We sat down to discuss our partnership with Preston Design & Construction Consulting (PDCC), a project management and owner’s representation firm led by industry powerhouse Amy Preston. CEO and President Bill Birck interviewed alongside Amy to discuss the relationship between a contractor and project manager, what a good relationship looks like, and how early engagement of a project manager with the contractor is crucial in giving everyone on the project a great experience. Together they gave specific instances where the project’s quality, budget, and schedule benefitted from a trustworthy and honest relationship between project manager and contractor.
When an owner decides to engage both a project management firm and general contractor on a project, there are a variety of preferences for what the process will be like. The obvious preference for both parties is early engagement. For project managers like PDCC, being brought in early allows them to plan the project and set the budget prior to design, mitigating the classic issue of owners seeing an over-designed concept and the feeling of a lackluster finished product when things are cut. For general contractors like Reed, being brought in early alongside a design team allows for successful estimates, proactive value engineering to prevent scope creep, and consultation on general constructability. Often, strong collaboration early-on is reflected in an owner’s contract with each party and how they incentivize the team to work together. Project team members coming to the table with a collective value mindset will create conversations around what’s best for the project rather than what’s best for their individual firm. Many of these tactics are discussed in the interview.
From Amy and Bill, on the process of beginning a new project partnership:
Amy: It so depends on the relationship, right? Reed and PDCC are both trying to provide value to the owner. Because the one with the owner is the long-term relationship any company wants to have, and because the owner typically does not only own one asset. We want to show our value across the portfolio and we want to bring in the best partners we know to help us be successful. An owner might bring me on first. It’s easy for me to say to the owner, “Hey, we should see if Reed could help us budget this project; see if Reed can help us look at this tenant component.” It’s easy for them to show their value and win the project. Reed will be in the loop on what’s going on in these buildings and in construction, we actively have conversations because they’re in the buildings with us. We formed a relationship and an alliance because we both know that we want to continue to provide value to the client and continue to service the client in a way that they want to continue to work with us.
Bill:From the point of view as a GC, providing value to a client by making important industry introductions or proactively identifying a potential project issue, is the value that differentiates Reed from our competition. When an owner is interviewing Amy to bring PDCC onto a project where Reed is on board first, we can say we’ve worked with Amy for years and we really enjoy working with her. She and her team are very organized, good communicators, and proactive. They represent the owner’s interest very well and are extremely well-versed and knowledgeable in the real estate, construction, and design life cycle. Throughout the process, PDCC is there in part to call the ball, if you will, on what needs to happen and how to move the project forward. With their knowledge and skillset, working with PDCC means it’s not a one-sided relationship, it’s collaborative, balanced, professional, and equitable – to the architect, the GC, and the engineer.
Amy: I will go back to what Bill said. In our industry, because it is so small and because we’re trying to do the same thing, if you can add value in other ways outside of your specific discipline, I think the market sees that. They find you more of a consultant and an expert other than just what you are there to do. You’re a trusted resource in the market.
Getting more property owners interested in restructuring how to approach bids and contracts is the biggest opportunity for keeping a project team aligned. With the competitive environment of the AEC industry, it’s common for the lowest-cost bid to be the one that wins a project. Once that project is under way, however, owners can find themselves with a stack of change orders that drives up project cost and could lead to schedule delays. When the focus is on numbers and not value at the bidding and contract stage, the whole project can go off-track.
To help avoid this, Bill and Amy both recommend pulling in what Bill calls “voluntary value engineering suggestions” from the start and leaning on GMP (guaranteed maximum price) for the contract structure.
From Amy and Bill, on pitfalls of lump sum bidding, and how GMP can streamline a project and maximize value for owners:
Bill: The lump sum contract sometimes seems to leave a bad taste in the owner’s mouth. If the drawings are over-designed for the budget, there is an immediate scramble when we’re brought on board the project. We must communicate to the owner that they can’t afford their design and the architect has to redesign, meanwhile the schedule hasn’t changed. To hit the lump sum number, we must collaborate with the architect and PDCC to cut scope out of the project. For example, you have these glass skylights. Well, those are no longer glass skylights. You had a curved wall? That’s gone. You’re still getting something, but we’re the bearer of bad news when the market is saying your design is not possible for your budget right now. With a GMP, the contractor is brought in early, which allows us to provide input and value to the architect’s designs, and if we know the budget, we’re able to bear some of that responsibility of hitting the budget. We can provide input into what the leads time are and valued engineered options on constructability. The owner can hear our value engineering suggestions and get the same look and feel the design team wants in this project and incorporate them into the drawings early.
Amy: You have to have conversations with people to understand where they’re at, because these bids are coming in sometimes with a 1% fee, and we all know that nobody’s going to work for free, but it might be the end of the year, so someone is going to take it at 1%. The lump sum bid sets the job up for failure because if you’re bidding just what’s on the documents, you’re not getting an accurate bid. There’s a lot to be inferred and there is a lot missed. In bidding, a good GC will look at the drawings and will tell you, “Hey, there are some things you need to consider with these drawings. These are the things that are going to happen that you may not have considered, but we’ve written them out and we have an allowance for that in our numbers,” right? That’s why we like the Reeds of the world, because they will say, “We want to be competitive. We’re going to bid what you gave us, but we’re also going to tell you what you’re going to need. We’re going to be a partner.” Then PDCC can put those items in the contract and level them out across the board, because Reed provided us with tools to give proper recommendations to our clients upfront by transferring that knowledge over. Now, does it always work in their favor? No, because we level that across the board to the team. But Reed being a partner even before they win a project works in their favor from a relationship perspective. We know that they’re looking out for the best interest of the client, whether they get the project or not. A lot of owners and clients have seen that when we do jobs with Reed, we rarely go back and ask for a ton of change orders or money because we bake it in with allowances Reed helped us identify early. We’ve worked together long enough to know what we’re going to run into.
Having the industry shift on how to navigate contract structure and interdisciplinary partnerships will take more than one conversation to accomplish. But the importance of these relationships as foundational for every successful project team can’t be overstated. There’s more wisdom to be shared from Amy and Bill’s conversation, so stay tuned for even more insights from the leaders of Reed Construction and Preston Design & Construction Consulting!
[Editor’s note: Amy and Bill’s quotes have been edited for content and clarity.]