| An Owner's Guide to Construction Projects
Establishing your Requirements Typical Phases of a Construction Project The Four Primary Types of Construction Contracts A Description of Professional Design Services Your Responsibilities as an Owner When You Want a Project of Exceptional Design Quality Other Professional Advice You May Require The Primary Methods of Professional Compensation How to Select an Architect and Contractor American Institute of Architects' (AIA)
Suggestions on How to Select the Right Architect for You.
The AIA outlines the design process for
residential projects. |
Introduction What is a successful project? A successful project is one that satisfies or exceeds your reasonable expectations. This pamphlet outlines some processes involved in translating your objectives into a finished building. Its discussion is limited to factors that occur on construction projects of less than about two million dollars. These projects are more likely to have a single source of decision making. They will be less dependent on external funding requirements, and often will be built for personal, as opposed to commercial, considerations. This pamphlet is not comprehensive. It covers the intricacies of the design and construction industry in a general fashion. Professional consultation is recommended to analyze your specific project needs. Great projects require great owners. You are the most important member of the project team. It is my hope that this book helps you better achieve your goals using the design and construction industry. Establishing your Requirements Every owner is unique in their requirements. Some owners have extensive experience in the construction process, while for others the process will be entirely new. Whatever your situation, it is useful to ask yourself some questions. What do you know about your project? What you will need to figure out with your professional advisors? These questions include: 1) Have you defined your project into specific activities or areas, or will these need to be determined as part of the design process? 2) Has a general project budget and construction budget been established? 3) Has a project schedule and construction schedule been determined? 4) What are your expectations of the project? 5) Do you have the financial resources to execute the project? Are there any conditions attached to these resources that might affect the project process? Projects in the range of a million dollars are often executed by individuals. The sums involved can easily be the largest expenditure ever by that individual. To get the most value out of the project it is critical that you are clear on your aspirations and requirements. These aspirations and requirements need to be clearly communicated to your architect and others during the project process. Typical Phases of a Construction Project The design and construction of a project will normally pass through several phases between the project inception and the project completion. Depending on your needs, these phases can vary. In brief, typical phases might be as follows:
The Four Primary Types of Construction Contracts Construction contracts allocate responsibilities, liabilities, and risks between parties. They also define project roles in which the different groups operate. It is important that all the contracts that you sign are coordinated. In other words, the contact you sign with your architect should be consistent with the contract you sign with your builder. The roles and responsibilities in these different contracts should be in harmony. The type of project has a strong influence on the most effective form of construction contract. Your architect can discuss generally the advantages and disadvantages of each method with you. Your architect also can work closely with your lawyer to help him or her in the preparation of the different contracts. The American construction industry widely recognizes several standard forms of contract that are produced by the American Institute of Architects (AIA). These contracts can be supplemented or modified by your attorney to suit the requirements of your particular project. For projects in the range of one million dollars it is common that the standard agreements get used with little modification. The AIA has written industry standard engagement contracts between owner and contractor, and between owner and architect. Also, the AIA has contracts for contractor-subcontractor and architect-consultant. The benefit of this to you is that the roles and responsibilities of all the parties in the different contracts are coordinated. There are many different types of construction contracts. Four typical types of construction contracts are listed below. There are many variations to these contract types, depending on your needs. 1) Fixed Price: The contractor gives a firm price to perform the work. This price to you includes various contingencies, and a higher rate of profit to the contractor. This is meant to cover the contractor for a higher element of risk to him. This method is best used when your requirements can be clearly defined, and when the level of construction difficulty is not excessive. 2) Cost Plus: The contractor is paid for the direct cost of the works, plus a fee. Here, no contingencies are included by the contractor, and the profit margin will generally be lower. The contractor has less risk, but you have more. This method is used to get better quality construction results, and when the construction difficulty is higher than normal. 3) Construction Management: The contractor is paid a fee for managing the construction. You directly employ subcontractors and directly pay major suppliers. This method is used more often on larger projects, particularly in periods of high inflation. This method is not generally appropriate for projects under two million dollars. 4) Design Build: The design and construction is performed contractually by one organization for a fixed price. This price is given prior to the design of the project, and is derived from a schedule of requirements produced by the owner. This method is best suited to very simple structures such as barns, sheds, etc. A Description of Professional Design Services Architects, and the consultants they retain, provide a non-biased professional design service. This can encompass a construction project from its inception through its construction and subsequent operation. Architects work with you to translate your goals and values into a form that can be built by the construction industry. Architects do not employ or subcontract any of the actual construction work. This avoids a conflict of interest. Architects have an agency relationship with you. This means that by law architects, like doctors and lawyers, are obligated to use reasonable skill and care in performing their services. Contractors and other suppliers legally, are vendors to you. This means that they have an absolute obligation to provide goods to you that are fit for their purpose. In other words, it is the architect's responsibility to define and adequately specify your needs. It is the contractor's responsibility to provide the goods as designed and specified by the architect. It is important that the differences between these two forms of relationship are properly incorporated into your contractual agreements. Your lawyer can help you in properly incorporating this into your design and construction agreements. Your Responsibilities as an Owner The building process is interactive. You have many responsibilities that need to be met so that your project reaches your goals and objectives. The following are some considerations. You are the most important member of the project team. The project process will operative more effectively if you have a basic understanding of the design and construction process. Architects and other professionals can explain the process to you. Ask questions of anything that is not clear to you. Ninety percent of the project process is applying common sense. You should have realistic expectations of what can be achieved through the design and construction process. Nothing is ever perfect. Also, it is unlikely that you can afford everything that you would like to include in the project. The time required to design and build a project is usually more than most owners expect. Allow enough time to analyze