The office fit-out market lends itself to approaching a Design and Build (D&B) contractor. When taking a new space, clients are usually on a tight timeframe to deliver a project and the nature of the D&B contractors offering is more attractive, with the upfront, free of charge work, which is accompanied by space planning and visuals of the clients’ potential space. In my experience, I have found that there are so many projects and clients out there (experienced or not) who are just not getting value for money on straight forward projects.
At MESH, we have been appointed on multiple schemes where there is already a D&B contractor on board. With many successfully adopting and delivering this business model, I wanted to share some of my thoughts on this method. As an independent, client-side Cost Manager, the majority reading this may think there is only one way this article is going (and I may or may not meet that expectation, so here goes).
Thinking back to basic principles, what are the key considerations you should review prior to starting a project? Time, cost, and quality, and maybe we should also add risk ownership. So, in office fit-out terms, let’s have a quick look at these four points (typical expectations of D&B) and my experience in how they fair at the end of most single source D&B projects:
- Time – Quicker?
Yes. As stakeholder engagement is never truly reflected in the original programme or promise, the pre-contract period takes longer than expected. However, in most instances, the D&B contractor can move quicker than mobilising a full design team, and they can have a very slick delivery method.
- Cost – More Expensive?
Yes, in terms of what you get for what you pay for. The negotiation process is typically a painful one for all parties (it’s a lot of meetings going through the granular detail and challenging almost every item). However, the result following our detailed interrogation of quantities, rates, and scope usually arrives at a cost reduction of approx. 5-10% less. In a more extreme example, for one of our clients the price dropped by 22% for the same scheme using this method. Now, this wasn’t just a result of either incorrect or not required items, incorrect quantities, or inflated rates. It was the result of all three. Either way, had we not interrogated, the client would be paying far more than they should. The initial costs provided will usually include numerous allowances (as would our early cost plans) that aren’t required but can’t be confirmed at the earliest stages. A key driver to why D&B is more expensive is because the client is expected to sign up to the total lump sum to transfer the risk, which means they are paying unnecessarily on a lot of straight forward fit-outs. From a MESH point of view, it is also worth pointing out that we don’t just reduce and omit items, we point out if something is missing or feels too low, we act fairly to both sides.
- Quality – Poor Quality?
No, typically I wouldn’t agree that you would get a poor product. I have been involved with some elegant and well finished offices which have been procured in this way. However, in comparison to what they could achieve for the same spend, if a detailed design was priced competitively, the client does not receive value for money. The time of the design and tender process, combined with the upfront cost of a design team, naturally deters clients from this route in the office fit-out market.
- Risk Ownership – Single Point of Responsibility? Not sure. D&B was intended to give clients a single point of responsibility, yet it may not be as black and white as this. I find that the “one stop shop” is great for leading design, coordination of packages, and delivery of the programme. However, the basis of the client’s bid is based on some form of Employers Requirements, which will be referred to in the event of a claim. Any issues identified on site, or with the Employers Requirements, still attract extensions of time and / or loss and expense claims. The single point of responsibility should allow a smooth ride for the client with one person to liaise with, and some D&B contractors do this well, whilst others do not.
The level of information provided to the D&B contractor up front will dictate how much risk is truly transferred. Prior to our involvement, I have seen varying levels of Employers Requirements:
- A developed design and the classic “design and dump” approach. – This approach can cause time issues and doesn’t always work. There is not a lot left to design so it should really be competitively tendered.
- A general arrangement and an Employers Requirements document – This is my preference, as the expectation is set, and the layout is broadly fixed to allow pricing upfront which can help to understand affordability.
- Employers Requirements document and functional content requirement only.
- Functional content requirement only – This can pose problems, unless managed well by both parties. The design process and difference in expectations (time, cost, and quality) can be poles apart and make for a protracted process and be unaffordable.
- A verbal brief – As above.
Another important part of the early involvement of the D&B contractor is a validation of the existing services and condition of the space. A benchmark needs to be established. I have seen varying levels of these reports. However, as a rule, if they are being commissioned, and the client is paying for them, then they should be comprehensive reports that state the condition of the proposed building and what works are required to resolve any issues. I have witnessed some scenarios where the validations have been paid for and haven’t provided the client with a useful document that can be used to make decisions on any remedial works that may be required.
The best examples I’ve seen is where a Pre-Construction Services Agreement is entered into to develop the design (including validations), costs, and programme. This is beneficial, as it offers the ability to use this set of information for a competitive tender should the proposal, mainly costs, not be in the right place. Where this route has been adopted, the D&B contractor delivered a great service upfront and presented reasonable costs. This scenario was successful, and we stayed with the single price on majority of instances, on projects from £1.5m to £9m. Whilst a competitive tender process may have achieved a slightly better price, the time delay of a traditional approach would eventually cost the client more, so ultimately, we still demonstrated value for money.
It’s imperative that a client proceeds cautiously without a professional team. In multiple instances, we have been brought into the project as QS / EA just in time (which was after design had been instructed to the D&B contractor). Where this has happened, we have been able to negotiate the contract sum and ensure the contracts include the correct documents to allow control during / after construction and ensure both parties are treated fairly. We have some great examples of projects that have been delivered to everyone’s requirements, where the contract is set up and the project is running. The final product is typically good too, and you would receive better value for money for going down a traditional route.
We have worked with a lot of D&B companies that regularly deliver a great service and I am more than happy to recommend them to our clients. However, there are those who do it badly and those projects are not fun for anybody. Not only do they usually cost everyone more money, but they also take longer than expected to deliver, and become projects that nobody actively likes to admit they were involved with.
At MESH, our role on these projects is to get to the right answer and ensure a robust contract includes enough information for off all parties to know what everyone is signing up to. As much as it may surprise some contractors, our fees are not based on achieving a certain level of saving for the client. In fact, we (the QS) are imperative in the process. We can ensure the client is comfortable they are receiving value for money and that the contract is being correctly administered, as well as, making sure expectations are understood from the beginning to avoid issues from contractors’ side too.