Attracting the Best Design and Construction Firms in a Construction Boom

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2019 Real Estate and Construction Issue
CapitalMasthead

Attracting the Best Design and Construction Firms in a Construction Boom

By: Cathy Altman

A skyline of cranes and heavy equipment proves that construction continues to boom in North Texas. Owners and developers continue to face risks associated with the shortages of available talent for construction projects. Owners can mitigate some of these risks through changes to their procurement processes, contract negotiations, and project management. The abundant opportunities available to good design and construction firms means that owners must work harder to ensure their projects attract the best talent.

The best design and construction firms have their own procedures and policies to ensure they select projects with the best opportunity for success. They know to avoid owners who interfere with their ability to perform profitably, who do not have sufficient knowledge and resources to undertake the project, or who have exhibited unchangeable behaviors that elevate the risk of the project. They will also turn down projects that are in unfamiliar locations, require unfamiliar techniques, or are poorly defined, leading to a higher than acceptable level of unknowns. Even when firms identify a solid project with a great owner, they need to be comfortable that their internal team with the requisite experience and skill to deliver the project successfully is available. For the construction professional the risks of promising to deliver a project when it does not have the necessary expertise and capacity seldom can be mitigated with procedures or contract provisions. Fortunately, owners can use the procurement and contracting process to overcome these concerns and attract the best firms to their projects.

While owners cannot hide their past reputational problems overnight, they can make sure the goals for their current project are clearly articulated to avoid the frustration contractors and design professionals experience with uncertainty and constant changes in directions. Well-written and detailed solicitation documents that portray a sophisticated owner with a clear understanding of the project, timeline, and budget should increase the interest from firms with the experience to deliver a high-quality project. Clarity about scope and schedule also allows responsible firms to properly evaluate the availability of their key superintendents, managers, and subcontractors needed to deliver a successful project. Transparency regarding the funding available for the project will improve contractor confidence in the owner and its project. Advance planning will also increase the talent pool. By expanding the time between the start of procurement and the start of design and construction the owner will allow more firms to secure time on their calendar for your project. Having a realistic schedule for construction will also attract more qualified proposers.

Good contractors also shy away from owners who fail to appreciate the importance of retaining employees or consultants with the experience to make timely decisions on behalf of the owner. Having a clearly-identified, empowered, knowledgeable, and collaborative owner’s representative reduces the risks of budget overruns and schedule delays for all participants. Surprisingly often, the first and only time many owners think about who will make decisions on their behalf is during the contract drafting when the attorney asks which name to include in the notice section. Early in the planning phase, owners should give thoughtful consideration to whether they have the existing staff to properly perform this important role. Owners who elect to retain an outside owner’s representative to interact with and oversee the work of the design and construction firms will need to research those options diligently. Ensuring the owner’s representative has a good working relationship with reputable construction and engineering firms will increase the pool of companies interested in working on a project. Of course, contract terms must be aligned with the expected role of the owner’s representative in decision-making.

Finally, attracting the best talent may also necessitate compromising on certain owner-friendly contract terms such as waivers of consequential damages, “no damage for delay” provisions, or burdensome indemnity or insurance requirements. Increased competition makes it more difficult for owners to shift all project risks to other parties and still draw the best firms to their projects. Those companies are more likely to choose projects where the owners are willing to retain certain risks inherent to the owner’s business, the project, or the site. For example, responsible firms will not risk the company’s viability by assuming the risk of lost profits due to the delayed start of a manufacturing facility for a business that generates hundreds of millions in revenue. A mindset of shifting risk to the party that is best able to control it, rather than away from the party with the most leverage, will create a positive distinction for your project among thoughtful firms.

By properly planning for the risks that responsible owners should be prepared to retain, the owner can then allocate additional resources to those areas to avoid or mitigate the risk. For those risks that are fairly allocated to the design or construction firms, owners should closely consider the proper contract language to back up those responsibilities. For example, as firms juggle the heavy workload, they may be more likely to move their best people or subcontractors to troubled projects, leaving you hanging. Locking in key personnel or subcontractors through the contract documents is critically important. Backing those contractual obligations with retention bonuses or liquidated damages for failure to comply may be helpful.

Once the team is in place, good protocols and procedures can help owners avoid or mitigate many of the risks inherent in a tight construction market. Protocols can be adopted to identify issues early, train employees to properly address them, and avoid what is avoidable. But successfully deploying these strategies depends on having a deep understanding of the perils involved in a particular project. Many successful construction teams devote significant time to regular partnering meetings with the owner, design professionals, contractor, and key trades at the table to brainstorm possible risks and strategies for avoiding or mitigating risk. Regular construction meetings with all key players can bring potential problems to the forefront for resolution. Peer review of design drawings and robust quality assurance/quality control program can catch errors before they become big problems. Many lawsuits trace to the same root cause – ineffective communication.

Risk is inherent in all construction projects, but owners position themselves best for a successful project by planning responsibly and fairly negotiating contracts to attract the most qualified construction professionals.