my shoes. There really were others out there who found certain aspects of our industry to be, well, messed up.
And so, based on both my own experience and tales from industry peers (and given that my main expertise is in cost estimating), I now give you 13 changes to the commercial construction bid process that should happen today. See if any of these strike a chord:
Change #1
Open competitive bidding for commercial construction projects should be allowed only to prime bidders who’ve previously been vetted and approved by the architect/engineer/client team prior to bid. Yes, I know this is already performed in some areas (particularly metropolitan), but there are still many, if not more, locales (especially when venturing into rural markets) where this is still not the case. In short, this new mandate would guard against Experienced/Reputable Building Co., Inc. losing out to Billy Bob & His Pickup Truck, Ltd. simply because Billy Bob lacks bidding, building and business experience.
Change #2
In conjunction with number one, the total number of vetted bidders on commercial construction projects should be capped at a maximum number. No more projects where 28 bidders show up to the letting. (Yes, this really did happen to me. And let me ask you: “Would you want to be low out of 28 bids? Me neither.) I happen to like between five and eight players, depending on market and project type/complexity. This range is sufficient to champion genuine competition while also offering the building client fair representation and sampling of the local building community, while also not being so high as to discourage good construction companies from bidding.
Change #3
It should be mandatory for the AEC team to formally post an advertised anticipated budget for all commercial projects out for bid. Currently, this practice is hit or miss—and mostly miss. With no budget as a guideline, prospective bidders have no way of knowing if the project—as a whole—is a pipedream. I can’t count how many times I dumped valuable office hours into bidding a project, only to later find out the whole affair had been folly due to wildly unrealistic budgets shared by the architect/engineering firm and client. Added stipulation: The client must acknowledge and publicly sign off on the anticipated budget. This will help curb the all too common cries of poverty after the fact, which is often used as justification to beat down (say, the bottom three) bidders post-bid—a period when the line of “aggressive business” and “dubious ethic” can grow uncomfortably fuzzy.
Change #4
All selected/vetted prime bidders who are unsuccessful on bid day (but did submit a bid) should receive remuneration from the AEC team for bidding the project. This might be a fixed stipend or perhaps something calculated as a percentage of the low bid on the project. For example, if the low bid comes in at $500,000, perhaps .1% x $500,000—or $500—could be granted to that handful of bidders to offset administrative/office expenses, which I assure you, is in most cases far greater than $500. Yes, costing/budgeting is a service and should be recompensed as such.
Change #5
Any bid project that results in the lowest bid coming in more than 25 percent over budget should require the AEC team to reimburse all prime bidders for office time and expense (perhaps in a similar fashion to number 4). Again, this is simply fair play. And one more thing: In the name fair play and professional responsibility, when this 25 percent over budget mark is surpassed—most often resulting everything going back to the drawing board for value-engineering and re-design—design firms should be prohibited from charging the client additional fees to revise the plans and specifications in order to get the project down to budget.
Far too many times I stood by in amazement as this scenario played out. I could never understand why clients allowed this. To me, this rang of quintessential double-dipping and seemed wildly unfair to the client. To put it another way, what other industry can charge to correct their own faults and mistakes? Now to be fair, there were firms that didn’t engage in this practice, and my hat is very much off to them. They owned up to their responsibilities and conducted business in manner to be lauded.
Change #6
A national level bipartisan committee should be created to oversee and police the content of a popular brand of support documents used in a vast majority of U.S. bid packages. Whether real or perceived, many of us in the building community feel the wording and directives in these design-industry–generated contract, general requirement, change order and specification forms are at times unfairly and dishonorably skewed toward the design community and away from the building contractor.
So, why do builders bid these projects if the support documents are so partisan? Because it’s the only game town. As builders, we’re stuck. Even with design/build and direct-client-negotiated work, many of us still rely on open-bid opportunities for a critical portion of our work volume. This compels us to accept (what we may at the same time consider to be) dubious and questionable contractual language in doing so. In short, we feel like the design industry “got to the party (the client) first.” They made the rules and created the language. As builders, our choice is to play along or not eat. And this is wrong. This new committee would be made up of an equal blend of design, code/oversight, private sector and construction industry representation.
Change #7
Unit pricing (part 1). Unit pricing on bid forms (for lump-sum bid projects) shall be allowed only when absolutely necessary and relevant to the project. There will also be a set limit on the number of unit prices allowed on lump-sum-type bids (no more five-page attachments of unit pricing that will likely never even be used). This practice is one of the more frustrating and worthless exercises I endured as an estimator, and I found it to be dramatically detracting from the bid effort by drawing cherished attention away from the far more important base bid effort.
The equation is simple (prospective building clients out there, listen up!): The less time an estimator is allowed to devote to primary/base bids, the less competitive and accurate your project cost will be. In short, you pay a premium for every unit price and alternate on the bid form (more on alternates later).
Don’t believe me? Think about it: If an estimator runs out of time, is he/she going to address unknowns by slashing the price? Of course not. We aren’t fools. If forced to do so by distractions or unrealistic timelines, we will always add money to cover unknown or unaddressed line items. Oh, and did you hear me earlier when I mention that most of these unit prices will never be used?
