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SmartMarket Report

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Managing Uncertainty and


Expectations in Building
Design and Construction
Premier Industry Partners: Industry Partners:
Design and Construction Intelligence

SmartMarket Report

McGraw Hill Construction Managing Uncertainty and


Expectations in Design and
President Construction
Kathryn E. Cassino SmartMarket Report
Executive Editor
About McGraw Hill
McGraw Hill Construction Construction
Research & Analytics/ Harvey M. Bernstein, F.ASCE, LEED AP
Industry Insights & Alliances McGraw Hill Constructions data,
Editorial Advisor and Chief Author
analytics, and media businesses
Vice President, Industry Stephen A. Jones
Insights & Alliances Dodge, Sweets, Architectural Record,
Harvey M. Bernstein, F.ASCE, LEED AP Editorial Director and Engineering News-Record
Michele A. Russo, LEED AP create opportunities for owners,
Senior Director, Research & Analytics
Burleigh Morton Managing Editor architects, engineers, contractors,
Donna Laquidara-Carr, LEED AP building product manufacturers,
Director, Research Communications
and distributors to strengthen their
Michele A. Russo, LEED AP Senior Director,
Head of Marketing market position, size their markets,
William Taylor prioritize prospects, and target and
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Deborah Snoonian Glenn
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SmartMarket Report
Introduction

P
erfection is a baseline expectation Better communication and integration

Managing Uncertainty and Expectations in Building Design and Construction

when you purchase a product. among project team members scores as


But as experienced owners of the most effective approach to reducing
building projects know, design the causes and impacts of uncertainty.
and construction is an imperfect process
The objective for this initiative is to
with a variety of inherent uncertainties.
advance the level of shared understanding
Given that reality, what can project teams
among owners, design professionals
do to identify, anticipate and mitigate the Stephen A. Jones
and construction firms about the mutual
conditions and factors that drive uncertainty, Senior Director
challenges they face in building design McGraw Hill Construction
and how can owners adjust their
and construction. This will help to shift the
expectations of project team performance
conversation from blame and recovery
to align with reasonable, achievable metrics
for unanticipated problems to proactive
that truly benefit the project?
and collaborative ways to reduce their
These are the core questions behind this
occurrence and to performance metrics
Managing Uncertainty and Expectations
that foster these behaviors.
in Building Design and Construction
In addition to the AIA Large Firm
SmartMarket Report, produced by McGraw
Roundtable, McGraw Hill Construction
Hill Construction in partnership with the
wishes to thank the other industry leaders
AIA Large Firm Roundtable. Key findings of
who provided support and guidance to this
this research with owners, architects and
research in order to bring this important
contractors include:
study to the market. Those organizations Harvey M. Bernstein
Owner-related issues, such as
include the premier industry partners of F.ASCE, LEED AP
accelerated schedule, unclear project Vice President
AIA, Autodesk and DBIA; and industry Industry Insights & Alliances
requirements, lack of direction and
partners AGC, Graphisoft and the Lean McGraw Hill Construction
involvement, and program or design
Construction Institute.
changes, are cited as the leading drivers
For more detail on the methodology of
of uncertainty on building projects.
this report, please see pages 5960.
While only 7% of owners believe perfect

construction documents are possible,


design errors and omissions are still
considered highly impactful sources of
uncertainty. On average, owners say
they expect to pay somewhere between
3%5% added cost on a building project
due to these issues, and consider
anything up to 6% to still be acceptable as
good performance.

Stephen A. Jones leads High Performance Construction Harvey M. Bernstein, innovation and sustainability and
MHCs initiatives in BIM and events. Before joining MHC, F.ASCE, LEED AP, has been a currently serves as a member of
how emerging economic and Jones was a vice president with leader in the engineering and the Princeton University Civil
technology trends are transforming Primavera Systems (now part of construction industry for over and Environmental Engineering
the construction industry. Active Oracle), a global leader in project 30 years. Currently, he has lead Advisory Council and the
in numerous industry associations management software. Prior to responsibilities for MHCs market National Building Museum Board
research group, including MHCs
(including the buildingSMART that, he spent 19 years in creative of Trustees. He is a visiting
thought leadership initiatives in
Alliance, the BIMForum, and management roles with top professor with the University of
areas such as commercial and
Construction Users Roundtable, design firms, most recently as a Readings School of Construction
residential green building, BIM,
Alliance for Construction principal and Board of Directors information mobility, innovation Management and Engineering in
Excellence and Charles Pankow member with Burt Hill (now and global construction markets. England. Bernstein has an M.B.A.
Foundation), Jones frequently merged with Stantec), one of the Prior to joining MHC, Bernstein from Loyola College, an M.S.
speaks at events around the world largest A/E firms in the U.S. served as President and CEO of in engineering from Princeton
on the business impact of emerging Jones holds an M.B.A from the Civil Engineering Research University and a B.S. in civil
technology and trends. He also Wharton and a B.A. from Foundation. He has written engineering from the New Jersey
hosts MHCs ENR FutureTech and the Johns Hopkins University. hundreds of papers covering Institute of Technology.

McGraw Hill Construction 1www.construction.com SmartMarket Report


SmartMarket Report
Introduction

T
he AIA Large Firm Roundtable I would like to thank the Roundtables
Managing Uncertainty and Expectations in Building Design and Construction

is pleased to present Managing steering committee for this project: Jay


Uncertainty and Expectations in Halleran, Assoc. AIA, managing principal
Building Design and Construction of NBBJ; Ralph Hawkins, FAIA, chairman of
SmartMarket Report as lead sponsor for HKS; James Bearden, AIA, CEO of Gresham
this industry study. Smith & Partners; Craig Williams, AIA,
The Large Firm Roundtable, founded principal and chief legal officer of HKS;
in 1984, includes leaders of the largest and Tim Twomey, AIA, vice president and Bryce D. Pearsall, FAIA
North American-based architectural and deputy general counsel of RTKL. This Chair, AIA Large Firm
A/E firms. The Roundtable is committed to project has been led for the Roundtable by Roundtable
Chairman, DLR Group
advancing the interests of design firms and Clark Davis, FAIA, former vice chairman
clients of all types and sizes. We undertake of HOK and principal consultant with
periodic research about industry issues Cameron MacAllister Group.
and best practices. This study may lead to additional
While its generally acknowledged research about some of the topics
that the design and construction process presented here. We look forward to your
isnt perfect, there has been a lack of real comments and invite others to join us in
data about what uncertainty to expect our future work.
and how to manage it well. As a result,
even top-performing project teams
sometimes end their work with conflict
AIA Large Firm Roundtable 2014
and strained client relationships. After ADD Inc. Gresham Smith and Page
AECOM Partners Pei Cobb Freed
discussing this issue for several years,
the Large Firm Roundtable decided in BWBR Architects HGA
Perkins + Will
2012 to move forward with this research Callison Harley Ellis Devereaux
Perkins Eastman
project. We commissioned McGraw Hill CannonDesign HDR Architecture
RTKL Associates
Constructions Research & Analytics group CBT Architects HKS
Shepley Bulfinch
to conduct the work. HLW International
Cooper Carry Inc. SHW Group
We believe the study findings will help
Corgan Associates HMC Architects
owners, architects and builders manage SOM
Cuningham Group HNTB Architecture
todays projects more effectively and SmithGroupJJR
improve our industrys performance in Dewberry HOK
Solomon Cordwell
the future. This report is intended to be an DLR Group Jacobs Global Buildings Buenz
educational tool for every member of the ennead architects KMD Architects Stantec Architecture
project team. EwingCole KPF Swanke Hayden
This project has included financial EYP Leo A Daly Connell
sponsorship and active participation from Little tvsdesign
FKP Architects
many other groups across the design and
Flad Architects LS3P Associates TRO JungBrannen
construction industryleading owners,
FRCH Design Worldwide Morris Architects VOA Associates
architectural and engineering firms,
construction contractors, technology firms FreemanWhite MulvannyG2 WATG
and professional organizations. We are Gensler NBBJ WHR Architects
grateful to these partners for their support. Gould Evans Odell ZGF Architects

Bryce D. Pearsall, FAIA, is chair of the AIA Large Firm Roundtable and chairman of DLR Group, which has integrated design offices
throughout the U.S. and abroad, and a passion for design in the built environment. During his time as three term LFRT Chair, the LFRT has led
valuable initiatives supporting architectural firms, our partners in the building industry and most importantly our clientsbuilding owners and
users. Bryce received his Fellowship in the American Institute of Architects in 1998 and is an advocate for the value of design, leadership and
the profession at all levels. Additionally he serves on the Board of Directors of The American Architectural Foundation, the American Institute
of Architects National Board Advocacy Committee, as Chair of the Iowa State University College of Design Advancement Council and as a
Governor on the Iowa State University Foundation.

SmartMarket Report McGraw Hill Construction 2www.construction.com


SmartMarket Report
Managing Uncertainty and Expectations in Building Design and Construction

table of

contents
5 Executive Summary
0
5 Executive Summary
7 Observations and Recommendations

10 Data
10 Introduction

11 Understanding Uncertainty
11 Top Factors That Cause Uncertainty
12 Overall Impact on Uncertainty
13 Causes of Uncertainty With Greatest Impact on Quality, Cost and Schedule
16 data sidebar Owner Insights on Uncertainty Data Findings
17 Frequency/Impact Analysis of Causes of Uncertainty
18 Drivers/Frequency of Most Impactful Causes of Uncertainty
21 Perceived Business Advantages of Project Uncertainty for Team Members
22 data sidebar Owner Insights on Uncertainty Data Findings
Front Cover Photo By: Joe Woolhead/SPI; Following page: Left: Anton Grassl/Esto; Right: Courtesy of HDR Architecture, Inc., 2013 Ed LaCasse/HKS

25 sidebar The Cost of Imperfection: Reducing Error-Induced Uncertainties

29 Performance Expectations and Metrics


29 Perceptions of Owner Satisfaction
30 Effective Criteria in Measuring Design Teams Performance on Project
31 Expectations Regarding Construction Documents
32 Expectations About Cost Impacts of Design Teams Performance Issues
33 Criteria for Measuring the Construction Teams Performance
34 Expectations Regarding Construction Teams Performance
35 data sidebar Owner Insights on Performance Expectation Data Findings
40 sidebar Claims Consultant Perspective

41 Opportunities for Performance Improvement


41 Importance of Four Major Mitigating Elements
42 Effectiveness of Specific Factors on Reducing Overall Project Uncertainty
44 Mitigating the Seven Top Factors That Cause Uncertainty
47 data sidebar Owner Insights on Mitigating Uncertainty Data Findings
49 sidebar BIM and Managing Uncertainty
52 Contingencies as a Means of Mitigating Uncertainty
54 data sidebar Owner Insights on Mitigating Uncertainty Data Findings
58 sidebar Lean Processes to Reduce Uncertainties

McGraw Hill Construction 3www.construction.com SmartMarket Report


Front Cover:
Construction at the World Trade Center site,
New York, New York

This page:
Left: MaineGenerals Alfond Center for
Health, Augusta, Maine
Below: Camp Pendleton Replacement
Hospital, Camp Pendleton, California
contents

Case Studies
27 End-User Engagement
Mozilla Headquarters, Mountain View, California

38 A Successful Balance: Integrating Design-Build, Speed, Owner Control and Workplace Safety
Camp Pendleton Replacement Hospital, Camp Pendleton, California

50 Project Culture Fostered by Integrated Project Delivery (IPD) Is Key to Success


MaineGeneral Medical Centers Alfond Center for Health, Augusta, Maine

56 Utilizing Design-Build-Bid to Minimize Uncertainty


Crate & Barrel, United States

59 Methodology
59 Managing Uncertainty and Expectations Study Research
60 Owner Advisory Group

1 Resources
6

SmartMarket Report McGraw-Hill Construction 4www.construction.com


Executive Summary

Owners, design teams and contractors contend with many types of uncertainty
Managing Uncertainty and Expectations in Building Design and Construction

as they produce building projects on strict schedules and budgets in a


dynamic environment of frequent change. In this context, is it realistic
or even possible to expect flawless execution of error-free documents?
This research examines the parameters of that question, including the causes of uncertainty, reasonable expectations
for performance by various parties and effective means of mitigating uncertainty to improve outcomes for everyone.

Top Causes of Uncertainty Top Causes of Overall Uncertainty for


Perspectives vary between owners, architects and Owners, Architects and Contractors
contractors on the relative importance of key drivers of Source: McGraw Hill Construction, 2014

uncertainty on building projects.


Ranking of Causes by Player
Unforeseen site conditions is among the top three
factors cited by all parties. Architects and contractors zero Causes of Uncertainty Owners Architects Contractors
in on owner-driven changes and accelerated schedule
Unforeseen Site or 1 3 1
(also owner-related), while owners and contractors Construction Issues
both point to the design team (design errors and design
Design Errors 2 (tie) 6 5
omissions). All parties rank the contractor-related factors
(contractor-caused delays and construction coordination Design Omissions 2 (tie) 7 2
issues) relatively lower as drivers of overall uncertainty.
While each party certainly cares about the causes it Contractor-Caused Delays 4 4 6
is responsible for, the general trend is to weight other
parties causes as being more significant. Owner-Driven Changes 5 (tie) 1 4
Other findings related to uncertainty include: Accelerated Schedule 5 (tie) 2 3
Unclear project requirements at the outset is

identified by all parties as the top driver behind Construction Coordination


Issues 7 5 7
owner-driven changes.
Contractors cite a much higher frequency of five types

of design errors and omissions in final construction


documents than architects perceive.
Individual trade contractor performance is the
4_1_executive summary_#01
top-named reason for construction coordination issues
by all parties, led by the general contractors (67%).
Despite their direct responsibility for these issues,

higher percentages of contractors cite scope gaps


among prime and subcontracts (41%), and lack of
thoroughness of preconstruction planning, estimating
and scheduling (33%) as leading causes of uncertainty
than either the architects or the owners do.
Although almost one third (32%) of general contractors

believe that trade contractors benefit the most from


uncertainty, about half of architects (47%) and owners
(50%) believe that general contractors do.

