Infrastructure Estimating Pitfall > The Electrical Subcontract Price

One of major pitfalls of general contractor (GC) estimating on infrastructure projects is getting the right numbers from the electrical bidders.  Electrical trades comprise a significant portion of the contract value on large fixed-price infrastructure projects.  GC’s are faced with the perilous task of taking prices from electrical subcontractors and electrical vendors.  The complexity of this task is significant and its impact on bid outcomes is huge.   Hard bid infrastructure projects are neither easy to bid nor easy to execute.  Getting the right electrical numbers is critical to submitting an overall bid which is realistic, competitive and which represents costs that can be achieved – and that yield an acceptable profit for the risks incurred.

As a GC, if you are only relying on numbers from the electrical bidders, then you risk becoming a price taker.  This can be  dangerous on a large trade line item because the GC is assuming that the prices taken are competitive and reliable.  Experienced GCs develop methods to validate electrical pricing in house, and do not rely solely on pricing submitted from subcontractors.  These methods vary in their scope and complexity. We will explore these methods and speak directly with successful GC to get their views on this important matter.

In today’s brutally competitive construction market, GCs need to understand that there is a difference between what things “cost” and what they “should cost”.

 

 

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Free Online Engineering Content – M.I.T. Open Courseware & I.I.T. (YouTube)

OpenCourseWare started out as a pilot program by M.I.T. (Massachussets Institute of Technology) in 2002 with 32 courses. As of November 2011, over 2080 courses were available online. We in the engineering and construction community applaud M.I.T for remaining true to its commitment to advance science and technology knowledge worldwide. The OpenCourseWare site offers a wealth of knowledge at no cost. Similarly, we recognize the bold and innovative step taken by the Indian Institutes of Technology (www.iitb.ac.in/). By placing all of its engineering lectures free of charge in video format on YouTube, I.I.T. has become a pioneer in providing free access to world-class engineering knowledge to the entire world. These two institutions exemplify the very best in engineering and science innovation, and remain at the forefront of global technology education both academically and morally. Here is the link to the OpenCourseWare site: http://ocw.mit.edu/index.htm You can access the I.I.T. (YouTube) video lectures online by typing in keywords “I.I.T. engineering lectures”.

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NYC Construction Safety Update > Certified Site Safety

By Michael Gianatasio, P.E., Chief Safety and Risk Management Consultant

Certified Site Safety

I wanted my first blog entry on the PLG forum to be about a specific safety compliance subject which my industry associates, colleagues and clients in NYC can connect with.  The issue of standpipe provision and maintenance on construction projects is a serious one, and one which has generated much interest during recent years by the NYC Department of Buildings, NYC FDNY and the construction industry.

Construction Standpipe Alarms

NYC Local Law 64 of 2009 (effective February 4, 2010) relates to requirements for construction site standpipe alarm systems, and notification procedures and work restrictions when such systems are out of service.

The following projects must comply with these requirements:

•         New buildings greater than 75 feet in height permitted on or after February 4, 2010.

•         Full demolitions of buildings with standpipes that obtain pre-demolition inspection approval from the BEST Squad on or after February 4, 2010.

Drawings

Drawings containing details of the temporary air pressurized alarm system must be submitted.

New Building Filing Requirements

The pressurized alarm system drawings must be submitted separately as a required item under the ALT 2 standpipe application and should not be included with the standpipe drawings. There is a new prior-to-permit required item “Standpipe Alarm Drawings & AI1 (Or AI1 proof)” that will apply to the ALT2 standpipe application.

Demolition Filing Requirements

1 > Pressurized alarm system drawings must be submitted as part of the ALT2 standpipe application.

2 > The ALT2 standpipe permit must be issued before the DM permit can be issued.

3 > Demolition contractors must provide the ALT2 application number to the BEST Squad when requesting a pre-demolition inspection.

4 > The BEST Squad pre-demolition inspection approval will not be granted unless the alarm system has passed testing and the associated OP98 has been accepted by the Building Department (see below).

