A New Direction for Tenant Improvements
The way of the future in terms of interior finish-outs may be collaborative ventures with more than a casual commitment to transparency. Open Book Design-Build Contracts offer a way to bring together clients, contractors and architect/designers at the project outset in an effort to keep costs low and also reduce construction time.
Instead of hiring an architect or designer to develop conceptual plans for interior finish out, and following the traditional path through bidding and build out, a firm would assemble a team—at the very outset of the project—consisting of designer/architect, contractor and designated project manager or construction supervisor.
It’s a way to save time and money by gathering a creative team at the very beginning. Collaborative development and problem-solving are integral parts of the process; subcontractors and additional experts, structural and social engineers, for instance, are brought in as necessary to ensure seamless progression from idea to reality. At least in theory.
The Way It Works
It is a scenario happening frequently on commercial tenant improvement projects across the country. If it is to work as planned, however, there are certain requirements:
- There should already be a level of trust established, perhaps through previous association.
- All participants must be committed to arrive at agreed-upon costs for the project.
- Pricing is also transparent, but there are opportunities to save money as well as to spread risk throughout the process.
- Subsequent construction contracts can be either guaranteed maximum price (GMP) or fixed-price, or some combination of the two, but there is no competitive bidding involved, saving time and effort.
Design-Build is, of course, not a new concept; it has made great inroads in commercial construction as well as for residential building. What is not so common is the flexible, confidential disclosure of costs, sometimes with third-party validation. It is an innovative new direction, one that might require some “re-thinking.”
A Future Direction
According to the Water Design-Build Council, an association of design-builders, “accuracy and completeness” are essential. There can be nothing left out, and ambiguity has no place. “Cost-is-cost-is-cost,” according to Council President Leofwin Clark, who adds that “a contractor’s or design-builder’s overhead, operating costs, burdens, encumbrances, profit, turnover, mark-ups, fees, charges, levies, incentives—or whatever other term you can think of,” is added on top of the costs to determine the actual price of the project.
He adds that both cost and pricing must be fair and realistic if the open book approach is to be successful.
Benefits of the approach, noted by those who have participated in an open book design-build project, include the ability to move forward even before plans and specifications are finalized, which can speed the process substantially. Also, if a GMP contract is in place, the books can remain “open” until project completion, with the potential of shared benefit if a building finish-out is delivered at less than guaranteed maximum price.
It is confirmation that collaboration works, is certainly a “win” for the client, and constitutes an equal incentive for the design-builder, in terms of validation, trust and future opportunity. All across the country and locally in local counties like Anoka, investors are taking note. Even under a fixed sum contract, there are no surprises, because all the contingencies as been worked out in advance.
