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Partnering With the Owner

True partnering will not work for everyone or in every situation.  However, in the right situations it provides great value.

Probably the two delivery systems that best facilitate true partnering are construction management and design-build. The problem with both approaches is the owner's, or buyer's, selection process is often flawed.  Because many buyers lack the ability to adequately evaluate a contractor's performance, they resort to comparing fees and overhead costs.  This often results in selecting the wrong contractor and results in partnering getting a bad name.

Instead, buyers need to be made aware that the general contractor's fee and the architect's fee represent about 10 percent of the total cost of a project.  Further, when considering the lifetime cost of a project, the construction cost only represents about 10 percent of the total lifetime cost of a building.  Therefore, the general contractor's fee and the architect's fee represent about 1 percent of the total lifetime cost.

Despite this, buyers too often buyers focus on these figures in their selection process instead of focusing on value delivered.

Contractors and architects must educate these owners that it is more important to select the right general contractor and architect than to worry about their fees, because the right contractor and architect will save the buyer in the long run. After all, even a 20 percent savings in architectural and general contractor fees only saves the lifetime project about .2 percent.

An example is the recommendation to use the more costly parabolic light fixture over an acrylic lens fixture. While the initial cost is higher, the 25 percent savings in electrical costs will reduce the property's operating expense significantly over its life.   Buyers need to understand the right contractor can save them significant costs, and that selecting the wrong contractor and design team can be a costly mistake.  While the buyer often blames the delivery system, the real problem is the selection process.

Buyers always worry if the got the best deal. Most contractors have experienced a client switching back to bid work in an effort to get lower prices. The problem is this individual is focusing only on initial costs, not total costs.  This is the real world and the buyer establishes the rules.

The answer is to educate the customer. The best way to do that is by establishing trust and by delivering high performance.  In order to increase the stability of the process, the contractor must demonstrate how it is saving the buyer costs in other areas that help deliver greater value.  In order to do this convincingly, the contractor must speak the buyer's language and help the buyer solve its problems. For example, if the contractor specializes in hospital construction, it must understand where there are high operating costs and provide solutions that reduce those costs significantly.  This is about the contractor knowing the current state of the art of hospital construction,not just construction.

This expertise and innovation skill provides credibility for your company in the negotiation process. For example, if you can provide references from other hospitals that proclaim that your company's ideas and suggestions saved that hospital thousands of dollars a year in operating and maintenance expenses, that will increase your firm's credibility and value.

To be a true partner you must seek situations where you can deliver greater value through your knowledge or provide faster completion through a design-build effort.

Caution - if you can't really bring special knowledge or speed to the process, then don't sell the partnering concept because you are not acting like a partner and will only hurt your credibility in the long run.

Remember: negotiated work is for the benefit of the buyer, not the contractor.  Of course, if the contractor does it well, it will benefit, too. But if the buyer doesn't benefit, then the contractor didn't do a good job.

Just like in any relationship, if your attitude is to deliver more than you receive, it will end up being a wonderful relationship if you pick the right partner.

 

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