New Testing Requirements:

The licensed master plumber or master fire suppression piping contractor indicated on the ALT2 standpipe permit must test the standpipe alarm system. If the system is successfully tested, the contractor must certify the successful testing on the latest OP98.

www.certifiedsitesafety.com

Michael Gianatasio has over 16 years of experience in construction safety and risk management.  He holds a B.S. in Civil Engineering from Manhattan College and is a registered P.E. (Professional Engineer) in NY, CT and FL.  He also holds numerous safety certifications including: NYC DOB Site Safety Manager’s License, FDNY Construction Site Safety Manager’s Certification and various other OSHA certifications.  Mr. Gianatasio has served as an expert witness in New York State Supreme Court labor law cases.

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PLG Subcontracting Observation #1 > Cash Flow

One of the biggest challenges for subcontractors is CASH FLOW management.  You can make an accounting profit and still get wiped out.  This can happen in any economic climate, but is a particularly acute problem in a down market when competitive pressure is severe.  The current prolonged slump  in the construction industry has stretched the financial capacity of even the best of subcontractors.  Subcontractors are often at risk for cash flow imbalances because they indirectly serve as the financing arm for developers, owners, general contractors and government agencies.  They are also at lower rungs of the contracting ladder, at least two-to-three levels removed from the money.  The construction supply chain is largely financed on the backs of subcontractors.  In a tight market, the cost of money can be squeezed out via the bidding process, increasing the risk that late cash receipts will erode profitability.

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Project Manager – The Servant-Leader

Project managers are not bosses. Instead, project managers are actually servants who must sacrifice for the good of the team; and must be willing to SERVE their teams, stakeholders and projects. Hence, the concept of the servant-manager who, in fact, leads by serving.

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The Role of The Owners Rep. Expands

http://newyork.construction.com/opinions/2011/0725-AsStaffsShrinktheRoleOftheOwnersRepGrows.asp

With the Poor economy forcing owners to make tough decisions about layoffs and budget cuts, one position they should not consider eliminating is the owner’s representative. That is because this job has become a vital tool in helping the owner save both time and money, especially as staff sizes shrink and the need for performance and quality-control monitoring rises…See ENR Link.

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Communicate NOW!

Communication is the cornerstone of good project management.  Good things happen when project managers communicate!

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B.I.M. Who Picks Up The Tab? By Michael Avramides, A.I.A

BIM: WHO PICKS UP THE TAB?

Michael Avramides, A. I . A. 1. 2011

Three colleagues walk into a bar: an Owner, a Contractor and an Architect. The Owner orders something quick and practical as time is of the essence.  The Contractor negotiates separately with two different bartenders to gets the best drink for the cheapest price.  And the Architect is worried about the design firm’s liability in the event that the other two end up incapacitated.

Of course I’m only kidding.  We are not like these fictitious stereotypes in a cheap joke.  But in real life, how expensive is Building information Modeling (BIM) for the design and construction industry and who should pay for BIM?  As with most things in life, it depends on how each player benefits.  If there is value, say in saving dollars, or demonstrable efficiency.

Let’s look deeper into each group realizing that we all fit in somewhere between the optimist and the pragmatist; the person running with that “gut feeling” or like our sister state Missouri would insist, having the “show-me” approach.

At one end we have Owners who have decided that BIM is the way to move forward, knowing that BIM is not a panacea and they may even encounter other acronyms along the way, such as COLs (Curves of Learning) or even LOMs (Law of Murphy’s). Meanwhile their colleagues, the “second-mover” strategists, are sitting on the sidelines waiting to see how the numbers really add up.  Who’s right?  They both are.  The optimistic Owner may be paying a premium to have a new project BIM’ed (adding a virtual notch on his virtual belt) but will see the design/construction cycle compressed, and the skeptics can learn on, clearly ignoring inflation, someone else’s nickel.  They, too, will (eventually) benefit.

Architects are similarly disposed to sometimes accept and sometimes avoid risk.  The more adventuresome have already made the investment, and in fact, there is evidence to suggest that hardware, software, training and other BIM requisites are not the imposing costs associated with BIM projects.  BIM is a tool that requires skill and talent in order to be used successfully, however the real costs are not for gearing up a design office.  Historically, managing the design process ate up the design fee.  This has not changed, and similarly the expense is not in creating electronic data, but managing the data.