Change #8
Unit pricing (part 2). When unit pricing is included on bid forms, each entry must always include separate lines for Add or Deduct. Yes, much can alter the unit price of a product or service, particularly in civil/excavation construction. An example: If an amount of fill material is reduced (after it’s been originally bid and agreed to by the civil contractor and fill supplier) once the project is underway, the unit price originally quoted to the contractor will likely jump up to offset the high-volume discount originally granted by the fill supplier. This elevated cost is then foisted upon the civil contractor, because the A/E is enforcing the unit pricing. Again, this simply isn’t fair.
Change #9
Unit pricing (part 3). Unit pricing must always include a quantity with which to base pricing. Virtually everyone (with the exception of design community apparently) understands that the quantity and/or volume of an item affects the aggregate cost for goods. No matter who you are or what you sell, the cost for mobilizing and demobilizing—along with other ancillary costs—must always be factored into the furnish and/or installation of a product or service.
Change #10
Similar to the limit on unit pricing in lump-sum bidding, there also should be established limits on the number of bid alternates allowed on lump-sum project bid forms. The use of alternates has grown way out of control and in my travels it was not unusual to find 10, 20 and (yes, this happened) even 55 alternates on a bid form. Addressing alternates creates similar distractions as discussed in unit pricing, except now those distractions are on steroids. Also keep in mind that bidders are commonly general contractors who may perform only a handful of trades in-house (with their own employees)—typically carpentry (including labor for hanging doors/windows/Division 10 accessories) and maybe even a little concrete, masonry and excavation.
The rest of the work (and the cost for that work) comes from subcontractors and suppliers—with the vast majority of this pricing coming on the final, frantic bid day. This happens for two reasons. First, many subs/suppliers simply don’t get to the bid until the last second (been there). The second reason sub/supplier numbers arrive so late is because many firms believe (I feel wrongly) that their bid numbers may be shopped (divulged to competitors) if they are submitted too early the process. Right or wrong, this helps to turn bid days into frenzied, unworldly experience where email, phones and (yes, still) faxes churn out and frantically spew all types of bids and correspondence while the estimator receives, sorts, prioritizes, analyzes and scrutinizes every piece of paper in a harried rush before hastily discarding it or inserting it into the final bid. Bid alternates simply make the exercise exponentially worse.
Change #11
Although this next one isn’t about the bid process per se, it would no doubt aid in the creation of far better architectural bid packages from which we cost building projects. I have to also mention that this is by far the most trumpeted sentiment I’ve heard repeated over the years while discussing our industry with my colleagues. It goes like this: Every architect and engineer in training should be required to spend at least six months working (in a trade relevant to their major) on an actual construction site before they earn accreditation.
I really like this one because I too worked with way too many designers who had earned the certificate but somehow came out into the world with no practical or applicable construction aptitude—and boy, did it show in their drawings. Our industry would benefit exponentially if more architects and engineers simply understood how the fitting of “tab A into slot B” actually works in the field. Oh, and for those of you would rebut with, “Well, if this is the case, then why shouldn’t builders be required to intern (similar to how a college student interns) in an A/E office for (say) six months prior to their building license being granted?” I’d respond, “Yes, I agree.”
Change #12
It should be mandatory for all architects/engineers who took part in creating a bid package be available for last-minute questions on bid day. I can’t tell you how many projects I’ve bid over the years where vital questions had popped up at the last second, only to find out the architect/engineer who could provide clarification was out on the golf course or otherwise “out of pocket.” I always found this to be extremely irresponsible of the part of the A/E firm and architect. And again, it’s the client who suffers in the end.
P.S. And please, please don’t trot out this tired nonsense of “submitting questions in writing to the A/E 10 days prior to bid date” garbage. This idiotic practice is and has always been pure ignorance. No one bidding on a typical commercial construction project has the fiscal luxury of decimating and analyzing a complete set of plans and specs (and don’t forget addenda that aren’t even out yet!) 10 days prior to the bid—and then also have time to formulate a formal list of spoon-fed questions to the A/E. Anyone who sincerely believes this to be a rational and reasonable protocol (and who, in turn, has peddled this same fantasy to their building client) clearly doesn’t understand the economics, the construction industry—or life.
Change #13
Designers should not be allowed to label areas of work “design/build” when said designation is clearly due to the fact that 1) they are unwilling (due to economics or timeline) or 2) incapable (due to lack of knowledge and/or resources) of doing the scope of work in question. This practice has blossomed over the years, and I saw it most often with mechanical and electrical work. A bid package would arrive at my office and the back pages—those commonly containing plumbing, fire protection, HVAC and electrical—would be blank except for a “design/build” note and direction about “submitting a layout and work scope” with your bid.
Again, to some of us in the building industry, this comes off as a cheap, blatant effort to shift design cost/responsibility to the contractor and away from the design office. Design/Build—true design/build—is an effective, efficient project delivery vehicle when implemented appropriately (with all team members on board, including the client), but for some A/E firms, it exists only as a convenient out and one more way cut economic corners.
I would hope this goes without saying, but obviously the list above has been created by a builder. I fully admit to bias and partisanship, and I have no doubt this list would be substantially different if penned by someone from the design industry or even the private sector. And to that I say, “Great, bring it on. I’ll be the first one to read it.” Who knows? I might even learn something.
But for now, let’s get it all out on the table, for it’s not until the industry as a whole comes together to discuss the issues that affect us all that we will begin to take steps to improve it. Here’s hopin’.
S.S. Saucerman is a retired commercial construction estimator and project manager who worked for a large upper-Midwest general contractor. He is also an established freelance writer and author whose work spans 20 years.
