Gerald relates his experience as the lone voice defending DBB on a recent Oregon Senate Committee looking to rewrite a portion of the Oregon public procurement law.
I recently served on an Oregon Senate Committee looking to rewrite a portion of the public procurement laws here in Oregon. Just a short history: my doctoral research measured the efficiency of traditional Design Bid Build, (DBB) and Construction Management / General Contractor (CM/GC or CM@Risk) project delivery systems, which were becoming real popular in the late 1990's. By 2012, nearly every building project in Oregon, is being delivered as a CM/GC. The actual intent or goal of the rewrite was not particularly clear to me, because the committee consisted of public agency directors, CM/GC contractors, design professionals, a couple of subcontractors, one full time academic and me.
The committee was formed because there was the belief that some agencies were misusing the CM/GC process, a non-low-bid, Request for Proposals, interview - beauty pageant - process. (Which I have no doubt was, is, and will in the future, be the case.) But the interesting thing to me was to listen to the CM/GC contractors on the committee constantly claim that the CM/GC process gives the owner the: "Best Value." At one point, a CM/GC's Vice President claimed that the preconstruction services they perform routinely save the owner as much as their (meaning the CM/GC's) entire fee.CM/GC's offer fees that are low by comparison to the DBB jobs I've estimated and bid when I was in that business, and those jobs I audited during my research. But, as noted by the presenter, there were a lot of ways to augment their fee. More importantly, in the past 20 years of CM/GC work in Oregon, there have been NO CLAIMS between public owners and CM/GC's, NONE.And, the reason is pretty simple, the budgets set by the CM/GC along with the owner and CM/GC controlled contingency create enough of a cushion that the CM/GC can settle just about any subcontractor claim. Furthermore, a study in Washington state found that CM/GC was "superior" to DBB project deliveries because they were almost always under budget, whereas DBB's often exceeded their original bid costs. Set aside the fact that the study compared about 200 CM/GC jobs against only 9 DBB jobs, the fact is that the CM/GC jobs actually exceeded their Maximum Allowable Construction Cost (MACC) quite frequently, but were still generally "under budget" because the budgets were so much more than the MACC's. In one case the original MACC was about $20 million, and the actual costs were $30 million, but the building was deemed "Under Budget" because the original budget was $60 million! I took 16 projects and found that combined, they exceeded their MACC's by $750 million! But most of them were considered "Under Budget!"Ultimately, the work of the committee, my objections notwithstanding, was to make CM/GC the default project delivery system to be used in Oregon in the future. It's not hard to see how this decision was made according to my old professor Harold Lindstone, who developed a method for understanding decisions he named "Multiple Perspectives of Decision Makers." In short: CM/GC's like the process because it reduces their risk (even though they deny it) and makes the job more enjoyable (not having to fight with an owners rep over the cost of a piece of flashing).Owners love it because: 1) nobody likes shotgun weddings - they get to pick who they are going to work with over the next several months or years on the job; 2) they can construct a budget that, even if it goes 100% over the MACC, can still be "Under Budget" - and thus they avoid the worst thing a bureaucrat can suffer - "bad press" - nobody ever got fired for bringing in a job under budget.Design professionals love it, because having the CM/GC on board during the early phases of final design, they can claim that their Spearin Doctrine warranties are either shared with the CM/GC or simply non-existent. And, since the designer is usually part of the selection committee that choses the CM/GC, he gets a say in who he's going to have to work with over the next couple of years.What's not to love? Well, if you're a trade contractor (sub) you can easily get screwed. In the bad-old DBB days, a General got work by being good to his subs. In the CM/GC era, you get work by being good to your owners. A complete paradigm shift. In our discussions, I argued for more transparency in subcontractor bidding, like public bid openings. Both the CM/GC's and the owners objected. The CM/GC's claimed that they are under no obligation to award a subcontract to a particular bidder just because they are low.One told the committee, that as long as a number of sub bidders were under budget, he can pick and choose whichever one, in his opinion gave the job the "best value." I pressed him, saying: are you telling me that if you have five bidders all under budget, but one bidder is a million dollars higher than the low bidders, you can choose that guy? And he answered, "of course, if I think it's the best value for the job." This includes self-performed work, according to that CM/GC representative. And nobody gets to know which sub bid what.Just to show you that the insanity was not limited to the CM/GC's the representative of the corrections department claimed that they had to use CM/GC because (and honestly, he said this) "we have to know that the prison doors are going to work!" And going with a CM/GC is the only way you can accomplish that? I didn't know that in the first 130 years of our state's existence, that we had a major problem with prison and jail cell locks not locking.No matter what you do, all businesses, contractors included, are profit seekers - and profit finders. It's patently absurd to think otherwise.
Gerald H. Williams, Jr. PhD, P.E.
Construction Research LLC
Portland, OR
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