A while ago, I was in conversation with the Consolidated Contractors Company Manager of The BIM Centers. They had recently won a contract to build the Abu Dhabi airport for 3 billion dollars That was good news, so I congratulated him on their winning bid. Then elated I asked him, how many bidders did you win against. “Two” he answered. “Two?” I asked. “Yes two.”
“Really just two?”… Now that was disappointing.
But it made me curious. I thought, can construction, which works on the basis of competitive bidding work well, when there are just two bidders. Clearly there is no competition at all; and it led me further to acknowledge, that maybe this is the reason why we don’t have good quality infrastructure in our cities.
Thereupon I set out on a task. I resolved, that I must understand these different models of construction projects, we use to build our infrastructure. And see if we can make it better.
This article is a report on that journey. It will walk you through the different models of construction we use today, and will list out the pros and cons in them. Thereupon, after having knowledge on why all these models fail, it will answer what could be the model we use in future? Let’s begin:
There are many project models that organizations use today. Here are four of them.
- Whole Construction model (WC).
- Design and construct model.
- Alliance model. And,
- Design, Construct and Develop model.
Whole Construction Projects Model (WC)
This is the most traditional model, which depends totally upon competition to reduce costs. It works through picking the lowest bid for design, and then picking the lowest bid for construction.
Yes, it does save some money. But it saves it, in the same way a poor father saves money by buying his son the cheapest education. Not the best way to save money, is it?
Picking the lowest bidder doesn’t work for a simple reason – Contractors want maximum profit for their services. Clients want minimum expenses. The one who suffers in this battle between the two, is the quality of the end product.
Designers are forced to deliver low quality designs, because they fall short of work hours to make good conclusive designs. This lack of funds also stops them from supervising on-site construction. On the other hand, contractors are forced to finish the project as fast as possible, to save on labour and other costs.
This ‘lowest bid always win’ model has also given birth to another strange principle amongst contractors. They say: “Since we can’t make good profit through our bid offer, so let’s make a profit out of every mistake. Who knows which mistake happened by chance, and which was done intentionally?”
Having said that, it is also true that, working under this model, if you can supervise a project well, you do have good chances of getting great quality at a great price. But to be able to supervise a project that efficiently is a rare quality.
Design And Construct (DC) Model
The design and construct model was created to address the key issue of the WC model: that the designer makes inferior quality drawings, and does not supervise on-site construction, which leads to many on-site changes in design. And thus leading to inferior quality end product. This is how the DC model tried to fix this problem:
The DC model says that, if a construction company is the expert on building conceptualized designs, then why not let the construction companies do the designing as well? Undoubtedly, it appears as a great idea. But let me show you, how it’s worse than even a WC model.
When you allow construction companies to hire their own designers, you allow them a chance to manipulate the designs as well; resulting in worse quality products than WC. Moreof, this also results in many municipalities having ‘challenging’ and ‘outsourced’ jobs in their organization.
Challenging for municipalities own small construction team, who build challenging modern methods of construction projects. And the outsourced ones for contractors that are hired through WC models.
This new model to run construction projects, undoubtedly is a leap forward from the previous two models. Working under this model, we have often seen strong co-operation between designers and contractors; designers help the contractors with on-site supervision and ensure that the end product is close to the conceptualized. And contractors consult more actively with designers while planning their work. Also the communication between clients and service providers is clear and strong.
But even with all its positive qualities, the alliance model too fails at some points. A major pitfall of it is that, it gives a fixed profit gap to contractors. And because of that, construction companies resort to making higher profits by doing construction projects under WC-model, while having an army of sub-contractors.
Another pitfall of Alliance-model is ‘re-inventing’. Why should we put everyone on the same line, and discuss the best approach for different things? When we could rather utilize already existing approaches and methods, and improve them gradually, without having to organize weekly development meetings.
Design, Construct, Develop (DCD)
When we realized that organizing alliance model for smaller projects (100.000€ – 200.000€) is inefficient; we solved this by inventing the “alliance for smaller projects” called DCD. This is the best amongst the lot. One that has the best of everything.
It has the benefit of Design and construct (DC), combined with leaner re-inventing process from the alliance-model. With added project development into the design phase, it also keeps the project lean and cheap. And when everything has been designed and developed. It allows the construction company to roll out on-site to do their job.
May be it seems perfect from a distance, but unfortunately on close inspection, DCD has the same pitfalls as that of Alliance model. DCD is very good for projects above 1 million Euro. For anything below that, it fails.
Now that we are aware of all the pitfalls in the various models. The next question is: how do we design a better model?
What Things Do We Want Our
Construction Projects Model To Prioritize?
If we want the project model to benefit the municipality, I would suggest to prioritize the following methods of construction architecture :
- Best Quality
- Skilled Contractors
- Credit tabs open
- Competitive Bidding
Most cost-efficient way to build is to build it once with the best possible quality.
We must hire skilled contractors, because bad contractors mess up even after being assisted with machine guidance, log point-to-BIM quality analysis and other tools. One of the ways to predict if a contractor is good or not could be based on their yearly revenue and profit.
Credit Tabs Open
We must guarantee budget expansion to reduce contractor’s fear of risk, and motivate him to stay committed to a project. This is important, because project costs get exponentially expensive, when the main contractor denies finishing a project. And we are forced to hire another contractor to finish it.
Competitive bidding is simply the best way to get a solid and accurate price for a project.
To conclude all the above points. this means that, project-model should be the cheapest, and give us high quality work. And yet give a good profit to the designer and the constructor.
Appears impossible, doesn’t it?
Hear me out, it is possible.
The Neo-WC Model.
Let me introduce you to the Neo-WC model. This is a model that I have designed myself, by keeping the good things from all the above models, while taking away all their pitfalls. And at same time I introduce some new ideas to them.
Using Bids For Design And Construction
I say, that we should continue using bids for design and construction. This will help keep costs in control. But at the same time, in those bids, we also demand the designer to do on-site supervisions (this will increase immediate costs, but will bring us great savings later).
Then we should give the contractor allowances for more budget, in case the project demands it. But he must be given that extra budget, only for extra expenditure for which he has documented proofs.
And also, when he applies for more allowances, he would now be subjected to a fixed percentage of profit on the project, which otherwise could have been a flexible profit margin. Doing this will can ensure that the contractor builds a project in the best quality.
Why Is The Neo-WC Model Important?
This Neo-WC model is important, especially for the municipality. Because if we continue using WC or DC models, we are leaving design and construction companies with low-profit-margin. And this attitude, we have seen, has already killed a lot of infra-development companies, and sooner or later, it will kill them all.
Therefore, if we really want to get the best quality and best price, while at the same time keep construction companies alive and growing. We will have to take the responsibility of infraconstruction development, and support construction companies build faster. Or otherwise we will have to pay them huge profits to develop themselves. There is no other choice. Because if you don’t you are literally burning investment money on inefficient methods of construction.
Therefore, if our goal is to get the best quality product at the cheapest price. We must develop a more sustainable approach. One that benefits all. Many municipalities have already done that, and have made savings on their investments many times over.
If you want to know more on this subject, I recommend you read this article.
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