How is it that the owner and developer “chisels” the design fees and construction budget yet pays change orders for errors and omissions (E&O)?
The owner and developer, who rarely hear the word “no”, wants a “Green Building” (developer virtu-signalling as well as a marketing opportunity) but only wants to pay for a low performance building. They accept high performance cars cost more, yet high performance buildings must cost the same as commodity buildings?
I have seen this movie before:
- I want a “green building” and I want it soon;
- Design time and fees are compressed;
- Copy and paste standard design solutions are used;
- Under engineered drawings and specs are issued with multiple E&O’s;
- Lowest bid, sometimes unqualified, contractor is appointed;
- Multiple RFI’s are raised and change orders issued due to E&O’s;
- Design team sign-off change orders to keep project on track;
- Owner pays, avoidable IMHO, high costs due to E&O’s;
- Design team are not normally penalized for E&O’s;
- Project becomes a game of survival and minimizing loses for everyone, and so it repeats.
However , the reality is:
- Owner wants an efficient building that works, with no defects, on time and to budget.
- Owner assumes zero or minimal E&O’s, that is what they contract for.
- Outcome of the building design process is a set of drawings and specifications (yes, thats it!).
- Purpose of the design drawings and specifications is ONE thing, instruct the construction team what to build.
Who is at fault?
- Owners and developers. They are their own worst enemies and have unrealistic expectations.
- Building designers. They need to get comfortable with the word NO.
IMHO, incentives are misaligned. In my experience, people are rewarded for cutting costs and budgets (macho culture), yet they are not penalized for E&O and contingency spending (damage limitation mode or CYA). Also design and construction professionals do not suffer the consequences of bad decisions and work, the owner operator does over the long term.
What to do?
- Accept that the building design process takes a minimum of 9 to 12 months (concept to IFC documents).
- Know if you reduce this time the design team will always say yes (they are client pleasers) but the E&O’s plus change orders will increase.
- Incentivize (by bonus and penalties) the design team on KPI’s for E&O’s Vs Change Orders caused by E&O’s.
- Just say NO to crazy and unrealistic developers. You will sleep better and ultimately make more money IMHO. Chose your clients wisely, fire the crazy ones.
- Focus on reducing E&O’s
- Feel shame when signing a change order caused by E&O’s.
As a former property development manager I can confirm:
- Contingency budget is for unforeseen problems (risk) and client driven changes.
- Contingency budget is ideally 2.5% but 5% maximum
- Contingency spend increases as design time reduces
It is said, insanity is doing the same thing over and over again and expecting a different result. How many E&O change orders have to be paid before shame leads to change in design quality outcomes?
Related posts & links:
#41 – Who Knew? – Commissioning Design Reviews Save Money, Time and Reputations ( https://www.linkedin.com/pulse/who-knew-commissioning-design-reviews-save-money-time-muggleton?trk=mp-reader-card )
#42 The “Hot Potato” That Is The Controls Sequence of Operation ( https://www.linkedin.com/pulse/hot-potato-controls-sequence-operation-adam-muggleton?trk=mp-reader-card )
#68 Hotel Design – How Many Stars? ( https://www.linkedin.com/pulse/hotel-design-how-many-stars-adam-muggleton?trk=mp-reader-card )