One great thing about becoming a more active blogger on construction consulting topics is that I get the opportunity to interact with my audience. A recent post addressed to owners in the early stage of a project was titled “5 Things to Consider When Hiring a General Contractor.” A construction contractor I know who does close to a billion dollars a year around America commented on the blog through my twitter account (@davidpray). He said, “Great insights Dave and truly major items for CM’s and GC’s to consider when choosing clients as well.”
The contractor made a crucial point: This is a 2-way street. Many times owners will come to the table and think they’ve got this capital project that everybody will be tripping over themselves to work on. That in fact is not necessarily the case.
It’s important for ownership to understand that when a construction contractor and/or a design-builder pursues a project, it’s an investment. They’re making a decision to pursue and there’s a financial impact to their organization. This could be as little as a few thousand dollars for something small and simple. If it’s a five million dollar building, it could cost them $10,000+ to submit a responsive proposal. Very large projects can cost as much as a quarter of a million dollars to pursue. To the point, it’s an allocation of their human resources they may choose to deploy elsewhere regardless of the amount of the investment. So contractors are going to approach a project mindfully. They have their own checklist for owners that they are willing to do business with. Owners…understand that.
Show Me the Money
One of the things that will be on their minds is whether you have a source of financing for your capital project. If the project is coming from a public company, their financial statements are a matter of public record so the contractor has some data to work with that might help inform their decision. Many owners have younger organizations that do not necessarily have ready access to large sources of capital. It’s good to give contractors a sense that you can actually fund what you think you’re going to be doing. Be transparent about your source of funding. If the perceived source of funding is bank financing, ownership (understandably) may not have funding wholly in place. You’re better off with honesty, such as, “we don’t have the loan, but we have good interest from a couple of financing sources.” You then might be asked, who might that be from? I wouldn’t hesitate to tell them who you’re talking to. The same goes for projects being financed by venture capitalists instead of traditional financing. Contractors will be looking for some sense of whether this project is financeable. The bottom line is talk about the money. It’s awkward to discuss but I guarantee you it will be on everyone’s mind.
Do You Really Know Your Building Project?
If somebody comes to a contractor and clearly states that they want a 15,000-square-foot office building on one story for X amount of employees who will need conference areas and a reception area and appropriate restrooms and storage and other relevant details, they have provided what we refer to as programming information. Contractors (particularly design-builders) look for how clear an owner is in their minds about what they’re trying to accomplish. They’ll look for whether they’ll need help in defining their programming requirements. Be open and transparent about your needs and where you are in figuring these details out. It will assist the design-builder in understanding the resources needed to add value to your project.
Look for a Good Fit
If you’re very well organized with your programming info as well as honest and accurate about when you need this project to be in the market, the contractors can potentially quote you more aggressively. Contractors have blanks in their forward-looking timetable that they are looking to fill. You may have heard very good things about Contractor ABC, but ABC might not be able to get to your project for another 6 months. Or he may really need to fill a blank that has just shown up in the schedule in 2 months time. The ideal situation is to create a good fit and the more transparent you are about the programming and your perceived time table, the better able you will be to find a good marriage with the right resource. The resource here (i.e. the contractor or design-builder) is arguably one of the most important resources on the project.
Do You Have an Owner’s Rep or Project Manager?
The better contractors are going to be attempting to work for the best and brightest owners, so it’s vitally important that you come across as an informed and knowledgeable purchaser.
One way for you as an owner to be a more professional participant in the marketplace is to have someone like PrayWorks represent you in that market. Your choice of project manager (or lack thereof) will be evaluated as well. I know that for a number of projects I’m involved with, the firms would not have elected to pursue them if I was not involved. Bringing in a construction consultant to act as an owner’s rep is a way for you to add expertise to your staff while you need it. Call or message me to begin a discussion about your upcoming project.
Check back next week for Building is a Two-Way Street, Part 2 to find out other qualities the best contractors are looking for in owners.