properly your needs and to develop them. The design and construction industry can serve you better if you can define your requirements and objectives clearly. It is a profitable investment of time and resources to explore and define your requirements at the beginning of a project. The design process requires many decisions by you during the development of the design. Successful projects have momentum. Your timely decisions help to maintain this momentum. Not all decisions need to be made on the first day. It is the responsibility of the architect and others to inform you when and what kind of decisions are required of you. It is the nature of human beings to change their minds, and owners are no exceptions. The later this happens in the design/construction process, the more disruption this causes. This disruption can cost you money and delay your project. As much as possible, when you give a decision, make it a firm decision. As the owner you provide the money to make the project happen. The design and construction industry is particularly sensitive to cash flow. This is primarily due to the way that firms are structured. Also this is due to the smaller size of firms that you will deal with. It is in everyone's interest, not least your own, for you to pay for legitimate goods and services in a prompt and efficient manner. When You Want a Project of Exceptional Design Quality Construction projects of exceptional design are different in many ways from other types of building projects. First, there is a higher intangible regarding design that eludes precise quantification. This makes the analyses of results more difficult. Secondly, the emotional commitment on your part (and hopefully your architect's) is higher than for a normal project. This potentially makes the project process more volatile. Lastly, the trust and respect between key individuals becomes very important. As the owner you will decide the value structure of the project process. These values will strongly affect the design, and will govern the choices that need to be made during the project process. A great project does not necessarily mean a great deal more money spent on your part. What is tremendously important is how your money is spent. Are you willing to sacrifice square footage to have a better quality space? These and many other questions get answered by the values that you impart to the project. On projects of exceptional design merit, the owner and architect form a close knit team. This team works together to explore and experiment with a multitude of design ideas. They select those ideas that are the most suitable to your requirements. The chemistry between the owner and the architect is very important. Other Professional Advice You May Require Using the services of the design and construction industry involves significant commercial transactions. The project process will operate more efficiently if you establish the proper commercial and legal framework for the project. A lawyer can help you in your responsibility of the preparation of contracts. You should preferably find a lawyer who has experience with the construction industry. Your architect can work with your attorney to draft a construction contract that best suits your needs. During construction, you and the contractor both need to have different types of insurance. Additionally, you may require that the contractor be bonded to insure completion of the work and the payment of all subcontractors and suppliers. A specialist in the field of insurance can help you with these matters. You may need the advice of an accountant. Your project may have requirements or restrictions with regard to financing, taxation (capital gains, estate planning, etc.), and auditing of the contractor. The Primary Methods of Professional Compensation There are several methods of professional compensation. The most appropriate method depends largely on the nature of the project, and how well the scope of works can be defined in advance. It is common to use different compensation methods on one project. For example, initial studies to figure out needs might be on an hourly basis. The balance of the work might be performed as a percentage of the construction cost. 1) Percentage of Construction Cost: The professional fee is based on an agreed percentage of the total construction cost. Often, the scope of the design project cannot be determined at the outset. This method directly compensates the professional for the actual work. 2) Hourly: Each hour of professional time is billed. This method is often used for preliminary studies, and miscellaneous additional services. 3) Fixed Sum: A specific scope of work is performed for a specific sum. This method works well if the type of building, and a precise scope of work can be given at the outset. If you have built this type of project before, or if the building type is simple, then this may be the best method of compensation for you. How to Select an Architect and Contractor The type of project and your goals and objectives will largely decide the most effective design and construction organizations to use on your project. Most likely, you will need only have contracts with an architect and a contractor. They in turn will have subcontracts with engineers, or trade contractors, respectively. Sometimes, depending on your needs, it may be beneficial for you to have additional contracts. Many variations of contractual arrangements are possible depending on your needs. Your architect can advise you on the most suitable contracting arrangements to achieve your goals. When selecting your architect, you should look at the architect's experience with your type of project. Look at examples of his work and talk with the owners of these projects. You should feel comfortable with your architect as a person and with his work. The architect's creative ability is his most important asset. It is this talent/skill, together with hard work, that shapes your needs and wants into a successful project for you. Particularly when you want a unique and special design, you should make sure that the architect is willing, and is able, to devote the time and other resources to your project. The detailed attention and involvement of the principal(s) of the firm is crucial to an excellent project. Often, smaller architectural firms can give you better service than larger architectural firms. This is because the principal(s) of the firm has/ have more day-to-day control over your project. When selecting a contractor, you should look at their experience with your type of project. These past projects should be at least the same construction value as your project. Check the contractor=s references. How did the contractor perform during past projects? Look at the quality of construction. There is a wide range in the quality available in the marketplace. This range of quality is reflected in the cost. If you competitively bid your project, pre-screen the contractors, and make sure that they build to a similar level of quality. A contractor who builds to a high quality standard will always be under-bid by someone who builds less well. Therefore, be clear on the standard of quality that you want, relative to what you are willing to pay, before you competitively bid your project. Do not necessarily pick the contractor that gives the lowest price. Sometimes a contractor will make a mistake in bidding and under-price a project. A construction project that begins on this basis will inevitably bring grief to both you and the contractor. The financial strength of a contractor is very important. Check credit references, and if necessary, get certified financial statements from the contractor. At a minimum, you should perform a credit check on your prospective contractor. There are numerous services available such as TRW, Omnifax, etc. that can give you this information inexpensively. If a contractor goes bankrupt during your project everyone loses, including you. This is the case even when the contractor has a valid performance and labor and material payment bond. In short, make sure your contractor is financially healthy. The architect normally coordinates the entire project process. Each member of the project team still retains their responsibilities within a framework that is established by you and your architect. |
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