As designers we’d also like to assume that you can charge a premium for providing this service.  For now we

probably can, but the marketplace has a way of taking perceived premiums, turning them into competitive advantages and finally settling on what we will all consider normal (and expected) business practices.  Regardless, take comfort in the indisputable fact that efficiency will generate profit.  It may happen right away or it may take time, but that’s why Architects are sometimes referred to as planners.  So Architect, plan thyself.  And for those design professionals who are techno-phobes, remember: your like-minded kindred spirits of a couple of decades ago, fearing and never adapting to Computer Aided Design (CAD), were able to push their mechanical pencils (and sometimes their offices) into oblivion.  For the record, no one is asking you to change your thinking, what’s changing is how your thinking gets transformed.  Love it or hate it, in order to be shared, thoughts – even the most brilliant ones — must become digitized.

CONTRACTORS see the fastest return on their BIM investment.  It is not always a given that the designer will provide a BIM model, and even if provided, it may not be everything that a Contractor needs in order to comprehend and undertake the construction process.  Even starting “cold” and using BIM for its fundamental clash detection — previewing physical conflicts between trades — BIM is worth the price of admission.   It then becomes easier to realize how we can adapt these new tools from the old methods and integrate others, like suppliers and subcontractors into an increasingly efficient team.

Now, what goes around comes around.  Not to sound like a Buddhist convert but the BIM model has a reincarnation of sorts for the Owner (please, no hate-mail from Buddhists).  This database, this encyclopedia of the project, can make Ownership easier to manage.  The Facilitates Management discipline can distill highly relevant data from the BIM model.  Did we give Owners another reason to pick up part of the tab?  Yes, and after a few drinks you can try to explain in the best pub tradition of quoting Olde English:  “Ye who benefitith, payeth,” and hope he remembers the next day.

And  by the way if  you do happen to catch me bellying up to the bar, remember, drinks are on me! (really of course, I’m only kidding!).

Michael Avramides is an Architect / BIM Consultant in New York. Please send comments to MCA@Avramides.com

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Supply Chain Integration

There seems to be a critical change occurring in the construction industry supply chain.  Owners, developers, contractors and government agencies are demanding a tighter integration of procurement, coordination, delivery and cost management activities.  The industry is completely reinventing itself with pervasive technologies and web-enabled tools leading the way.  This change is not only inevitable, but it also brings with it, a vast range of opportunities.   With the help of my colleagues and industry associates, this blog will be expanding the supply chain discussion in 2011.

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Real Estate Financial Modeling (REFM)

refm-logo.png (198×139)

I am pleased to introduce a new member to our Center of Excellence, Real Estate Financial Modeling (REFM) – http://www.realestatefinancialmodeling.com/

REFM is the premier provider of Excel financial spreadsheet models, financial modeling education and financial modeling consulting for real estate transactions of all types.  Its founder and Managing Principal, Mr. Bruce Kirsch, will be featured as a permanent member of this blog and will be a regular contributor to its content.

REFM provides its customers with the advanced financial modeling knowledge, tools and skills they need to successfully model their transactions and present them with confidence internally and to potential partners, lenders and investors. REFM’s educational training is offered through digital Video Tutorials, Live Group Training seminars, and through the Urban Land Institute. REFM also provides Private Consulting Services.

Based in Arlington, VA, REFM was founded by Bruce Kirsch in 2009. Mr. Kirsch is a recognized expert in and top instructor of Microsoft Excel-based financial modeling for real estate transactions. Through REFM, Kirsch has trained both new and experienced real estate professionals in financial modeling from a wide variety of real estate businesses, organizations and institutions, including private equity, development, brokerage, trade groups and government.

In addition, REFM has given on-campus real estate financial modeling training sessions to Undergraduate, Masters and MBA students from top schools including The Wharton School, The University of Pennsylvania School of Design, Harvard Business School, Harvard Graduate School of Design, Massachusetts Institute of Technology, MIT Sloan, UCLA, USC, Georgetown University, Cornell University, University of Chicago and George Washington University.

REFM is a member of the District of Columbia Building Industry Association.

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