What’s Old is New Again: Commercial Development

old-new-plansSince the middle of the 20th century, the construction and development industry, as a whole, has grown inefficient. In the 1960’s, savvy owners realized that they could often enjoy a cost savings by breaking the design and construction practices into segments, much like Ford’s process driven “assembly line” approach that revolutionized the manufacturing industry 50 years before. Breaking up a project into insulated disciplines allowed the owners to save by introducing competition at multiple phases, instead of only at the onset. These changes also drove the architecture, engineering, prime contractor, and subcontractor trades to become even more compartmentalized in their respective disciplines, often losing the perspective of other team members working toward the same goal. This new segmented model created divisiveness and conflict among project participants.

In many cases, this fragmented model has carried on to the present day. However, there is one major difference. The owners that began this segmentation were professional developers and buyers of these services. They were experts in their own right and had deep knowledge of each phase of the process. Therefore, they could rightly hire the proper candidate at each step. Unfortunately, today this has put the unestablished owner in a difficult situation. Despite the size of the project, the owner must now operate inside a fractured business model, often doling out millions of dollars to several firms, which may each contest each other during the job’s progress. Individual contracts with these separate firms are typical, creating silos of effort with their own agendas, leaving the owner to play referee. Architects may design over budget, engineers may cut corners, contractors may bid-low and then look for change orders, and subcontractors may misrepresent abilities, capacity, or materials used. In this model, each party is looking to better themselves instead of focusing on the true desired result: a successful project for the developer.

Within the last 20 years, a sort of renaissance has occurred in the design and construction industry. All parties involved realized that the segmented model was broken. In fact, the most efficient and cost effective approach to new construction and major remodeling was a team approach. This realization began in the private market, but the team approach is now readily common even in the public sector. Contract delivery methods such as Construction Management at Risk and Design/Build have flourished by focusing efforts on results, not costs. By the early 2000’s, a new method was emerging. As defined by the American Institute of Architects, Integrated Project Delivery (IPD) “is a method that integrates people, systems, business structures and practices into a process that collaboratively harnesses the talents and insights of all participants to reduce waste and optimize efficiency through all phases of design, fabrication and construction.”  In simple terms, the IPD method utilizes all stakeholders, from owner to subcontractor or even supplier, and empowers them to make decisions for the good of the project. Value engineering, life-cycle analysis, technology integration, value to market, health and wellness implications, and other factors can all be considered before an initial concept design is created, with all parties providing input. As shown in the graphics, the “who” and the “how” in the project are decided much earlier and the team creates the best project outcome. Costs, benefits, savings, and risks are contractually shared among team members.

This type of arrangement has been called many things over the years, but some firms have been providing these services all along. For instance, at Scherer Construction, we have many abilities in-house, but also have a cultivated network of partners, developed over 30 years, that we can bring in to help a project succeed. As an additional perspective for our clients, Scherer leaders have the experience of being an integral part of many land development deals and understand the inner workings and complex financing. Although most of our work is completed with outside design firms, we have two full-time architects that help us deliver a true design/build solution. Our vast network of engineers and specialized subcontractors allows us to quickly assess the feasibility of a project. These relationships have been nurtured through years of working together and learning which group has the expertise to provide the best solution to a specific project. Although a new client may not see it, when they meet with us there is actually a room full of experts already working on their project. The benefit is imbedded in our results: being on time, under budget, and finding innovative ways for the project to be improved. This is why 90% of our business is either repeat or referred to us. No matter what you call it, having a team of experts from the beginning is the best way to get the right building in the end. Choosing a construction partner that has experience in all phases of the development process increases your chances of a successful and painless project.

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