Navigating the GMP process in Today's Changing Environment
Advisory services for real estate developers considering high rise and complex construction projects requires a more robust evaluation than at any other time in our history. Revisiting the basic industry questions as to who can BID, BUY, BUILD and BILL these projects is now subject to a paradigm shift in our industry.
In the not too distant past, selecting the right construction management firm took you the majority of the way to schedule and cost certainty. You relied on an established track record, primarily based on the company’s past performance, purchasing power, trade contractor relationships, command and control of a labor force, experience and team. Value adds were sophisticated insurance programs, logistics and regulatory expertise with trade contractors who were open shop or union. Projects of a certain size, the requirements to use a tower crane, the much sought after 3 day cycle and
There was a dividing line. This is no longer the case.
Construction Management firms, with less than a dozen years of experience, rooted in the open shop world, profess to be able to build projects in the range of $50-150 million dollars. They bring relationships and a track record with this open shop subcontractor base. Many present a tantalizing price per square foot price and a promise of a competitive schedule . Their story is one of the mouse that roared, with a modicum of success and a sentiment of joining forces with an owner, to knock down past commercial impediments and conquer future market territory
The other options includes hiring a Construction Management firms with 50-100 years of admirable and enviable experience in building some of our city’s most notable projects. These companies have well earned reputation capital built on a successful and safe completion of many, many projects of similar size and complexity. They have a mature relationships with union trade contractors, many with the same tenure and success rate as the construction management firms who hire them, to deliver as advertised. However, the price point has become untenable. More recently, these CM firms have forged relationships with the open shop trade contractors, with varying degrees of success in driving to a more competitive price point for the owner and starting over to deliver a product where, in many cases, you have new relationships with subcontractors, in a world where the work is delivered in a somewhat different manner. Additionally, this dynamic has resulted in the union trade contractors providing price concession bringing them within striking distance of their open shop competitors.
For an owner/developer, you now need to make a decision without a perfect choice, but the best choice for your project. This decision plays an enormous influence on the support and interface necessary for the design team. in an environment where the construction management firms rarely self perform, the trade contractors can play a paramount role in the process. Consider the following
When will you know, with a degree of certainty?
- critical exchange and support for the design team
- safety record
- the price
- labor source
- insurance programs
- Bonding or other securitization mechanisms up and down the chain
How do you weigh the benefits/risks of trade contractor who can build the job but may not meet the requirements of an SDI program?
What will the lender accept for your construction loan?
The old construction industry adage stated time and time again when comparing an experienced contractor to one with less of a track record is “A million dollars buys a lot of aspirin” Today, the stakes are usually much higher. Making an informed decision is the best litigation tool available to an owner today. Navigating these waters requires an analysis of hard data, experience and in depth knowledge of the market. We are uniquely qualified and positioned to guide you through the process.
Combining deep expertise with real time market data to optimize the GMP process.
If you're interested in learning more about our project services, please connect with Susan at firstname.lastname@example.org to chat about our GMP process.