McGraw Hill Construction 5www.construction.com SmartMarket Report


Executive Summary continued

Expectations and Performance Opportunities for Performance


Managing Uncertainty and Expectations in Building Design and Construction

While most owners (86%) report a high level of Improvement


satisfaction with quality on their projects, fewer are Clearer direction from owners (79%), and more active
highly satisfied with cost (63%) and schedule (64%), leadership by owners (68%) are the top-cited mitigating
regardless of owner size or project complexity. elements. Nearly two thirds (64%) identify best value or
The ability to develop a set of documents that meet other team selection criteria not based primarily on low
the owners program requirements and are constructible fee as very important.
within budget is unanimously cited as the most-valued Reinforcing the value of tighter designer/builder
metric for design team performance, followed by the collaboration, more integration between design and
ability to work with other team members to solve issues build parties during design and construction (77%), more
and not escalate to the owner, which is the number one time for design firms to participate in coordination (66%)
metric for construction team performance. and clearer definition of deliverables between parties
While only a fraction of the industry believes it is during the design process (67%) all rank among the top
possible for the design team to create a perfect set of five. Also, the use of BIM by entire project team (50%)
final construction documents on a reasonably complex outranks the use of BIM by single firm (32%), further
project, surprisingly, architects with that opinion emphasizing the greater value of collaborative efforts.
(13%) outnumber owners (7%). That said, a significant Owner contingencies are a traditional method of
percentage of owners (21%) believe it is reasonable to mitigating design and construction risk, although
expect perfect documents, and almost three quarters owners policies and practices generally do not embrace
(73%) say it is reasonable to expect perfect performance transparency or leverage standard approaches.
from the construction team. Most (81%) always have a project contingency, but just

Most owners (80%) say they expect to face added under a quarter (24%) have a standard risk assessment
costs from design errors and omissions on their future process to determine the right amount.
projects, and on average they feel that a 3%4% range is Only about half (51%) always tell architects about a

reasonable for non-negligent mistakes. contingency, and only around a third (37%) always
tell contractors. While a quarter (25%) never tell their
architect, even more (37%) never tell their contractor.
Only about a third (37%) allocate contingencies into

separate project risks.

Expected Cost Impacts of Design Mistakes


on Future Projects (According to Owners)
Source: McGraw Hill Construction, 2014

Expects Future Projects to Be Completed With No Level of Additional Costs Accepted as Normal
Added Costs Due to Design Mistakes (According to Owners) (According to Owners Who Anticipate Additional Costs)
Yes 0%
No 3%
Not Sure
1%2%
40%
8% 12%
3%5%
38%
6%10%
15%
80%
11% or More
4%

SmartMarket Report McGraw Hill Construction 6www.construction.com


Recommendations
Observations and Recommendations

The survey results and interviews with the projects Owner Advisory
Managing Uncertainty and Expectations in Building Design and Construction

Group (OAG) yield a number of observations and recommendations to


help project teams minimize the causes and impacts of uncertainty,
establish appropriate performance expectations and improve building
project outcomes for everyone. Some highlights are included below.

Imperfection Is Change Orders Looking Deeper going to happen no matter


Inevitable Are Not at Owner- how much work you put
The findings in this study Inherently Bad Driven Causes of in upfront.
are clear that expecting To that point, while about Uncertainty Design Team
flawless execution of error- half of the surveyed The top drivers of
Impact on
free drawings on building owners favor using uncertainty-related
Owner Causes of
projects is not realistic. the number of change problems, according to
Uncertainty
Only 1% of owners orders as a performance the survey results from
On programmatically
surveyed say theyve ever metric, neither design nor architects and contractors,
intense buildings, it is
even seen a perfect set construction respondents are owner-driven changes,
unrealistic to expect
of drawings, and great support it, nor does and the need for clearer
all owner stakeholders
projects are certainly the OAG. One of those direction from owners,
to understand design
possible without them. As owners notes that the term as well as more active
and construction well
to contractor perfection, has gotten a negative leadership by owners.
enough to provide
one OAG member aptly connotation because OAG advice on these
perfect guidance. So
puts it, Construction is it generally has a cost types of issues includes
design professionals
not an exact science associated with it. But the following:
should make the effort to
so its not that theres change orders come from
Realistic understand more about
an issue, but how the many different places.
Expectations what end users will really
contractor recovers from Some are good and benefit
about Owners be doing in the building
that issue. the end product. Its not
Design and construction (e.g., technical, workflow,
This makes the critical enough to just judge it on
teams need to understand operating requirements)
point that performance the number. Another uses
that their owner clients are before, as one owner
expectations must shift them simply as a way
often dealing with a range says, they start getting
from a zero-defect baseline to adjust contracts up or
of internal stakeholders people excited about
to an informed and down as needed during
(boards, finance officers, where spaces are going to
realistic acknowledgment the process.
administrators, end users, be. Such better-informed
of an acceptable range of Owners should
operations staff, etc.) design is less likely to
reasonableness for the revisit how they view
and dynamic external generate disruptive
impact of imperfection, change orders and
forces (market changes, stakeholder changes and
tailored to each project. consider more appropriate
regulations, technology more likely to increase
And effectiveness in metrics aligned with
advances, etc.). Thus, owner satisfaction. As
dealing with imperfection activities that avoid and
they cant always be another owner says,
is a more valuable mitigate the uncertainty-
expected to provide Before you draw one
metric than frequency of related problems that
perfect information at thing, finalize the value
committing it. underlie changes.
the outset, nor always propositions so you know
control scope, budget or what youre answering,
schedule changes during instead of what you think
the project. As one OAG we want.
member says, Change is

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Observations and Recommendations continued

Similarly, they cite the get messed up a little bit, Start early, integrate quickly and
Managing Uncertainty and Expectations in Building Design and Construction

disruption caused by but its going to certainly work together as a whole so you
designers not knowing the be more functional as it know what youre getting into.
[cost] ramifications of [the] moves forward.
design before show[ing] a
Construction months out, going through research findings show
pretty drawing to owners
Teams Anticipating the documents and the that more integration and
or regulatory officials,
Rather than plan to identify things better communication
causing what one refers
Reacting to that may become issues are the most effective
to as the terrible process
Problems later. And then have those mitigating factors against
of value engineering
The OAG members conversations as early as overall uncertainty. One
to basically identify what
express little patience possible so that its not a OAG member succinctly
we arent going to get
with experienced crisis later. If something puts it that documents
[that] our users are all
construction teams that requires input from the dont take the place
excited about.
dont identify uncertainty- owner to sort out some of communication,
On a positive note,
related problems in uncertainty, bring it up in continuing that if
several owners foresee
advance that they should a spirit of having an equal communication is better,
what one calls a
have seen coming. One seat at the table. Everybody coordination would be
big opening for the
owner says I tell them, is a professional. Lets better. Anothers formula
architectural community
Dont tell me its new not let the project suffer for mitigating uncertainty
to step up and help
when youve dealt with because we dont want to is to start early, integrate
out by providing
this your entire career. surface something for a quickly and work together
greater leadership and
Instead, they value group conversation. as a whole so you know
evolving toward a deeper
construction teams that A third extols the benefit what youre getting into.
relationship with owners
anticipate issues and of open dialogue [with Integration can take
that he calls a trusted
will initiate the tough contractors] from start many forms, from
advisor, participating a
conversations early to to finish, asking the right full-on IPD (integrated
lot more and a lot sooner,
avoid crises later. For questions as you work project delivery) to less
really doing an integrated
example, to prevent through it. If the contractor intensive approaches
project design around
cost conflicts related to is proactive saying, Were applicable within other
that clients mission and
scope, one owner tells concerned about this, more conventional project
that clients culture. He
contractors, When then the owner can say, delivery methods.
predicts it can be a whole
something comes up No, I think youre going For example:
new paradigm for the
that isnt part of what you forward in a good fashion. On design-bid-build
architectural world, not a
signed up for, raise your Or the owner can go to the projects, some OAG
transaction based on You
hand and say right there contractor saying, Weve members are finding
tell me what you want
and then No cost, maybe got four other jobs with the success by engaging
and Ill tell you how its
cost or definitely cost. same inspector, he keeps trade contractors in
going to be, but more of
Another says, a doing this, can you guys a Design Assist role,
an ongoing, participative
really high-performing think this through as you either for a fee or as a
process where theyre
construction team has move forward? guarantee of being able
continually helping you
not only people who to bid the job, to review
get to where you need
to go. He believes that
are excellent in the field Communication, cost and constructibility
in this less prescriptive
with communication Collaboration and of documents prior to
role, architects will need
and coordination for Integration: Early, finalization. One owner
to get comfortable that
whats happening now, Open and Often says Though not 100
but somebody [who is] Expanding the focus to the percent, weve had very
their designs going to
looking several weeks or whole project team, the solid success to the point

SmartMarket Report McGraw Hill Construction 8www.construction.com


Observations and Recommendations continued

where now we always On a cautionary He finds that this It is organized by the


Managing Uncertainty and Expectations in Building Design and Construction

do it. note, highly integrated awareness successfully categories of spend. The


One has a new, but projects can run a increases everyones chances of it happening
highly successful Term special risk. As one very sense of fiscal are this, and the total value
Agreement program, experienced IPD owner responsibility without is that, which gives you a
where he bids out on-call, says, When everyone needing IPD. risk score. The total score
indefinite quantity shares responsibility, no Another, when using IPD, informs his setting an
contracts to a number of ones really responsible. So engages all members appropriate contingency.
collaboration-oriented you have to watch that. in establishing the Until owners feel their
design and construction contingency, which teams are displaying
firms, then forms ad Managing is then openly drawn more diplomacy around
hoc integrated teams Risk Through down by all parties to spending contingencies,
from within the group Contingencies deal with the impacts secrecy about their
to collaborate on small, Contingencies are widely of uncertainty, and the amounts is likely to
quick projects. used to buffer financial remainder is shared. This remain standard industry
uncertainty. The survey transparency incentivizes practice. However, owners
A primarily design-bid-
results show most (81%) all parties to act frugally. should definitely follow
build owner recommends
owners carry them on all A third, working in the lead of OAG members
collaborating intensely
their projects, although a design-bid-build in developing more
on submittals to avoid
they generally do not environment, gives the informed ways to establish
unanticipated problems
share information about general contractor a 2% contingencies, based on
in the field, such as a sub
them with their teams contingency specifically real-world experience and
looking at you and saying
and typically do not for subcontractor change project-specific risk factors.
I forgot to order it. He
have a standard method requests, agreeing to split
explains the process:
Within the first three
for establishing their the unused portion 50/50. Benefits of
months [of construction],
amounts, either by This motivates aggressive Technology
category or as a whole. negotiation of changes on The findings cite that BIM
we take the mechanical,
While most OAG his behalf, driving their is effective in mitigating
electrical, plumbing,
members do not share total cost as low as 1%, uncertainty through
building controls, fire
contingency information, and it provides a well- virtual coordination and
protection and usually
primarily because as earned incremental fee digital fabrication. All
elevator subcontractors
one says, Its a constant for the general contractor. firms should embrace
and their suppliers,
fight [about] why Im not the best technologies for
and basically lock them Many OAG members have
letting them use that their area of the industry.
in a room for a week a standardized way to
money, several others For more information on
with the architect and establish contingencies,
are finding success BIM, including the Level
engineers to make them typically dialing a starting
through creative of Development standard,
coordinate their submittals percentage up or down
approaches to sharing see the BIMForum link in
completely. When theyre based on their experience
information about, the Resources section on
finished, theyre stamped with specific factors that
and sometimes the page 61.
by the architect and will affect a particular
unused portion of,
engineer, and everyone project. One OAG
can go order their
their contingencies.
member has developed
Conclusion
One owner shares In all, the study findings
stuff and know its a formal Risk Register,
the complete project affirm Peter Druckers
coordinated. And the a spreadsheet listing all
pro forma, including conclusion that a problem
owner has less risk. the ways uncertainty
contingency, with the anticipated is a problem
might impact a project.
major team members. half solved. n

McGraw Hill Construction 9www.construction.com SmartMarket Report


Data:Introduction
Data:Section Hed1

M
cGraw Hill Construction has conducted extensive research
Managing Uncertainty and Expectations in Building Design and Construction data

over the past few years on construction industry trends that are Note About
changing the ways in which design and construction projects the Data
are conducted. The SmartMarket Reports that are based on The data in this report
this researchincluding a series on building information modeling (BIM), are based on a survey
the use of different project delivery systems, the adoption of lean building conducted from April
approaches, the impact of improved information mobility and the wider use of to May 2014 with 155
owners, 82 architects
prefabrication and modularizationall focus on ways in which the industry is
and 78 contractors.
evolving to improve productivity, quality and profitability. The initial screening
However, despite the continuing advancement of tools and approaches, process was conducted
building design and construction teams still frequently face unanticipated by phone, and the
problems that negatively impact quality, cost and schedule. While in an ideal survey itself was
world, the uncertainties that create these problems would be understood, conducted online.
anticipated and addressed collaboratively and proactively by the project team,
Respondents were
the focus is more typically on assigning blame for unmet expectations and
screened in part based
determining responsibility for recovery. on their involvement
The purpose of the research on uncertainty and performance expectations with complex projects.
presented in this SmartMarket Report is to: For more information on
Identify which aspects of uncertainty have the most negative impact, what the survey methodology,
their causes are, and what tools and processes are available to project teams see page 59.
to reduce their occurrence and mitigate their impact.
In addition to the
Understand the varying perspectives of owners, designers and contractors on
quantitative study,
their own and each others level of performance, what the most meaningful interviews were
aspects of performance are and how they should be measured, and how all conducted with
parties can more productively align around reasonable expectations. seven owners widely
recognized as leaders
In addition to the owner, architect and contractor perspectives captured in in the construction
the main survey research, McGraw Hill Construction conducted in-depth industry. Their
interviews with an Owner Advisory Group comprised of seven innovative responses to the issues
owners, each specializing in a different building type. Their commentary raised in the broader
on the broader research results provides experienced insight into how the survey are represented
industry can best capitalize on these findings. in a series of short
articles interspersed
The goal of this research initiative is to provide objective data and
throughout the data.
experienced perspectives as a context for entire building teams to engage in For more information
constructive, informed conversations about realistic performance expectations on the owners included
and to consider practical ways to address the factors that drive uncertainty, in this discussion, see
so that they can both reduce its occurrence and mitigate its impact. page 60.

SmartMarket Report McGraw Hill Construction 10www.construction.com


Data:Understanding Uncertainty
Top Factors That Cause Uncertainty

As the first phase of this research, over 1,500 owners,


Managing Uncertainty and Expectations in Building Design and Construction data

architects and contractors were presented with a list


of factors and asked to select the one that causes the
greatest uncertainty on building projects. Listed below
are the top seven causes of uncertainty identified by
these respondents.
Accelerated Schedule

Owner-Driven Program or Design Changes

Design Errors

Design Omissions

Construction Coordination Issues

Contractor-Caused Delays

Unforeseen Site or Construction Conditions

Interestingly, responsibility for all but one of these seven


disruptive factors can be said to align closely with a
particular project team member.
Owner: In most cases it can be fairly said that the owner

is in control of a decision to implement an accelerated


schedule and for generating owner-driven changes
during the project process.
Design Team: Similarly, the design team rightfully can

be seen as having control over design errors and design


omissions in the final documents.
Contractor: Along the same lines, the contractor

would be the party perceived as most responsible


for construction coordination issues and contractor-
caused delays.
Player-Neutral: Only unforeseen conditions are neutral,

not caused by any one party.

It is also important to note the other factors that scored


relatively low among respondents regarding their impact
on uncertainty. These include:
Team Formation Process
Project Delivery Method
Renovation (versus New Construction)
Project Complexity
Regulatory Permitting Process

None of these factors was selected as having the greatest


impact on increasing uncertainty by more than 7% of any
respondent type, so they are not included as a focus of
this report.

