Throughout my 37-year career in commercial construction, it has been the principal practice of competitively bidding out contractors, architectural & engineering firms, construction managers, furniture dealers, etc. Many large corporations have adopted Sarbanes Oxley Compliance to ensure that they get the lowest price possible for any goods and services.
These practices may work when purchasing a commodity that will be incorporated into a widget to be sold in a retail market. However, this practice is counterproductive when applied to commercial real estate construction practices where the buyer is purchasing “services”.
Commoditizing services have rarely, if ever, resulted in a successful project with a project completion that is on budget and on schedule. It fosters an environment where the project team is defensive and quick to point out the faults of the other team members, to preserve what little profits are in their contracts. It also renders a low level of respect from the client as they do not value the experience and knowledge of the project team members.
If one wishes to develop the “dream team” of commercial construction & development projects, they will not commoditize the services that are being provided by their project team. The best way to hire these professionals is through the interview process. The selection process should be based on experience and skills that would directly benefit the project, the culture of the vying party and how it fits with your culture and goals, and equally important, whether you like the proposed team or not. You will likely be working together for an extended period. It is important that you can relate with your team members.
All service contracts can be easily managed through negotiated fees and the open-book methodology. The goods and basic services (subcontracted work, furniture product, technology equipment, etc.) can still be bid out by each service provider and marked up with pre-determined fee percentages. This method ensures Sarbanes Oxley Compliance if necessary.
This method also enables the early onboarding of all key team members (Construction Manager, Architectural & Engineering teams, General Contractor & Furniture Dealer), which facilitates early project planning and design while maintaining all budget goals. It does not allow for fault finding when process pitfalls are foreseen and prevented from happening. When the entire team is working closely together towards the same goal, it is inevitable that the project results will be under budget and completed on schedule.
My first experience in running a project using the above methodology was for Mercury Payment Systems Headquarters. My engagement was to be their development manager for Mercury Village, a 30-acre self-developed Master Planned Business project that included Mercury’s Headquarters office building and amenities. From entitlements to punch list the project team exceeded all client expectations for budget, schedule, and quality. A prime example is that we overshot our goal of a LEED® Silver project and was able to attain LEED® Gold.
Jim Collins, in his book Good to Great explains the concept, “First Who, Then What—get the right people on the bus”—is a concept developed this book. “Those who build great organizations make sure they have the right people on the bus and the right people in the key seats before they figure out where to drive the bus.”
-By Charles Suh