McGraw Hill Construction 11www.construction.com SmartMarket Report


Understanding Uncertainty

Overall Impact on Uncertainty

Respondents rated the relative impact of each of the Top Factors That Cause Uncertainty
Managing Uncertainty and Expectations in Building Design and Construction data

seven major drivers on overall uncertainty. Comparing Source: McGraw Hill Construction, 2014

the total rankings with those of the separate architect,


Owners
contractor and owner groups reveals an interesting Architects
pattern. The chart, at right, shows the percentage of Contractors
architects, contractors and owners who rated each factor
as having a high or very high impact. Unforeseen Site or Construction Issues
The neutral factor, unforeseen site or construction 47%
issues, ranks highest overall (47%), with an especially 45%
strong vote from contractors (56%) who often bear the 56%
brunt of dealing with those situations in the field.
The two owner-associated causes, owner-driven Design Errors
changes (47%) and accelerated schedule (45%), rank 41%
a close second and third in the percentage of total 21%
respondents who find them to have a high impact on 49%
uncertainty. Yet only about one-third (35%) of owners
agree that these are top causes of uncertainty, starkly Design Omissions
contrasting with the high percentage of architects  41%
who regard them as highly impactful (63% and  15%
55%, respectively). 55%
Owners primarily involved with healthcare projects are
Contractor-Caused Delays
most reluctant to identify owner-driven changes (29%)
or accelerated schedule (19%) as top causes. 37%
On the other hand, the impact of owner changes 35%
and accelerated schedules are acknowledged most 32%
by large owner organizations (38% and 42%,
Owner Program or Design Changes
respectively) and those doing mostly office projects
35%
(42% and 39%, respectively).
63%
The architects two issues, design omissions and design
51%
errors (both 37%) ranked next overall.
Although architects surely are concerned about Accelerated Schedule
the impact of design omissions and design errors, 35%
they do not cite them as highly (only 15% and 21%, 55%
respectively) relative to other concerns, particularly 54%
owner-driven changes (63%) and accelerated
schedule (55%). Construction Coordination Issues
Office-project owners feel most strongly among all 30%
owner types about the negative impact of design errors 28%
(55%) and design omissions (61%). 29%
The contractor-related causes, contractor-caused
delays and construction coordination issues, ranked Almost half (47%) of small contractors cited contractor-
as the least impactful overall, selected by just 35% and caused delays as having a high or very high impact on
30% of all respondents, respectively. Unlike owners and uncertainty, perhaps because they may typically work
1_1_Uncertainty_Causes_C1_#01
architects, the contractors ratings of these issues were on smaller projects with shorter schedules, where delays
very similar to the totals. have a more pronounced impact.

SmartMarket Report McGraw Hill Construction 12www.construction.com


Understanding Uncertainty

Causes of Uncertainty
With Greatest Impact on Quality, Cost and Schedule

To look deeper into the impact of these causes, owners, Cause of Uncertainty With Greatest
Managing Uncertainty and Expectations in Building Design and Construction data

architects and contractors were asked to identify which of Impact on QUALITY


the seven top factors has the greatest impact on each of Source: McGraw Hill Construction, 2014

three key metrics: quality, cost and schedule.


Owners
Similar to the findings about overall uncertainty, each Architects
party views factors controlled by others as being the Contractors
most impactful.
This consistent lack of alignment demonstrated Design Errors
below between owners, architects and contractors 17%
about these extremely important aspects of project 5%
control, execution and team performance highlights 19%
a challenge of perceptions within the industry. One
of the key objectives of this research is to quantify the Accelerated Schedule
magnitude of these differentials, so that the problems 16%
related to uncertainty can be understood, openly 32%
acknowledged and effectively managed in a constructive 32%
dialogue, rather than dealt with passively through
contracting strategies that assume perfection, avoid and Design Omissions
transfer risk, and too often result in unmet expectations, 14%
costly claims and litigation. 4%
12%
Factors With the Greatest Impact on
Construction Coordination Issues
Project Quality
11%
Accelerated Schedule and Owner 14%
Program or Design Changes
5%
24% of all respondents cite accelerated schedule as the
most important cause of uncertainty that can impact Owner Program or Design Changes
project quality. However, the variation between parties 10%
responses tells a deeper story. 19%
Nearly one third (32%) of both architects and
9%
contractors weigh in for accelerated schedule as the
top factor. Unforeseen Site or Construction Issues
Only half as many (16%) owners choose accelerated 10%
schedule, in spite of the fact that owners are typically in 2%
control of the project schedule. 9%
The trend repeats itself with owner program or design

changes, where twice as many architects (19%) name it Contractor-Caused Delays


as the most impactful factor, than do owners (10%). 6%
9%
3%

1_2_Uncertainty_Quality_C5_#02

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Understanding Uncertainty
Causes of Uncertainty With Greatest Impact on Quality, Cost and Schedule continued

Design Errors and Omissions Cause of Uncertainty With Greatest Impact


Managing Uncertainty and Expectations in Building Design and Construction data

Design errors is the most-cited factor by owners (17%), on COST


especially those doing mostly office projects (27%). It is Source: McGraw Hill Construction, 2014

also named by a significant number of contractors (19%).


Owners
However, it is top-ranked by only 5% of architects. Architects
Design omissions is similar, with even fewer (4%) Contractors
architects selecting it compared with contractors (12%)
and owners (14%). Midsize owners (those who spend Unforeseen Site or Construction Issues
$50M$100M annually on construction) feel strongest 27%
(27%). This should not be interpreted to mean that 20%
architects are unconcerned about design errors and 25%
design omissions, just that they feel other factors have a
greater impact on quality. Owner Program or Design Changes
16%
Other Factors
44%
Although the two factors contractors control are lowest-
rated among the group, a similar pattern appears. Only 27%
5% identify construction coordination issues as most Design Errors
impactful compared with owners (11%) and architects 14%
(14%), and only 3% point to contractor-caused delays
0%
compared with owners (6%) and architects (9%).
12%
Factors With the Greatest Impact on Design Omissions
Project Cost 10%
Owner Program or Design Changes 2%
Owner program or design changes is considered most 8%
influential, with 26% of the total selecting it as the factor
Accelerated Schedule
with the greatest impact on project cost. But again,
7%
the interesting part of the analysis is in the dramatic
variance between parties perspectives, where 10%
architects (44%) strongly cite it as the most impactful, 12%
while only a third as many (16%) owners agree. Contractor-Caused Delays
This misalignment is at the heart of the need for early,
3%
open and constructive dialogue about how such changes
4%
need to be managed. There is much less misalignment on
accelerated schedule. 1%

Design Errors and Omissions Construction Coordination Issues


No architects select design errors as the most impactful 3%
factor on cost, and few select design omissions (2%). 4%
Instead, architects favor owner program or design 1%
changes as noted above (44%) and unforeseen 
conditions (20%).
Interestingly, only about 10% of contractors and
owners select one of those as the most impactful on cost,
which tends to substantiate the architects perspective. 1_3_Uncertainty_Cost_C3_#02

SmartMarket Report McGraw Hill Construction 14www.construction.com


Understanding Uncertainty
Causes of Uncertainty With Greatest Impact on Quality, Cost and Schedule continued

Other Factors Cause of Uncertainty With Greatest Impact


Managing Uncertainty and Expectations in Building Design and Construction data

Contractor-related factorsconstruction coordination on SCHEDULE


issues and contractor-caused-delaysagain scored Source: McGraw Hill Construction, 2014

lowest among the group, but even though everyones


Owners
numbers are small, the tiny percentage of contractors (1% Architects
for both factors) is also again the least. Contractors

Factors With the Greatest Impact on Unforeseen Site or Construction Issues


Project Schedule 25%
Unforeseen site or construction issues is the unanimous 15%
top factor impacting project schedule, especially 21%
for owners (25%), but after that a similar pattern of
conflicting perspectives appears between the parties. Owner Program or Design Changes
14%
Accelerated Schedule and Owner
31%
Program or Design Changes
Owner program or design changes again has more than 20%
twice the percentage of architects (31%) who consider Contractor-Caused Delays
it to be highly influential compared with owners (14%). 13%
Accelerated schedule shows a similar gap between
14%
contractors (17%) and owners (8%).
9%
Contractor-Caused Delays and
Accelerated Schedule
Construction Coordination Issues
Because schedule compliance is considered to be much 8%
more aligned with contractors than architects, their 14%
factors (contractor-caused delays and construction 17%
coordination issues) rank higher in this category relative
Construction Coordination Issues
to their ranking for impact on quality or cost. However,
8%
as in those other instances, noticeably fewer contractors
name them as the most important factor than the 5%
architects and owners do. 3%

Other Factors Design Omissions


The percentage of all respondents selecting design 5%
omissions (5%) and design errors (3%) is the lowest of 2%
any factors, and again, fewer architects (2% and 0%, 7%
respectively) point to them than do the other parties.
Design Errors
5%
0%
3%

1_4_Uncertainty_Schedule_C4_#02

McGraw Hill Construction 15www.construction.com SmartMarket Report


Data: Owner Advisory Group Insights on Uncertainty Data

Owner Insights on Uncertainty Data Findings

Alignment on Most Owners grow a little numb, maybe even


Managing Uncertainty and Expectations in Building Design and Construction data

Impactful Causes of callous, to shortening schedules and budgets


Uncertainty without adjusting the program.
As to the differing perspectives of
owners, architects and contractors information, where people actually non-discretionary ones are often
on which factors impact uncertainty, see themselves. Now the question is, 23 times more.
Boyd Black, University of Chicago, Are we just going to sit and live with
sums it up well for this projects this, or are we going to do something Design Errors and
Owners Advisory Group (see page about it? And if so, what do we do? Omissions
60 for more information), saying How do you shift these numbers in While the group acknowledges
We probably all thought that in our positive directions? Which ones can that perfect documents are not a
intuition, but now we have data to you change? reasonable expectation, they concur
support that its pretty extreme.  with the research results that assign
Don Vitek, Whirlpool, adds, I think Accelerated Schedule a high impact to problems caused
the magnitude [of difference]  and Owner-Driven by imperfection. Having practiced
is surprising. Changes architecture for many years,
Chuck Hardy, GSA, sees these The group concurs that owners need Moebes, Crate & Barrel, accepts the
results as a reflection of the to improve their practices related to imperfection, but he encourages
industrys unwillingness to examine owner-controlled factors. design teams to be forthright
causes and make real changes. I John Moebes, Crate & Barrel, about it. There just never seems
think its a skewed perception and shares the perspective that owners to be a design error, even in things
its troublesome. Thats whats grow a little numb, maybe even like roofing and flashing or other
driving the legal profession. His callous, to shortening schedules things where its just clearly been
interpretation is that each party and budgets without adjusting designed wrong, where the design
feels they are somewhat out of the program. Weve been guilty professional, whether its an architect
control in the areas where theyre ourselves of arbitrarily taking two or an engineer, just nods their head
blaming others. But he insists that weeks out of our fastest schedule and says, Yeah, that ball got past the
they do have control, [theyre] just and expecting everyone else to goalie on that one.
choosing not to assert it. There are adjust to that. Yet we know that
ways, whether its earlier planning or unless we adjust the program and Contractor-Caused
a much more trusted advisor role [by find systems or techniques that Mistakes and
the design team] that make it more really fit that reduction in time, Coordination Issues
productive than just saying, Well, theres going to be a problem later. Continuing that thought, Moebes,
weve just got to continue down Vitek, Whirlpool, says,Maybe Crate & Barrel, says that in his
this path. He advises that when its denial. If you make a change  experience, Contractors are a little
a problem occurs, fast rewind, its like Oh, this cant be a big bit more up front saying, Yeah, that
and ask What could we have done change, but the owner might not was built wrong. Well go handle that
before we ever got to this place get that it has more repercussions with the subcontractor.
that would have at least potentially than they imagine. As to the research finding that 
mitigated us [from] even having this Jerry Lea, Hines, says it most GCs say trade performance is the
conversation? We tend not to look at directly: I really think the owner is biggest problem, Vitek, Whirlpool,
things that way. Its always just How the source of most of the evils. asks, Does that come [from]
can we best solve the reality we have Craig Russell, Disney, however a breakdown in the field by the
today? rather than trying to retool. observes once weve locked trades installing the work, or is the
He continues, saying, Whats down our design, the percentage breakdown really in the supervision
great about this report is that it of impact from discretionary of those individuals by the
really codifies with numbers and changes is low single digits, while coordinating general contractor? n

SmartMarket Report McGraw Hill Construction 16www.construction.com


Understanding Uncertainty

Frequency/Impact Analysis of Causes of Uncertainty

While one cause of uncertainty may occur frequently but Frequency and Cost Impact of
Managing Uncertainty and Expectations in Building Design and Construction data

have relatively low impact, another may not occur often Top Causes of Uncertainty
but have a major impact when it does. Conducting  Source: McGraw Hill Construction, 2014

a frequency/impact analysis is one way to prioritize 


Top Factors Index (1100)
which causes will be the most beneficial to address 
for mitigation. Owner-Driven Changes 84
Focusing on the aspect of project cost, respondents
were asked the following two questions related to each of Design Omissions 59
the top seven causes of uncertainty:
Construction Coordination 53
How frequently does each cause occur on
your projects? Unforeseen Conditions 51
What is the typical percentage impact on cost?
Design Errors 50
These responses were normalized and multiplied, then
scaled into a range of 1-100, resulting in a frequency/cost Accelerated Schedule 38
impact index score for each one.
The analysis clearly indicates that owner-driven Contractor-Caused Delays 37
program or design changes (84/100) is the most
impactful cause on cost, and by a significant margin.
This makes sense because these changes are reported 
to occur, on average, on almost two thirds (60%) of
projects. Over one third (36%) of contractors and one
quarter (26%) of owners say owner-driven changes
always occur, with 40% of healthcare owners reporting  1_5Uncertainty_ImpactIndexTable_#02
it taking place on all their projects. Since these changes
must be accommodated, they often have an unavoidable
budget impact.
Design omissions (59/100) is the next highest ranked
cause, likely because omissions are reported to occur,
on average, on half of all projects (54%) and carry the
potentially major implication of discovering missing
project scope after a budget has been established.
Interestingly, half of the contractors (48%) claim
omissions occur on every project, while none of the
architect respondents claim omissions occur more than
half the time, with the majority (84%) saying design
omissions occur one quarter of the time or less.
Design Errors (50/100) are reported as occurring less
The next three factors cluster within a few points of
frequently than design omissions, therefore appearing
each other:
lower among the index scores.
Construction Coordination Issues (53/100) often cause

expensive rework. The use of BIM is making a major Accelerated schedule (38/100) and contractor-caused
contribution to reducing both the incidence and severity delays (37/100) benefit from relatively low reported
of coordination problems. For more information on the frequency across all the respondents project experience.
use of BIM to manage uncertainty, see page 49. This frequency/impact analysis clearly indicates that
Unforeseen Site or Construction Issues (51/100) are reducing owner-driven changes will be the most effective
always a potential cost problem. As such they are an way to mitigate the impact of uncertainty on project cost,
excellent candidate for a reasonable owner contingency followed closely by fewer omissions in design documents
and a well-established change management process. and better coordination.

McGraw Hill Construction 17www.construction.com SmartMarket Report


Understanding Uncertainty

Drivers/Frequency
of Most Impactful Causes of Uncertainty

The frequency/impact analysis identified owner-driven Important Causes of Owner-Driven Changes


Managing Uncertainty and Expectations in Building Design and Construction data

changes, design omissions and coordination issues as (According to Those Who Rate Them Important/
the most impactful causes of uncertainty (see page 17). Very Important)
To effectively address these, it is important to understand Source: McGraw Hill Construction, 2014

more about them. The following pages share specific Owners


research findings on their causes and frequency. Architects
Contractors
Drivers of Owner Program or
Design Changes Unclear Project Requirements From Owner at Outset
Unclear project requirements from owner at outset is 59%
the most important driver overall, rated as being of high 79%
or very high importance by the most respondents (71%). 85%
There is significant variation between the perspective
of contractors (85%) and the owners themselves Budget and Schedule Changes
(59%), reflecting a theme throughout the research of 52%
each partys reluctance to acknowledge the relative 68%
importance of drivers/causes that are most closely under 79%
their control.
New User Functions and Technology at Owner
This differential in perspective repeats with the next
two most important drivers: 41%
Budget and schedule changes (63%) is cited by far more 39%
contractors (79%) than owners (52%), which makes 24%
sense because contractors are tasked with managing
Owner Changes in Project Leadership or Staff
those elements, although owners are typically the
source of them. 38%
Owner changes in project leadership or staff displays 55%
a similarly deep variance between owners (38%) and 36%
architects (55%). This kind of change could be more
Owner Organizational Growth and Change
impactful for architects because it can be disruptive
36%
to the design process, whereas owners may feel staff
turnover on their side is a normal part of business, 29%
therefore not as important. 20%

Though less significant overall than the first three


drivers, owners are more willing than architects or
contractors to identify two driversnew user functions
and technology at the owner and organizational growth 1_6_Uncertainty_OwnerChanges_C8_#01
and change at the owneras top drivers for program or
design changes. These findings may be influenced by the
fact that these drivers are often initiated from elsewhere
in the owner organization, external to the project
leadership or staff itself, but must be dealt with by 
them directly.

SmartMarket Report McGraw Hill Construction 18www.construction.com


Understanding Uncertainty
Drivers/Frequency of Most Impactful Causes of Uncertainty continued

Frequency of Types of Design Specific Design Errors or Omissions


Managing Uncertainty and Expectations in Building Design and Construction data

Omissions and Design Errors That Occur Frequently


Rather than exploring the causes of design errors and (According to Those Who Rate Them as
omissions, the research focused on determining the Occurring Frequently/Very Frequently)
frequency of occurrence of four specific types. Source: McGraw Hill Construction, 2014

It is important to note that while architects are typically


Owners
responsible to the project team for the quality and Architects
completeness of the full set of construction documents, Contractors
design omissions and errors can occur in the documents
of any of the design professionals (engineers, specialty Lack of Coordination Among Disciplines
in Contract Documents
consultants, etc.), not just the architects.
With half (50%) of all respondents citing it, lack of 40%
coordination among disciplines in contract documents 27%
is top on the list of common problems. Striking here, 81%
though, is the huge variance between the low frequency Gaps or Discrepancies in
reported by architects (27%), and the far higher Contract Documents
perception by contractors (81%), who, it could be argued, 36%
have an educated opinion because this directly influences 21%
their responsibility of coordinating the trades. 68%
The disparity between architect and contractor
perceptions of frequency continues through the final Constructibility Issues of
Proposed Design Solutions
three issues:
Gaps or Discrepancies in or Between Contract
29%
Documents: Architects (21%), Contractors (68%) 12%
Constructibility Issues of Proposed Design Solutions: 55%
Architects (12%), Contractors (55%) Errors in Calculations,
Errors in Calculations, Details, Dimensions: Architects Details, Dimensions
(8%), Contractors (44%) 23%
Respondents were given the ability to write-in other 8%
issues related to design errors and omissions they see 44%
occurring at a high frequency. Incomplete/unclear/
incorrect details or designs is the top among all those
responding (51%) and especially among owners (59%).
While it is tempting to dismiss these differences
as just the routinely opposing views of architects and
contractors, quantifying this significant degree of
construction coordination issues than architects
misalignment points to the need for more focus on
or owners. These findings probably reflect an
expectations, perceptions and alignment about how
acknowledgment of their responsibility for construction
design team performance should be measured, and what
1_7_UncertaintyDesignErrFreq_C10_#01
coordination and their strong feelings about its drivers.
amount of uncertainty-related variance from perfection
67% of general contractors say that individual trade
should be considered reasonable, normal and acceptable
contractor performance is the most frequent driver of
in construction documents.
coordination problems. Far fewer owners (42%) cite this,
Drivers of Construction which is understandable because they typically leave
Coordination Issues day-to-day trade contractor management to the general
In most cases, a higher percentage of contractors contractor. However, more of the large owners (48%)
identifies most of the factors included in the research identified this issue, likely reflecting a higher degree of
as contributing with high/very high frequency to awareness on their part.

McGraw Hill Construction 19www.construction.com SmartMarket Report


Understanding Uncertainty
Drivers/Frequency of Most Impactful Causes of Uncertainty continued

Responsibility for the next two falls squarely on


Factors Frequently Contributing to
Managing Uncertainty and Expectations in Building Design and Construction data

the shoulders of contractors, and to their credit, they


Construction Coordination Issues
represent the highest percentage of respondents citing
(According to Those Who Rate Them as Occurring
them as highly impactful:
Frequently/Very Frequently)
Scope Gaps Among Prime and Subcontracts: All
Source: McGraw Hill Construction, 2014
respondents (35%); contractors (41%)
Lack of Thoroughness of Preconstruction Planning, Owners
Estimating and Scheduling: All respondents (28%); Architects
contractors (33%) Contractors

Misinterpretation of design/technical documents places Individual Trade Contractor Performance


the onus of responsibility on the construction team 42%
rather than finding fault with the documents. 35% of 52%
architects and 41% of contractors rate this highly, with 67%
owners (20%) pulling down the average likely because in
most cases they would be unaware of the issue occurring. Scope Gaps Among Prime and Subcontracts
Underperforming/unqualified/inexperienced staff, 32%
subs and team was not included in the main survey, but 35%
it was brought up frequently by respondents when asked 41%
about other factors that frequently cause design errors
Lack of Thoroughness in Preconstruction
and omissions.This factor is focused more on the lack of Planning, Estimating and Scheduling
properly skilled personnel than the previously discussed 27%
factor of individual trade contractor performance, which
28%
reflects a company-level assessment.
33%
Concerns about staff could be tied to the growing
workforce shortage in the industry, and can potentially Misinterpretation of Design/
drive many kinds of uncertainty on projects. Interestingly, Technical Documents
architects (43%) and owners (29%) perceive this more 20%
frequently than contractors (20%). Since these could be 35%
considered subjective measures, it raises the issues of 41%
performance expectations and perceptions related to the
Labor and Material Market Changes
construction teamand points to a need for fair and open
discussion early in a project about how performance 20%
should be measured to reduce this misalignment, clarify 26%
expectations and establish transparent measures to 33%
define good performance.
Bidding/Contract Award Process
The bidding/contract award process, along with
labor and material market changes, receive the fewest 18%
designations of high impact, but contractors are about 20%
30% more vocal than the average for each. 27%
Miscommunication between teams was also
noted among the other factors independently cited
by respondents (41%). It is the only factor where
architects lead (50%), likely because design professionals
1_8_Uncertainty_ConstCoord_C12_#01
can be one of the teams referred to and thus are aware 
of the impact.

SmartMarket Report McGraw Hill Construction 20www.construction.com


Understanding Uncertainty

Perceived Business Advantages


of Project Uncertainty for Team Members

While uncertainty can be seen as a root cause for all Team Member Who Gains The Greatest
Managing Uncertainty and Expectations in Building Design and Construction data

manner of problems on building projects, it is possible Advantage From Project Uncertainty


that some parties may stand to benefit from it. As the Source: McGraw Hill Construction, 2014

saying goes, Wheres theres mystery, theres margin.


Owners
To explore this issue in the research, respondents were Architects
asked if they believe that uncertainty creates a business Contractors
advantage for one or more team members.
Only a third (33%) of all respondents and 39% of General Contractor
architects believe that one or more parties are 50%
benefiting from uncertainty. 47%
Owners generally perceive that a single player
18%
benefits from uncertainty the least (28%), although
large owners are well above average (38%), perhaps Trade Contractor
indicating a relationship between total dollar volume 30%
of projects and perception of advantage. 19%
Meanwhile, a large percentage of the group (31%) isnt
32%
sure, indicating that a significant slice of the industry is
on the fence about this matter. Construction Manager
9%
Those who replied positively were shown a list of six
12%
company types (owner, architect, consulting engineer,
14%
construction manager, general contractor, trade
contractor) and asked to identify which one gets the Owner
greatest business advantage from uncertainty. 5%
Half of the architects (47%) and owners (50%) pointed
9%
to the general contractors, while only 18% of general
18%
contractors themselves agreed, repeating a familiar
pattern in these overall finding about uncertainty. Architect
Trade contractors were the next most-cited group, with 0%
general contractors (32%) and owners (30%) leading 3%
the way. Architects (19%) pulled the average down
7%
significantly, perhaps reflecting less direct exposure to
the day-to-day business aspects of the trades, which are Consulting Engineer
traditionally handled by the general contractor. 0%
Interestingly, a significant number of contractors
3%
(18%) say that owners gain business advantage from 4%
uncertainty. This may be because of a perception
that when owner-related problems occur, owners
sometimes deflect responsibility and hold others most
responsible, a behavior that aligns with other findings in
this research. 1_9_Uncertainty_PlayerAdv_C15_#01
The other company types received generally

low citation as potential beneficiaries. The firms The varying perspectives among the key parties 
least perceived to benefit are the architects (3%) about causes and impacts of uncertainty point to 
and consulting engineers (2%), an important the need to better understand expectations and
acknowledgement by the broader industry. perceptions about performance.

McGraw Hill Construction 21www.construction.com SmartMarket Report


Data: Owners Advisory Group Insights on Uncertainty Data

Owner Insights on Uncertainty Data Findings

Causes of Owner-Driven I dont think uncertainty really benefits anybody.


Managing Uncertainty and Expectations in Building Design and Construction data

Changes
Lack of Upfront Planning
[in our contract] that we want them Design Teams Role in
and Unclear Project
to include normal and customary Causing Owner Changes
Requirements
changes that are reasonable for Boyd Black, University of Chicago,
The members of this projects
them to address. But if the changes believes that design firms often have
Owners Advisory Group (OAG, 
are unreasonable, then weve got to a hand in causing what can appear to
see page 60 for more information)
pay for them. Were going to be fair be owner-driven uncertainty by their
had a variety of perspectives on
about it because if were not, they tendency to establish and perpetuate
these issues.
wont be there next time for me. a culture of change during design.
Chuck Hardy, GSA, points to the
Eric Miller, Sutter Health, feels it is Design is a very iterative process,
extended gestation period of many
important to do a good job gaining and each step along the way youre
federal projects. We often plan far
understanding on what the terms making refinements. [Design teams
too soon for a project that we get
of satisfaction are for a project. are] always looking to make another
the bill for later. The alignment was
If that has been done, he agrees tweak thatll make it a little bit
clear when we did the study five
there is a reasonable limit to the better. Some are still making design
years ago and confirmed when we
changes owners should expect changes during construction. But
submitted for funding three years
a team to anticipate. When the that generates a culture that change
ago. Now were starting design,
changes stack up, and its all these is okay, and the users experience a
but things have changed. I dont
little things that add up to hundreds design thats constantly in flux. So,
think youre ever going to get away
of thousands, sometimes millions why should they feel that they cant
from having changing project
of dollars, its difficult to look [the make suggestions to refine and
requirements [in that situation]. 
project team] in the eye and say, improve design without the design
But if you can understand why
You should have thought of all  team immediately saying Youre
theyre changing, then you can
of them. changing things? My response is
manage to them.
Well, yeah, but you changed a whole
Don Vitek, Whirlpool, faces the Changes to Owners
bunch of stuff last week. The culture
opposite situation in a fast-moving Project Staff
of change either needs to be avoided
corporate environment. Its John Moebes, Crate & Barrel, thinks
or better managed.
not unusual for us to be asked to isolating changes in owner project
He also sees that a lack of sufficient
completely scope out something staff [as a cause of uncertainty] is
depth in programming can end
and commit to a number and a important. Ive seen a lot of that
up driving owner changes that
delivery time frame with very, staff-cycling-through-the-project
could have been avoided. I think
very little information. Then were thing, especially with landlords and
architects and engineers can provide
charged with delivering on a developers. Generally the owners
incredible leadership by drawing
schedule that is extremely difficult project manager knows the most
out the information from owners
to achieve. Thats just kind of the about the project and stakeholder
that they need to make more fully
way it is in corporate America  needs. When you lose that person
informed recommendations before
these days. and get a new replacementif you
they start getting people excited
Jerry Lea, Hines, says as a get a replacementthe project AEC
about where spaces will be, or what
commercial developer they do their team can really be leaderless. I think
the building will look like. Really
best to predict what the market thats a huge Pandoras box for
understanding all the [technical,
wants, but [project teams] have uncertainty, and [negative impact on]
workflow and performance] criteria
to be ready to adapt midstream cost and schedule. Its something 
that need to be met and testing it
when market changes force project the owner side of industry needs to
at a relatively detailed level, so that
changes. He continues that we say do better.
when we do start design and we do

SmartMarket Report McGraw Hill Construction 22www.construction.com


Data: Owner Advisory Group Insights on Uncertainty Data continued

start placing these different elements Frequency of Errors Vitek, Whirlpool, concurs that the
Managing Uncertainty and Expectations in Building Design and Construction data

in the building, we understand the and Omissions contractor expects perfection and
implications not just from a spatial The OAG members commented on 100% clarity on drawings, but you
organization standpoint but from a the difference between contractors never get that. And architects expect
performance standpoint. Because and architects perceptions about the well-informed contractors [who] can
I dont think the owners, in many frequency of errors and omissions. interpret drawings where needed
cases, understand enough about Lea, Hines, says although design to fill in the gaps. I think thats
design and construction to really teams arent doing the same quality reasonable if its not taken too far.
give clear direction all the time. So of documents [they used to], we
There are strong feelings about the
as design goes on, owners say, Oh, also find that contractors and
value of integrating construction
I didnt realize that. Well, that wont subcontractors have begun to get
knowledge into design documents.
work. And then the architects say, a little lazy. We typically will not
Miller, Sutter Health, notes, Im
Well, thats a change. Well, yeah, have an architects or engineers
finding the pushback from contractors
its a change, and its an owner representative onsite full-time,
to be If that darn professionalit
change, but if the design team had because the contractors quit
doesnt matter, architect, mechanical,
a deeper understanding of the full doing their job. Instead of looking
whatever it isknew what it took
implications of the design on the at the drawings, theyll just ask
to install this, they wouldnt draw it
users operations, there wouldnt the architect, Where do I find the
that way. He, like others, involves
need to be a change. I think thats detail on this? Whats the answer
contractors earlier because the open
a huge opportunity for architects to this question? Its clearly on the
conversation, the open platform,
and engineers to demonstrate true drawings or in the specs, but they
the Big Room, whatever you want
leadership on projects, true value. dont want to bother to look for it.
to call it, has helped that.The
Hardy, GSA, observes that
Inexperienced Owners conversation drives documents that
architects tend to focus
Create More Uncertainty are constructible.
documentation effort on design
All of the group members cite Hardy, GSA, forecasts that further
intent, because if I care about it,
inexperience as a major cause of blurring of the traditional lines
Im going to put more detail into
owner-driven uncertainty. Hardy, between design and construction will
it. That leaves other aspects less
GSA, makes the comparison that impact business models. How much
thoroughly defined, yet he sees
people who arent typically engaged of the design is actually being done
trade contractors expecting to
in this industry are much like by the detailers in shop drawings and
use the documents almost like
someone who is dealing with new  not by the architect? While our fee
instructions to build an airplane
IT in their office. Its that happiness structures, our logic and everything
model from a hobby shop, saying,
that Im going to finally get what I has the architect as the master of
Im going to build it just like it says.
need, and its going to be perfect. those, a lot of it is migrating to the
Every piece will fit. Everythings
And they expect it to work magically, sub community. So I think there has
going to go together, and its going
but their expectations are much to be a realization of how design
to be a happy place. But life doesnt
higher than reality. is really getting done right now,
work that way.
and that it will likely result in a fee
realignment. Not a lessening of fees,
but allowing architects to spend
more money on what theyre good
If that darn professional knew what it took to at, which is the design intent. And
install this, they wouldnt draw it that way. let the subs and GCs spend money
on what theyre good at, which is the
detailing and the implementation of
that design intent.

McGraw Hill Construction 23www.construction.com SmartMarket Report


Data: Owner Advisory Group Insights on Uncertainty Data continued

Causes of Coordination Vitek, Whirlpool, puts it most smoother? The general contractor is
Managing Uncertainty and Expectations in Building Design and Construction data

Issues and simply. If communication is better, [being blamed for poor] preplanning
Contractor Errors coordination would be better. and has to deal with all the trade
Commenting on the research  coordination and disruption in the
finding that general contractors  Who Benefits From schedule. And the owners going,
think trade contractor performance Uncertainty? Where am I going to get money for
is the leading cause of coordination Moebes, Crate & Barrel, speaks this? What am I going to do? I think
issues and construction errors, for the entire OAG when he says at the end of the day, architects,
Miller, Sutter Health, identifies I dont think uncertainty really owners and general contractors are
internal discontinuities within the benefits anybody. Miller, Sutter really linked on a project. And I think
trade contractor as a driver. The Health, adds, No one really wins all of them equally are pained by
biggest issue usually is that the in uncertainty. No one does. Your uncertainty and change.
person who estimates and does the owners checkbook is never large Craig Russell/Disney makes
detail is not the person [who] leads enough, and your contractors the point that many owners, 
the installation. The superintendent appetite for doing work for free is such as his organization, are
or job foreman walks in the first never going to be there. interested in long-term relationships
day and says, Thats impossible. Although the research shows most with design and construction
You cant do that. But I have to respondents believe contractors companies. He continues that 
say, Heres a mirror, start looking, are the most frequent beneficiaries If we feel that another party was
because youre now talking to your of uncertainty, Chuck Hardy, GSA, materially advantaged on a particular
own team. Thats within your  thinks pointing to general contractors project because of our own inability
own dance. is a troublesome sign. It further to get our act together, it will work
Offering another perspective, encourages the misperception that counter to the spirit of maintaining
Moebes, Crate & Barrel, points a change order is a good thing for that long-term relationship. n
to the common use of a design- themthat theyre making money on
bid-build delivery system as an them. He believes a more nuanced
underlying cause. Youve got a view is that trade contractors and
lot of placeholders and straw man
systems in your model that really If we feel that another party was materially
cant be coordinated until the actual advantaged on a particular project
sub-trade shows up. And most of the
because of our own inability to get our act
industry is relying on a design-bid-
build type of project delivery that together, it will work counter to the spirit of
holds the sub-trade to the very end. maintaining [a] long-term relationship.
But by that point the designers have
spent so much of their fee that they construction managers are the ones
dont want to have to re-coordinate, [who] dont have liability in the bigger
and the owners already procured picture. And as change comes, and
documents, so no one wants to uncertainty is added, and scope is
change anything. Youve got so added, the trade contractor and the
much industry standard practice that construction manager are expanding
seems to work against having really their contracts. Meanwhile he says,
good coordination with the sub- the other three [architect, general
trades that, although I think its right contractor and owner] are having
to point to the sub-trades, its wrong real issues because for an architect,
to really tar them too thickly because its Why didnt you think of this
its the way the industry works. earlier, and why cant I have this

SmartMarket Report McGraw Hill Construction 24www.construction.com


Sidebar: Secondary Research on the Cost of Imperfection

The Cost of Imperfection:


Reducing Error-Induced Uncertainties

Some valuable research has been conducted into the question


Managing Uncertainty and Expectations in Building Design and Construction

of the cost of imperfection on projects, but far more research is


needed for a full, quantitative understanding of this issue.

V
irtually all buildings Zack calculate that the direct costs of Project Complexity
will have unanticipated rework balloon by 80%, bringing total Project complexity also operates
changes during costs of rework for changes from all as a risk factor for error, but
construction. Some factors to 7.25% to 10.89%. industry literature tends to define
although fewer than is widely And these numbers are on the complexity loosely. In addition,
thoughtare due to design errors rise. In studies conducted between although the prediction makes sense
and omissions. Others are due to 2002 and 2011, costs of rework as a intuitively, few numbers are available
unexpected site conditions, freak percentage of cost of construction to back it. A couple of 1999 studies
weather, contractor modifications of run at more than twice the costs in attribute higher rates of errors and
construction materials or methods, studies from the previous decade. omissions to retrofits, which might
or other sources of havoc. Typically, Reasons suggested include the lack be considered a type of complexity:
owners handle the prospect of of skilled, qualified craft labor, and one expert puts the rate at 5% for
these uncertainties by adding the expectation that teams today do retrofits, compared with 2% for new
contingencies to their budgets, but more, faster, with less. More study construction; another study sets a
in todays business climate, many is needed, however, to understand 1.0% base rate for new construction,
owners express a shrinking tolerance this trend and to develop strategies with 1.5% for additions and 2.5%
for uncertainty-driven cost overruns, to reverse it. for renovations. 2
no matter what the scale.
International Projects
What level of uncertainty is Variables Affecting International projects carry a higher
reasonable to expect on construction Rates of Error percentage of cost changes due to
projects, particularly with regard to Variables associated with rates of
errors, compared with domestic
errors and omissions? How much do error include project size, complexity,
projects, according to the Dougherty,
changes typically cost? And how can location, delivery method, time
Hughes and Zack study, which cites
projects keep rates of error down? frame and certainty around project
figures of 2.1% for international
parameters, although there are
projects and 1.7% for domestic.
Baseline Rates of Change relatively few quantitative studies.
No studies examining possible
and Error Researchers in all disciplines call for
regional differences within the U.S.
According to a 2012 study by more investigation in this area, and
were found.
Dougherty, Hughes and Zack the largely qualitative conclusions
summarizing statistics from in the literature often add little to Project Delivery System
more than 25 papers covering 359 common sense. Qualitatively, researchers across
building and infrastructure projects, all disciplines consider design-bid-
Design Errors and
the direct costs of rework from build (DBB) projects apt to produce
Omissions
design errors and omissions alone more errors overall because of their
Changes due to errors and
range from 0.5% to 2.6% of total sequential nature and the resulting
omissions typically account for
construction cost.1 separation of project expertise into
a higher percentage of cost on
Factor in all other reasons for silos. But empirical data to support
larger projectsalthough some
rework, and direct costs range from that expectation are rare, and a
research suggests this trend goes
4.03% to 6.05%. Add indirect costs counterexample, a 1999 study of
into reverse when project budgets
on top of that, which are often not projects completed for the automotive
top $100 million.
tracked, and Dougherty, Hughes and industry, sets DBB as a baseline,
1. Dougherty, Jason M., Hughes, Nigel and Zack Jr., James G., The Impact of Rework on Construction & Some Practical Remeedies, prepared for the Navigant Construction Forum. August 2012. 2. Automotive Industry Action
Group (AIAG), Guidelines for Improving the Accuracy of Architect/Engineer Construction Documents, April, 1999. 3. ibid.

McGraw Hill Construction 25www.construction.com SmartMarket Report


Sidebar: Secondary Research on the Cost of Imperfection continued

and adds a cost-of-error markup Better Communication on Reviews of change orders on


Managing Uncertainty and Expectations in Building Design and Construction

to other delivery methods: 0.5% to a Human Level owners past projects to avoid
construction management, and 1.0% The human-themed version of repeating the same mistakes
to design-build.3 In 2012, researchers better communication calls for
at the University of Colorado and more effective communication and Need for Additional
Penn State University began work collaboration among project team Research
on a database correlating project members. In particular, the tendency To get a true picture of the sources
performance with delivery method. to avoid difficult conversations about and costs of errors and omissions,
Work on the project is ongoing. potential conflicts at the outset of however, more quantitative study
a project, when all parties want to tracking changes and their causes
Other Factors
present themselves at their best, is needed. This tracking needs to
Other factors that make intuitive
consistently correlates with higher occur duringrather than after
sense as predictors of error include
rates of change. construction. In the meantime,
fast-tracking and initial uncertainty
owners and contractors may take
around project budget or goals. Team Members Leading
comfort from studies indicating that
Researchers across disciplines share the Drive for Improved
design errors and omissions are
an expectation that these factors Communication
responsible for a smaller portion
will correlate to a higher incidence Studies conducted by groups
of the costs of change than they
of error, but there are no prominent, representing design professionals
probably think. n
well-known studies or project data suggest benefits from designers
supporting the expectation. continuing contribution to the project
team throughout construction.3
Strategies to Cut Rates A position paper by an owners
of Change and Error group calls for owners to lead the
Two themes emerge from studies creation of collaborative, cross-
of strategies to reduce the costs functional teams comprised of
of change and error: better design, construction and facility
communication via technology and management professionals.4 And
better communication on a human most studies agree that owner
level between members of the expectations and buy-in are crucial to
project team. reducing costs of change.
From a contractors perspective,
Better Communication Via
strategies for avoiding changes and
Technology
cost overruns include:
The technology-themed version
Continuous involvement of a
of better communication calls for
buildings end users
more extensive and smarter use
Getting a design freeze prior
of building information modeling
to construction
(BIM) and digital design tools. These
Having the owner appoint a
are preferred because they allow
project czar as the sole source
all parties working on a building
of contact with the contractors
owners, architects, contractors,
and the sole entity who can
specialty trades, fabricators and
approve changes
othersto access and interact with
Third-party biddability,
design information that is up-to-date,
constructibility and operability
accurate and trackable.
reviews to reduce uncertainties
3. Two studies conduced by the American Consulting Engineers Council (ACEC): ACEC, Client Expectations of Perfection, prepared by the ACEC Risk Management Committee, 2005 and ACEC, TheCost of Perfection in Public
Works Projects: A Design Professionals Perspective, Revision 2.10, 2006. 4. Construction Users Roundtable (CURT), Collaboration, Integrated Information and the Project Lifecycle in Buildgn Design, Construction and Operation,
prepared by the Architectural/Engineering Productiviyt Committe of CURT, WP-1202, August 2004.

SmartMarket Report McGraw Hill Construction 26www.construction.com


ca
se
st
ud
y
End-User Engagement
Mozilla Headquarters
Mountain View, California

was done, staff members felt


Managing Uncertainty and Expectations in Building Design and Construction

ownership in the design. It would


help them understand the decisions
we made in the design process. It
gave users a chance to provide input
on a level that was unprecedented in
modern construction.
The user-engagement strategy
for the new Mountain View project
grew out of Mozillas past work with
MKThink. Mozilla, which has built 11
facilities in the last three years, has
used MKThink on its projects around
the world. To us, MKThink is more
than just a design team, they study
our culture, says Rob Middleton,
director of workplace resources
at Mozilla. We have a very open-
source-natured culture. Everyone
here at Mozilla has an opinion, and
their opinion is valued. So we wanted
to take what weve learned elsewhere
and actively engage our employees
to have input in creating their culture.
We know the things that we think
worked and didnt work, but lets hear
from our employees directly.
The team first used a strategy
Mozilla employees work in an open environment with no private offices, so offices
are designed with numerous collaborative and conference room spaces. of surveying its employees and
studying how facilities were

W
hen architecture The 54,000-square-foot-project utilized during a project they
firm MKThink relocated Mozilla headquarters from conducted in San Francisco. For the
began developing an existing location in Mountain Mountain View project, the team
concepts for Mozillas View to a new one in the area. chose to pursue even more direct
new Mountain View, California, Jonas Kellner, senior associate at engagement with employees. The
headquarters, the firm not only MKThink, says the strategy enabled strategy included online surveys,
sought to meet the expectations of the team to not only gather important in-person group and individual
company executives and facilities information on potential facility interviews, presentations to the
personnel, but the entire staff. usage, but it also improved employee entire staff and email exchanges.
Through extensive engagement buy-in about the new location.
with all 260 employees, the team Some of the staff was concerned User Engagement
ultimately created a design that about losing the downtown office, The process was structured around
increased employee efficiency, he says. Part of the desire for the a series of three brown bag lunch
minimized wasted space, improved client was to make the staff be part sessions with staff. Employees who
Photo courtesy of MKThink

building performance and eliminated of the design process and engage couldnt attend in person were able
the need for significant post- them in that before we started to connect via online conferencing.
occupancy alterations. construction. By the time the design During the first session, Kellner

continued

McGraw Hill Construction 27www.construction.com SmartMarket Report


y
ud
Mozilla Headquarters
st
ed
se
Mountain View, California
u
n
ca

ti
n
co

says the team explained the process Kellner says that at its existing Although some value engineering
Managing Uncertainty and Expectations in Building Design and Construction

and announced that employees facilities, staff generally remarked was required, Middleton says
would receive a brief online survey. that there were not enough no functionality was lost in the
The team followed up with a conference rooms. Additionally, process. In fact, the completed
questionnaire about how and where in-office studies showed that project required no significant post-
employees carried out work, their conference rooms were often occupancy alterations, an outcome
opinions on existing workspaces occupied by only one or two for which Middleton credits the
and other related questions. The people at a time. The team also teams user-engagement process.
team also did an in-office study to remarked that staff may not know A lot of times, people dont
observe how spaces were used at the when conference rooms were understand what they need until
previous facility. Focus groups were available on short notice. things are built, and then they
set up with team managers and their In response, the design team want to make changes. Weve had
team members to gather additional created more than 60 unique no additional modifications since
team-specific information. The team spaces, including 37 we moved in, which is somewhat
team also set up a wiki page where conference rooms. The conference unheard of. n
presentations and results could be rooms range in size from large
posted, in case anyone wanted to spaces that can accommodate
reference them later. approximately 20 people down to Project Facts

st
at
The team presented survey video phone booths that can fit up and Figures

s
results at the second brown bag to two people. Video conferencing Architect
session, at which they were able is available in every room, but the MKThink
to discuss the findings openly with technology used in those rooms Type of Project
users. This gave us talking points, ranges, depending on space Tenant Fit-Out in Class A
Kellner says. We could say, You requirements. Middleton says this Office Building
guys said you want a slide [between translated into a significant budget Size
floors], but you also say you want savings for Mozilla.Instead of 54,000 sq. ft. over 2 stories
more conference rooms. Which building a 10-person conference Start
would you want more? People room with $60,000 in video October 2013
started to understand trade-offs. conferencing capability, [we] could
Completed
Do you want a bigger gym or scale that down and put three April 2014
bigger desks? four-person media rooms in the
Based on the collective input, the same amount of space, where the
team began to hone its designs. At technology is only $12,000 Overcoming Uncertainties
the third brown bag session, the per room. End-user outreach helped
team presented design ideas and User engagement continued determine facility needs.
solutions to concerns. By the end, during construction. Contractor All 260 employees were

we got a lot less comments and BNBuilders installed cameras at the surveyed and engaged in
emails; that was indicative of this project site so Mozilla staff could in-person meetings.
entire process, Kellner says. monitor progress. We collaborated Resulting design addressed

One significant finding from with the owners to create a Twitter employee efficiency, minimized
the teams survey process involved [account] and Facebook page, wasted space and improved
building performance.
the staffs use of conference so [employees] could see inside
rooms. Mozilla staff works in a everyday and could comment on the Conference room designs met

open environment with no private project, says Tony Castillo, project needs and saved money.
offices. As a result, staff needed to manager at BNBuilders. They No post-occupancy
have access to collaborative and become part of the project. That modifications were required.
private spaces when needed. was a big hit.

SmartMarket Report McGraw Hill Construction 28www.construction.com


Data:Performance
Expectations and Metrics

Perceptions of Owner Satisfaction

Architects and contractors were asked how often they Frequency With Which Projects Meet Expectations
Managing Uncertainty and Expectations in Building Design and Construction data

believe their projects meet owners expectations about Source: McGraw Hill Construction, 2014

quality, cost and schedule, while owners were asked how Always Meet Expectations
often they find that their expectations are met. Frequently Meet Expectations
The marked differential of perspectives between Sometimes Meet Expectations
owners and their project teams on three critical aspects of Infrequently/Never Meet Expectations
owner satisfaction reveals the need for much more clarity
about performance expectations and more standard Quality
methods for consistently measuring them. Owners Architects and Contractors
2% 0%
Meeting Quality Expectations 2%
Alignment among players is closest on the subject of 12% 20%
quality, where nearly all architects (99%) and contractors
(97%) feel they meet owners expectations with high
49% 49%
frequency, and a solid majority (86%) of owners agree. It
appears that BIM plays a role, because more (93%) of the 66%
owners who employ BIM on their projects report this high
satisfaction with quality, compared with those who do
not (84%). Only 2% say they are always disappointed in
the quality they receive from their project teams. Cost
Owners Architects and Contractors
1%
Meeting Cost Expectations
Perceptions are less well aligned relative to meeting 7% 11%
11%
owners cost expectations.
31%
Fewer than two thirds of owners (63%) cite a high
30%
frequency of satisfaction.
Most contractors (91%) and architects (85%), 52% 57%
on the other hand, believe they are frequently
satisfying their clients.

While only 1% of contractors confess to a low frequency


of meeting cost expectations, a much higher percentage Schedule
Owners Architects and Contractors
of owners (7%) say their cost expectations are not met.
1%
Among types of owners, the greatest percentage of
highly satisfied owners are among those in healthcare 10% 12% 10%
(74%), while the least are in education (56%). This may
reflect the difference between healthcare project teams, 36%
26%
which are frequently comprised of highly specialized
designers and builders who are selected through a 52% 53%
qualifications-based process, versus the large percentage
of education project teams that are formed through public
bid processes.
Less than two thirds (64%) of owners agree. In fact, a
Meeting Schedule Expectations significant percentage (11%) say they are rarely satisfied.
The greatest misalignment between the parties occurs
2_1_PerformOwnerSatPerceptC18C19_#02
relative to schedule. In general, the findings among owners are consistent
A high proportion of architects (90%) and contractors across organization size, project types and the degree of
(87%) believe they are hitting the mark frequently. complexity of their projects.

McGraw Hill Construction 29www.construction.com SmartMarket Report


Performance Expectations and Metrics

Effective Criteria
in Measuring Design Teams Performance on Project

Owners, architects and contractors are in relatively Effective Criteria in Measuring Design Team
Managing Uncertainty and Expectations in Building Design and Construction data

close alignment on the rank order of metrics that Source: McGraw Hill Construction, 2014

should be used, but some interesting variations of


Owners
emphasis are also evident between parties. Architects
The ability to develop a set of documents that Contractors
meet the owners program requirement and that are
constructible within budget is cited by a large majority Ability to Develop Documents That Meet Owners Program
Requirements and Are Constructible Within Budget
of each party as the single most important metric for a
design team. This reinforces the view that the documents 90%
are the foundational deliverable upon which much of the 94%
success of the project depends. 85%
A close second is the ability to solve issues by
Ability to Solve Issues Working With Team Members and
working with team members and not escalate to owner, Not Escalate to Owner
with over three quarters of architects (83%), contractors 78%
(77%) and owners (78%) citing it as very important. 83%
This points to the shared appreciation of a collaborative
77%
approach to issue resolution, in contrast to more
adversarial practices. Number of Design Errors and Omissions
Applying metrics based on design errors and 63%
omissionsincluding the percentage of construction 52%
cost due to design errors and omissions, the number 67%
of design errors and omissions, and the percentage of
contingency used due to design errors and omissionsis Percentage of Construction Cost Due to
Design Errors and Omissions
less widely supported by any of the parties. In fact, most
62%
owners acknowledge that perfection in documentation is
neither possible nor reasonable to expect (see page 31). 57%
Only about a quarter (28%) of architects favor a metric 64%
for number of change orders on a project, probably Percentage of Contingency Used Due to
because there is a wide variety of factors that can Design Errors and Omissions
generate change orders, many of which are unrelated to 50%
design team performance. However, it is interesting to 37%
note that almost half (46%) of owners designate it as an
59%
effective metric to apply in their measurement of design
team performance. Number of Change Orders on a Project
46%
28%
41%

1_10_Perform_PerfCriteria_E10_#01

SmartMarket Report McGraw Hill Construction 30www.construction.com


Performance Expectations and Metrics

Expectations Regarding Construction Documents

Possible to Have Perfect Possibility of Perfect Construction Documents


Managing Uncertainty and Expectations in Building Design and Construction data

Construction Documents (According to Owners, Architects and Contractors)


Only 10% of owners, architects and contractors Source: McGraw Hill Construction, 2014

believes that it is possible to have a perfect set of final Possible


construction documents on a reasonably complex Impossible
Don't Know
project. Interestingly, owners (7%) represent the
2%
smallest portion of this group, while architects (13%),
who reasonably should be the least willing to take this 10%
position, actually make up the largest part of the group.
Among that small group of respondents who believe
perfect documents are possible:
88%
Twice as many concentrate on commercial

projects than institutional work, probably


reflecting the typically higher complexity level
of institutional projects. Experience With a Perfect Set of
There are more small owners (those that spend $10 Construction Documents
million to $50 million annually on construction) than (According to Owners, Architects and Contractors
2_3_Perform_ExpectPerfectDocs_E1_#02
larger owners, perhaps because their projects are often Who Believe Perfect Documents Are Possible)
less complex. Source: McGraw Hill Construction, 2014

Has Seen/Produced a Perfect Set


As an inquiry into the past experience of the group who of Construction Documents
believe perfect documents are possible, the owners (7%) Has NOT Seen/Produced a Perfect Set
and contractors (10%) were asked if they have ever seen a of Construction Documents
set of perfect construction documents, and the architects Don't Know
(13%) if they had ever produced one. The responses (15%,
Owners and Contractors Architects
17% and 18%, respectively) show that reality has fallen far
0%
short of the ideal in their actual experience.
Since it was not stipulated that the documents had
16% 16% 18%
to be related to a reasonably complex project as in
the question about the possibility of perfection, these
probably reflect some past experiences with relatively
simple projects that were completed without incident. 82%
68%

Reasonable to Expect Perfect


Construction Documents
Just the owners were asked if they believe it is reasonable
Expectation That Perfect Documents on a
to expect to have a perfect set of final construction
Complex Project Is Reasonable
documents. Although only a few (7%) believe it is 2_2_Perform_SeenPerfectDocs_E4E5_#02
(According to Owners)
possible to produce perfect documents, three times as Source: McGraw Hill Construction, 2014
many (21%) say they think it is a reasonable expectation. Expect Perfect Documents
This seeming contradiction is illuminated by Do NOT Expect Perfect Documents
comments made during individual interviews with Don't Know
members of the Owner Advisory Group, where several 4%
stated that although they understand perfection is not
possible, they would typically not openly acknowledge 21%
that position and will instead always hope for it.

75%

McGraw Hill Construction 31www.construction.com SmartMarket Report


Performance Expectations and Metrics

Expectations About Cost Impacts


of Design Teams Performance Issues

Most owners (80%) say they fully expect to encounter The fact that eight in 10 owners (80%) say that they 
Managing Uncertainty and Expectations in Building Design and Construction data

added costs on their future projects that will be caused fully expect added costs from design mistakes firmly
by design mistakes. resolves the question that imperfections of this nature are
When asked how much additional cost caused by well within reason. While the majority (53%) express the
design mistakes (as a percentage of total construction belief that a normal percentage cost impact from these
cost) they would accept as normal, owners responses issues is 3% or greater, the results across all owners show
range from 0% to over 20%, but the average is 3%5%. a wide variance, from 0% to over 20%. These findings
Only a few owners (3%) hold the line at 0% budget suggest another opportunity for an open and informed
impact being acceptable. team dialogue, based on specific aspects of a project
Less than half (40%) believe 1%2% is the early in the process, to develop alignment that will avoid
acceptable range. conflict later.
A similar percentage (38%) believes 3%5%

is an acceptable expectation.
The remainder (19%) would accept upwards

of 6% added costs.

Expected Cost Impacts of Design Mistakes on Future Projects


(According to Owners)
Source: McGraw Hill Construction, 2014

Expects Future Projects to Be Completed Level of Additional Costs Accepted as Normal


With No Added Costs Due to Design (According to Owners Who Anticipate
Mistakes (According to Owners) Additional Costs)

Yes 0%
No 3%
Not Sure
1%2%
40%
8% 12%
3%5%
38%
6%10%
15%
80%
11% or More
4%

2_5_PerformOwnerExpectCostsC20C21_#02

SmartMarket Report McGraw Hill Construction 32www.construction.com


Performance Expectations and Metrics

Criteria for Measuring


the Construction Teams Performance

Similar to the inquiry about design team performance, all Best Criteria for Measuring the Performance
Managing Uncertainty and Expectations in Building Design and Construction data

respondents were asked which metrics should be used to of the Construction Team
measure the performance of a construction team. Source: McGraw Hill Construction, 2014

The results show there is relatively close alignment


Owners
between the parties on the rank order of metrics that Architects
should be used. Contractors
There is also more commonality among owners,

architects and contractors on the importance of each Ability to Solve Issues Working With Team Members and
Not Escalate to Owner
one than with the design team metrics.
78%
The ability to work with other team members to solve 85%
issues and not escalate to the owner ranks as the top 77%
metric favored by all the parties. This collaborative
behavior is an important tactical way of dealing with Percentage of Construction Cost
Due to Construction Errors
the impacts of uncertainty as they manifest themselves
58%
on projects, but it requires an appropriate culture on
the project team and the discipline not to default to self- 62%
protective measures when challenges arise. 58%
Hard metrics make up the rest of the top five, Number of Change Orders on a Project
reflecting the more quantitative nature of the work
52%
performed by the construction team. There is
28%
general alignment between the parties on the order of
importance, especially since the option of no errors due 17%
to negligence ranks last overall, reinforcing the point that Percentage of Contingency Used
perfection is not an expected industry standard. Due to Construction Errors
Interestingly, although measuring the number of 50%
change orders on a project ranks last among contractors 45%
(17%), it is second-highest rated among owners (52%). 45%
This differential is similar to the large number of owners
(46%) who rate this as an appropriate metric for design No Errors Due to Negligence
teams performance, versus far fewer architects (28%). 43%
(See page 30.) 40%
The reasoning may be similar in each instance,  38%
in that architects and contractors both likely believe 
there are many causes of change orders that are not in
their direct control.

2_6_Perform_Metrics_E13_#02

McGraw Hill Construction 33www.construction.com SmartMarket Report


Performance Expectations and Metrics

Expectations Regarding
Construction Teams Performance

Possible to Have Perfect Performance Believe Construction Team Can Have


Managing Uncertainty and Expectations in Building Design and Construction data

by the Construction Team Perfect Performance


Similar to the questions addressing expectations of Source: McGraw Hill Construction, 2014

perfection in construction documents, respondents Owners


were asked if they believe it is possible for a construction
23%
team to deliver perfect performance. Whereas only
about 10% of respondents expressed the belief that Architects
perfect documents are possible, significantly more 20%
(average 24%) feel perfect performance is achievable by a
Contractors
construction team.
Interestingly, 31% of contractors say that perfect 31%
construction performance can be delivered. This
optimistic stance by the party most responsible for
delivering perfect construction performance significantly
outpaces owners (23%) and architects (20%) and, in 2_7_Perform_ConstPerfectPerf_E6_#01
Reasonable to Expect Perfect Performance
fact, aligns with the higher percentage of architects than
by Construction Team (According to Owners)
owners who believe perfect documents are possible. Source: McGraw Hill Construction, 2014
(See page 31.) In both cases a trend is emerging where
owners may hold lower expectations of perfection than Reasonable
the parties who would appear to be most responsible for Not Reasonable
delivering it. Don't Know

Reasonable to Expect 7%
Perfect Performance From
the Construction Team 20%
When owners were asked if they think it is reasonable
to expect the construction team to deliver perfect
performance, far more (73%) expressed assent than did 73%
with perfect documents (21%). This clearly demonstrates
that owners hold the construction team to a higher
threshold of performance expectation than the design
team. This seems to convey a general sense by owners
that the types of uncertainty dealt with by design teams
may rightfully produce a wider margin of acceptable error
than they are willing to expect from builders. 2_8_Perform_OW_ConstPerf_E8_#01

SmartMarket Report McGraw Hill Construction 34www.construction.com


Data: Owner Advisory Group Insights on Performance Expectation Data

Owner Insights on
Performance Expectation Data Findings

Owner Satisfaction We have found if its a good job for the


Managing Uncertainty and Expectations in Building Design and Construction data

The Owner Advisory Group (OAG, contractor, its a great job for us.
see page 60 for more information)
believe that the variance between
owner and architect, engineer, into it with the attitude of, I want to Thinking in a larger context about
contractor (AEC) team ratings of help the contractor succeed. We measuring design team value,
owner satisfaction with quality, have found if its a good job for the Boyd Black, University of Chicago,
cost and schedule have to do with contractor, its a great job for us. expects them to be thinking on the
perspective and attitude. owners behalf about the entire
Don Vitek, Whirlpool, suggests Design Team Metrics project process, not just the design.
that although the project was The OAGs comments on design Its an opportunity to demonstrate
delivered on the agreed-upon revised team metrics support the research leadership by considering, for
schedule, maybe the owner agreed findings about the primary example, How do we make sure
on it reluctantly and still got beat up importance of good documents that the campus is as little impacted
by senior management because it and collaborative behavior, over as possible during the project?
was later than what was promised. hard metrics about changes and Generally, the quality of the design
That could leave a bad taste in the contingencies. As Hardy, GSA, itself is easier to deal with. Its the
owners mouth, even though the puts it, If you hit those top two, the quality of the process, the quality of
AEC team felt they met schedule. others will come in line. the experience, that we look for.
Chuck Hardy, GSA, further Eric Miller, Sutter Health, more
explains that while quality is a directly relates document quality to Perfect Construction
softer metric that can be finessed construction cost impact. When Documents
somewhat in discussions with top it comes to work that was missed, The Owner Advisory Group 
management, cost and schedule if I spend a buck with an architect, generally agrees that perfect
are tougher. Were making Im going to spend fifteen dollars construction documentation is an
commitments internally that cant with a contractor to fix it. So his unrealistic expectation.
be easily moved. Architects and focus is on creating a complete set Although Lea, Hines, believes

contractors are saying, We handled of documents up front, so that you in general today drawings and
this uncertainty as perfectly as we dont have that expensive circle  specifications arent as good 
could, mitigated the risk as best of change. as they used to be, he also admits, 
we could, but time or cost was still Another slant comes from Lea, I dont think Ive ever seen 
added. And these are hard numbers Hines, who differentiates between a perfect set of drawings. 
that owner project teams and their his metric for design, which is, Has I would love to.
hierarchy upwards dont like to take the building been successful from a Craig Russell, Disney, says perfect

into the board to explain  leasing standpoint? and production, documents could be possible
what happened. where its not only the quality of if you have all the people who
John Moebes, Crate & Barrel, the drawings but its getting them are going to build it foresee all
believes that owner experience done on time. His perspective on the the outcomes and plan together
impacts satisfaction. As satisfaction metric about avoiding finger-pointing to create a perfect, zero-defect
falls off, I would look at the level of with contractors: Ive seen that design. But, he continues, Im
sophistication of the owner. Jerry before, so I always insist architects not talking on the first project.
Lea, Hines, agrees and also thinks have a strong project manager to Im talking on the tenth project,
happy teams create happy owners. put a stop to it. Theyll take [the where this team is extraordinarily
We get good value for what we pay contractor] aside and say, You wont high functioning and can think
for, in quality, cost and schedule. We do that again. Youre going to work as through the project very well
staff the job during construction with a team, or well get you replaced on together. Otherwise, do I think its
a pretty seasoned team that goes the job. They just wont stand for it. reasonable? No.

McGraw Hill Construction 35www.construction.com SmartMarket Report


Data: Owner Advisory Group Insights on Performance Expectation Data continued

Black, University of Chicago, adds, Generally, the quality of the design itself is easier
Managing Uncertainty and Expectations in Building Design and Construction data

We sometimes joke here that to deal with. Its the quality of the process, the
the only time we get even close to
quality of the experience that we look for.
perfect construction documents is
as-builts.
Though perfection is elusive, Hardy, GSA, believes if were doing number one right, most of
Hardy, GSA, captures a common 3% to 5% close to perfect on our those others would be minimized.
belief among the group that the drawings, I think that is probably a He fully expects problem-solving
expectation should always be that good number. from contractors. Owners are
youre going to get the best set ever, Moebes, Crate & Barrel, who does hiring contractors because theyre
if not perfect. Although he adds seven or eight stores a year, the subject matter experts in
that, its the owners responsibility believes the cost of imperfection construction. They get a set of
to determine the requirements for correlates to owner experience. drawings that shows the design
document quality and clarity. He For us, its probably less than 3%. intent, and he expects them to
feels owners train [design teams] But less frequent builders, such as solve some of the anomalies in the
into what is an acceptable level of mall developers he deals with, are drawings and the design to meet the
documentation. And if they let seeing more impact and certainly expectations of the owner.
their vigilance slack on a project, the have more E&O issues. Construction errors are generally
next project most likely will follow Miller, Sutter Health, who involves less of a problem for the group.
that lesser set. contractors early to help improve Lea, Hines, recalls, We see them,
design, is more pointed. If it but its not common. Weve had
Most are focused on how to deal
exceeds 3% to 5%, I start hunting. contractors lay out the job and get
with the inevitability of imperfection.
Weve invested a lot of money it wrong. Sure, they make mistakes.
Vitek, Whirlpool, states it succinctly:
in preconstruction, and I have Nobodys perfect. He focuses
Documents dont take the place
difficulty believing after multiple more on evaluating the quality of a
of communication.To that point,
months and a lot of iterations, that contractors service. I think through
Lea, Hines, extols the benefit of his
you have more than a 3% to 5% it in stages. In preconstruction: Did
firms hands-on approach. I think
wiggle on your total cost to deliver. they work with us in finalizing the
the industry standard for errors and
Russell, Disney, reminds us that design effectively, or did they play
omissions on drawings is probably in
sometimes its a design error, not any games? In construction: Did
the 5% to 7% range. Ours is less than
a designer error, meaning that a they manage the subcontractors?
2%, and we track this on every job. We
well-intentioned element of the Even some good contractors put a
hire good consultants, then we look
design simply didnt work out in  staff out there that doesnt know how
over their shoulder and try to help
the field. Everybody kind of owns to manage the subs effectively. He
them.The idea is, Lets try to get the
that one. continues, The biggest place we see
most complete and coordinated set of
contractors fall down today is in close
drawings we can.
Construction Team out and commissioning, especially

The Cost of Imperfection Performance Metrics when theyre real busy. They start
The top metric for construction sending their top people off to the
The average impact of design
teams identified in the research next job, which is an event of default
imperfection is cited by owners in
is collaborative problem-solving, in our contract. The systems today
the research as typically 3% to 5%
followed by other quantitative are so complicated to commission
of construction cost. In general, the
metrics on construction errors that youve got to be paying attention
Owner Advisory Group members
and change orders. Hardy, GSA, or youre going to be in trouble.
focus on what Miller, Sutter Health,
agrees with that priority. Once
calls a range of reasonableness
the contractor gets into the drivers
that is appropriate to each project.
seat, its a great metric. If theyre

SmartMarket Report McGraw Hill Construction 36www.construction.com


Data: Owner Advisory Group Insights on Performance Expectation Data continued

Regarding the use of change Perfect Construction Offering another perspective,


Managing Uncertainty and Expectations in Building Design and Construction data

orders as a metric: Performance Russell, Disney, feels that often,


Vitek, Whirlpool, thinks the term The OAG members largely agree execution is imperfect as a result
has gotten a negative connotation that it is more reasonable to expect of the design. I would say three
because it generally has a cost perfect execution by contractors. out of four problems in the field
associated with it. But change Moebes, Crate & Barrel, says, are not because of field personnel
orders come from many different With retail builders that goal of imperfection. They track straight
places. Some are good and benefit perfect [construction] could be back to design.
the end product. Its not enough to real because we build so much, To address this, Disney is
just judge it on the number. Is a 100 and the quality of what we build is implementing integrated project
change order project worse than directly associated [with] the brand delivery (IPD) contracts with
a 20 change order project? Im not experience for the customer. incentives and profit pools where
sure you can say that. Miller, Sutter Health, believes, he expects near-perfect design,
Moebes, Crate & Barrel, adds, As long as I define what and contractors who say, Okay, I
Less sophisticated owners tend perfection is, I think they should understand this job exactly. I helped
to always see a change order as hit it. When you look at [MEP work] you design it. Now I will hold myself
a negative. They feel like theyre in its installed condition, its a accountable for performing its
getting preyed upon. And a lot piece of artwork. Youre almost execution at a very high level 
of architects feel the same way. embarrassed to put sheetrock over of quality. n
Owners who build a lot realize a it. Thats the way you want it. And
change order is just the way you when I walk down that finished hall
adjust a contract up or down. We at the end of the day, it should look
show everybody the [construction] damn near perfect.
contract and say, Yeah, some of the Vitek, Whirlpool, makes a different

stuff isnt covered in the scope, and point, that construction is not an
theres going to be a change order exact science. Everybody wants
to handle that. But its not meant to it to be, but its not. So its not that
pillory any of the designers or set theres an issue, but how does the
up the contractor later. Were just contractor recover from that issue?
up front with saying, This is how I would expect performance at a
the jobs going to run. very, very high level for a team 
Hardy, GSA, agrees. If I tell a that reacts and responds well 
project team, Your metric is to uncertainty.
number of change orders, theyll
just start grouping change orders. Documents dont take the place of communication.
Instead of individual ones, theyll
have one huge one. Its a metric that
I dont put a lot of credence in.
Lea, Hines, addresses it by

reducing the incentive. We dont


pay an additional fee on change
orders unless I really change the
scope of the job. The contractors
put what fee they want for that in
their initial bid. So theres not a big
incentive for the contractor to ask
for change orders.

McGraw Hill Construction 37www.construction.com SmartMarket Report


y
ud
st
se

A Successful Balance: Integrating Design-Build


ca

Speed, Owner Control and Workplace Safety


Camp Pendleton Replacement Hospital
Camp Pendleton, California

T
he Navys new hospital at
Managing Uncertainty and Expectations in Building Design and Construction

MCB Camp Pendleton, a Camp Pendleton Replacement


landmark facility serving Hospital used bridging documents
to integrate the owners quality
70,000 active-duty and priorities with design-builds
veteran members of the military and speed and cost advantages.
their families, faced an aggressive
construction schedule from the
start. Funded under the American
Recovery and Reinvestment Act of
2009, the project came with a hard
expiration date on its financing. In
response, the Navy departed from
its traditional design-bid-build
preference for project delivery and
instead awarded the project on a
design-build basis.
The new hospital was completed in
49 months from start of design: well
below the Navys typical completion
time frame of five to seven years for
a hospital project and six months
ahead of the projects own schedule.
By any industry standards,
says David Williams, R.A., senior
project manager for NAVFAC
Southwest, we were at least 30% expectations, a multidisciplinary successful balance of design-build
ahead of schedule for a project of this integrated team of representatives advantages and owner control.
complexity and magnitude. of medical staff, patient groups and After award of the contract to
And at a contract cost of Navy stakeholders collaborated a joint venture (JV) design-build
$447,300,000, the project came in with HDR on a guiding charter of team of Clark Construction Group
more than $80 million below the themes and goals for the project and and McCarthy Building Companies,
Navys $530,000,000 budget. reviewed iterative documentation of with HKS Architects as the project
the emerging design. architect-of-record, the Navy
Bridging Uncertainty The bridging documents, kept the bridging team intact and
Design-builds speed and fixed which were developed to a 30% co-located at Clark/McCarthys site
cost often come at the price of completion level, became the basis trailers, where they continued to
Photo courtesy of HDR Architecture, Inc.; 2013 Ed LaCasse/HKS

a reduction in owner control. To of the Navys comprehensive RFP provide oversight throughout the
mitigate this, before issuing its RFP, and a fixed requirement of the bid. documentation phase.
the Navy retained HDR Architecture The bridging documents not only We focused heavily on this issue
to develop a set of documents that secured the Navys priorities, but of co-location, says Williams,
would outline the project program, they provided bidding teams with a attributing to that strategy alone a
generate a design concept, describe high level of certainty as to what the significant measure of the projects
adjacencies within the hospital and project entailed, while leaving the savings in both time and cost.
generally spell out the project the engineering and construction detail
Navy wanted. open to them to maximize. Make Haste Slowly
To ensure these bridging The result, says Thomas Todd, To get the project out of the starting
documents embodied the Navys AIA, vice president at HDR, was a blocks as fast as possible, the JV

continued

SmartMarket Report McGraw Hill Construction 38www.construction.com


y
ud
Camp Pendleton Replacement Hospital
st
ed
se
Camp Pendleton, California
u
n
ca

ti
n
co

team broke the project into discrete It took a bit of convincing,


Managing Uncertainty and Expectations in Building Design and Construction

packages: site work, structural says Carlos Gonzalez, P.E., vice Project Facts

st
at
with minimal mechanical, central president at Clark, because these and Figures

s
plant, parking structure, and the conversations added time up front. Owner
exterior and interior design of the But they avoided rejected final NAVFAC Southwest
hospital. For each package, the team submittals or incorrect designs that Architect
developed a schedule that would would have resulted in construction HKS Architects, Inc. and HDR
allow construction to proceed before changes later. Architecture, Inc.
the project was fully designed. By the end of design, 99% of Construction Manager/
For all its haste, the process of cost items were accounted for, and General Contractor
documentation and construction construction changes amounted to Clark/McCarthy Joint Venture
was far from pell-mell. A master plan less than 2%. Project Type
provided a clear and reasonable path Hospital with central utility plant
from breaking ground to handing Increased Safety for and parking structure
over the hospital, and field leadership Increased Certainty Size
for each major phase brought key On a project with a health-based Hospital: 518,000 square feet
subcontractors together to break up mission, worker safety becomes a
Central Utility Plant: 21,000
the master plan into daily activities matter of project integrity. The Navy square feet
the team could follow, monitor and provided great leadership on this,
Parking: 546,000-square-foot
remedy if any aspect of the work says Gonzalez. From day one, they
parking structure and 1,000
began to slip. were not afraid to stop work or slow
stall surface parking lot
The Navy instituted an approvals down until we could demonstrate
process of intermediate submittals that we could do it safely. Their Design Start
September 2009
consisting of three submissions unwavering commitment to safety
before the final permit drawings. At empowered us to follow along. Construction Completion
each interval the owner provided The project built its exemplary October 2013
feedback, which enabled the team safety record day by day, with
to develop the design in close initial orientations to safety, weekly Project Results
alignment with owner expectations. site walks by a joint government- Schedule: Finished 6 months
To improve the print-review-design contractor safety team looking for ahead of schedule
process, designers and reviewers ways to improve, monthly meetings
Cost: Project budgeted at
met a week prior to each review and to review and recognize safety-based $530,000,000 but came in at
flipped through the forthcoming behaviors, and a parade to celebrate $447,300,000
submittal page by page. When the the first million work hours without a
Safety: Zero lost time and zero
reviewers began their work, they loss-time incident. DART injuries in 2.6 million
were familiar with what they were The success Im most proud hours worked
looking at, and conversations with of, says Gonzalez, is safety. In
LEED: Gold certification
the designers were fresh in their 2.6 million hours worked at Camp
minds. In reverse, when the reviewers Pendleton, the number of DART (days
completed their review, they met with away, restricted or transferred) and
the designers again and ran through lost-time incidents was zero.
the same page flip, explaining their
comments.This process enabled the Outstanding Overall
designers to address a concern on the At the conclusion of the Camp reflects implicitly on the teams
spot and it distilled the real issues for Pendleton contract, the Navy strategies for managing expectations
action, which were then written up provided a performance evaluation and uncertainties. The verdict
into formal comments. to the joint venture, which overall: outstanding. n

McGraw Hill Construction 39www.construction.com SmartMarket Report


Sidebar: Claims

Claims Consultant Perspective

Advances in construction methods and collaborative tools can


Managing Uncertainty and Expectations in Building Design and Construction

help project teams identify potential issues and reduce risks.


Relationships between team members are critical in that effort,
enabling better communication and collaboration.

U
ncertainties can be costly, director of PMA Consultants, says break that down. You do things in the
and sometimes they lead that schedule claims are traditionally model that catch many of the things
to disputes and claims. the most difficult to resolve, but that lead to problems in the field.
While many traditional advanced schedule control systems Still, working in BIM can have
causes for claims remain the same, enhance opportunities to avoid its downsides from a claims
some consultants say that advances issues or mitigate them quickly. perspective. The risk lines can get
in construction methods and tools We see that sophistication blurred when you get into a BIM
can help reduce the risks. from both contractors and owners; environment, he says. If there is a
Roy Cooper, vice president and contractors in terms of preparing and problem, it gets more complicated to
leader of Construction Claims submitting schedules and owners in figure out who is responsible.
Services at Arcadis, says analyzing terms of evaluating those [schedules] The increased complexity of
projects from a claims perspective and commenting on them, he says. projectsfrom both a technical
at an early stage can go a long way and organizational standpoint
toward identifying and avoiding Collaboration and can increase the risk of disputes as
costly risks. Enhanced schedule Communication well. A project may have numerous
reviews, for example, can make a Collaboration and communication stakeholders on the owners side,
significant difference. Nearly all among team members are critical each with a particular set of project
claims that his group encounters when trying to reduce uncertainties requirements and expectations.
have an element of time, he says, on projects, says Frank Guita, Likewise, large projects often
where issues affect construction senior vice president and managing require joint ventures of design
schedules. Cooper suggests that director of the Americas Claims and construction teams, where
project teams should view projects and Consulting Group at Hill each member may have a unique
not from a purely nuts-and-bolts International. More collaborative perspective. In a joint venture,
schedulers standpoint, but a delivery methods and tools like contractor X might think differently
claims perspective. building information modeling can than contractor Y and contractor Z,
This is different [from] your help in this effort, Guita says. Cooper says. Imagine if a dispute
typical schedule review, he says. By the intent of the process, BIM comes up: One might want a fight,
Were taking a harder look at it. is collaborative, he says. In the and the other wants to kiss and
What is in the schedule that can bite traditional design-bid-build delivery make up. The owner doesnt know
us down the road on claims? model, you can have islands of if they should bring flowers or
Cooper says that qualitative self-interest. When you go down a boxing gloves.
risk assessmentwhere potential BIM road, youre in a collaborative Regardless of the means and
risks are identifiedand quantitative environment, and that starts to methods used on a project, Cooper
riskswhere potential costs of connect those islands. says dealing with potential risks on
risks are estimatedhave been Guita adds that through such projects comes down to relationships
traditionally difficult for owners to collaborative techniques, teams between people. Half of the battle
execute. However, advancements can identify conflicts and problems is about the people, he says. If we
in technology, such as scheduling early. The number one cause of work out the relationship issues,
software and building information construction disputes we see is then we have a better chance of
modeling (BIM), are making it easier. problems or defects with contract avoiding or mitigating and resolving
Richard Martone, managing documents, he says. BIM starts to disputes early.n

SmartMarket Report McGraw Hill Construction 40www.construction.com


Data:Opportunities for
Performance Improvement

Importance of Four Major Mitigating Elements

To begin the process of identifying what practitioners Top Ranked Factors for Reducing
Managing Uncertainty and Expectations in Building Design and Construction data

should concentrate on in order to have the greatest Uncertainty (According to Owners, Architects
positive impact, respondents were asked to rank four and Contractors)
major potentially mitigating elements in order of their Source: McGraw Hill Construction, 2014

likely effectiveness in reducing all types of uncertainty in Ranked 1st Ranked 2nd Ranked 3rd
the building design and construction process.
Documents: Detailed construction drawings with no Detailed Construction Drawings With
significant errors or omissions No Significant Errors or Omissions
Early Collaboration: A collaborative approach with 48% 25% 18% 91%
involvement by the entire project team in early design A Collaborative Approach With Entire Project
Issue Resolution: Clear process for project team Team Involvement in Early Design
members for dealing with issues that arise during 34% 36% 20% 90%
design and construction
Clear Process for Project Team Members for Dealing
Shared Liability: A collaborative approach with shared
With Issues During Design and Construction
liability across the project team 10% 25% 48% 83%

Error-Free Documents A Collaborative Approach


With Shared Liability
Error-free documents rose to the top as the dominant
9% 14% 12% 35%
desire, with half of all the respondents (48%) saying that
if such documents were possible to produce, they would
certainly be the most important mitigating element. Only
a few (9%) rank error-free documents as least important
(i.e., not among their top three choices). 3_1_Improve_ReducingUncertTOTAL_E9_#01
Although it has been well-established in the findings
that perfection is not a realistic expectation, the
unanimity among architects, contractors and owners
on this point reinforces the importance of construction
documents as the foundational element on which much
of the success of the rest of the project depends.
satisfactory issue resolution process and that
Early Collaboration other mitigation strategies are more important for
34% chose early collaboration as most important, reducing uncertainty.
although a similar proportion (36%) placed it second
on their list, underscoring its subordinate position to Shared Liability
error-free documents. Respondents who are involved Shared liability receives the smallest level of support
in a high proportion of healthcare work felt especially (9%) as the most promising mitigation approach. Nearly
strongly (41%) about the value of a collaborative two thirds (65%) of all respondents exclude it entirely
approach, likely reflecting the growing popularity of it in from their top three, led by architects (78%), who most
that market sector. likely feel that they have the least amount of control over
the riskiest aspect of a project. Conversely, contractors
Issue Resolution show the most overall support for shared liability as a
The support for a clearly defined approach to issue means to mitigate uncertainty, with half (52%) including
resolution ranks much lower, with only a few (10%) citing it among their top three. This may indicate a desire by
it as most important and half (48%) placing it third on contractors for design professionals to accept more of the
their list. Contractors seem least supportive, with 31% risk on a project, as well as showing that contractors have
not even including it among their top three, almost twice an interest in exploring new ways to structure business
the average (17%) among all respondents. This may be arrangements around risk and liability to reduce the
because many contractors feel that they already have a impact of uncertainty.

McGraw Hill Construction 41www.construction.com SmartMarket Report


Opportunities for Performance Improvement

Effectiveness of Specific Factors


on Reducing Overall Project Uncertainty

To provide greater detail in identifying the most Top Factors That Reduce Project Uncertainty
Managing Uncertainty and Expectations in Building Design and Construction data

effective ways a project team can address and manage Source: McGraw-Hill Construction, 2014

uncertainty, respondents were asked to rate 13 specific Owners Architects Contractors


factors as to their impact on reducing the overall level
of uncertainty in the building design and construction More Integration Between Design and Build Parties
During Design and Coordination
process. The chart shows the top nine factors selected 76%
by at least 50% of owners, architects or contractors who
76%
rated each factor as either having a high or a very high
79%
impact, but the analysis below looks at all 13 factors.
Clearer Direction From Owners
Several themes appear in these responses.
75%
89%
Importance of the Owners Role
77%
Two of the top three factors cited by all respondents
relate directly to the owners role on projects. More Active Leadership by Owner
Clearer direction from owners ranks first with most
72%
(79%) of the total respondent pool, and rates even 70%
higher (89%) among architects. Project complexity 57%
influences this factor somewhat, with over eight in Clearer Definition of Deliverables Between
Parties During Design
10 (83%) of the respondents who do mostly complex
67%
projects citing it as highly significant, versus fewer
67%
(73%) of those who rarely do complex projects.
More active leadership by owners, a closely related
67%
factor, is third overall, with over two thirds (68%) citing Best Value or Other Team Selection Criteria
Not Based Primarily on Low Fee
it as having high or very high impact on reducing
61%
uncertainty. Large owners and architectural firms
68%
weigh in even more emphaticallyat 77% and 83%,
68%
respectively. This is likely because their large and
complex projects often involve especially high levels More Time for Design Firms to Participate in Coordination
61%
of uncertainty and thus would be likely to benefit most
80%
from active owner involvement. Indeed, respondent
experience with project complexity does impact 63%
preferences, where over two thirds (76%) of those doing Use of Construction Manager as
Constructor Contracts
mostly complex work identify active owner involvement
47%
as critical, versus just over half (51%) of those involved
26%
primarily in simpler projects.
55%

Integration and Collaboration: Contingency in Owner Budget for


Design Errors and Omissions
Three of the top five factors highlight support for better
47%
collaboration among all parties, a theme that appears
45%
repeatedly in this research.
49%
More integration between design and build parties
Use of BIM and Other Virtual Design
during design and construction is deemed impactful Tools by Entire Project Team
by over three quarters (77%) of all respondents. 44%
Especially appreciative are the large contractors (91%), 55%
probably because of their experience with benefits
53%
of greater integration on their relatively large and
complex projects. To that point, significantly more of
the respondents who do mostly complex projects (83%)

2_9_Improve_ReducingUncert_F1_#02
SmartMarket Report McGraw Hill Construction 42www.construction.com
Opportunities for Performance Improvement
Effectiveness of Specific Factors on Reducing Overall Project Uncertainty continued

identified this factor as very important than those doing that proportion is reversed among architects, where
Managing Uncertainty and Expectations in Building Design and Construction data

mostly simple projects (67%). This is also reflected more small firms (71%) favor this as an important factor
among owners, where many more from the education than the large firms (60%), perhaps reflecting that more
(82%) and healthcare (77%) sectors cite it than office fee-based bidding activity typically occurs among those
project owners (62%). smaller firms.
More time for design firms to participate in Use of construction manager (CM) as contractor is

coordination garners high votes from two thirds favored by almost half (44%) of all respondents. Over
(66%) of all respondents. It is particularly supported half (54%) of healthcare owners cite it, as do 55% of the
by architects (80%), and also by the large contractors contractors, especially the larger ones (61%) who are
(74%), reinforcing the value of tighter designer/builder more likely to understand its value.
collaboration as an effective risk reduction strategy. Although the use of integrated project delivery (IPD)

Three quarters (75%) of BIM users weigh in with high contracts is an emerging trend still in its early stages,
support for this, versus just over half (57%) of non-users, over a third (37%) rate it highly, with contractors
reflecting its valuable role in coordination. And among (41%) leadingand even more notably, large
owners, the strongest support is shown by the large contractors (45%). Similarly, large architects (50%)
organizations (65%) and those in healthcare, where the greatly outnumber small ones (23%) and many more
benefit of coordination proves especially valuable. healthcare owners (46%) identify it as a top contributor
Clearer definition of deliverables between parties during than office owners (25%), probably reflecting the
the design process is cited by identical percentages difference in actual IPD experience between the two
(67%) of architects, contractors and owners, identifying groups. This statistic will be interesting to watch in
it as a high priority initiative for the industry with future research as IPD use evolves and more completed
unanimous support. Owners in the healthcare sector project metrics are made public.
(74%) and the larger contractors (73%) show above- The use of design-build contracts, while only cited by

average enthusiasm. Interestingly, three quarters (74%) about a third (31%) of the total population, receives
of owners with small (less than $50 million annually) high marks from contractors (42%), perhaps reflecting
building programs cite this, versus fewer (62%) of the greater experience with its benefits than architects and
largest owners (greater than $100 million annually), owners. This finding is also consistent with the results
perhaps indicating a greater perceived need for of the 2014 Project Delivery Systems SmartMarket
structured project processes in that portion of the market. Report, which showed that contractors favor design-
build over other delivery systems to achieve most
Team Formation and Project Delivery project benefits. Project complexity also impacts
Approach/Strategy preferences for design-build, with 44% of healthcare
Five of the cited factors relate to how teams are formed owners indicating their belief that it is a valuable
and what approaches and strategies they use for contributor to reducing uncertainty versus just 25% of
managing the delivery process. For more detailed the respondents who rarely do complex work.
information on the use and perceived value of many of Use of lean design and construction principles,

the delivery systems mentioned below, see the 2014 though only scoring high among a quarter (26%) of
Project Delivery Systems SmartMarket Report. all respondents, received top ratings from a larger
64% of respondents believe Best Value or other percentage of contractors (33%)especially the larger
team selection criteria not based primarily on low ones (40%), again likely due to their more extensive
fee can have a major impact on reducing uncertainty experience with the considerable benefits of lean. The
as the project moves forward. Owners, who might 2013 Lean Construction SmartMarket Report revealed
be thought to be most resistant to alternative team that a high percentage of the industry are still unfamiliar
formation approaches, are only slightly less enthusiastic with lean practices, suggesting that as familiarity with
(61%). More of the large contractors (74%) cite this this approach grows, it may be more widely recognized
approach than the smaller ones (59%), likely indicating for its impact on reducing project uncertainty. See page
a preference to be evaluated for their resources and 58 for more information from lean practitioners on the
experience, and to be paid fairly for it. Interestingly, benefits they have experienced from its use.

McGraw Hill Construction 43www.construction.com SmartMarket Report


Opportunities for Performance Improvement
Effectiveness of Specific Factors on Reducing Overall Project Uncertainty continued

Use of Building Information Modeling trade contractors in an integrated approach on projects


Managing Uncertainty and Expectations in Building Design and Construction data

(BIM) and a sense that just one firm modeling does not
Two of the factors reported by the survey respondents provide the same degree of benefit.
identify the influence of BIM on reducing uncertainty.
McGraw Hill Construction has conducted extensive
Half (50%) of all the respondents believe the use of
research on the business value of BIM in the U.S. and
BIM and other virtual design tools by the entire project
beyond that demonstrates the advantages BIM provides
team significantly reduces uncertainty. As a sign of its
in reducing uncertainty. The findings are published in a
positive reputation even among non-users, a third (32%)
series of SmartMarket Reports, including the Business
of the respondents who are not currently using BIM
Value of BIM in North America SmartMarket Report and
still give it a high rating. Owners overall are slightly less
the Business Value of BIM for Construction in Global
convinced (44%), although size matters because over
Markets SmartMarket Report. For more information on
half (51%) of the large owners (those spending more
those findings, see page 49.
than $100 million on projects annually) cite this factor.
Also, large contractors show above-average support
(62%). These findings reflect the fact that currently, BIM
Importance of Budget Contingency
Almost half (47%) of all respondents identify contingency
tends to be used by larger companies on larger projects.
in the owner budget to accommodate design errors and
Overall, fewer (32%) see the use of BIM and other
omissions as being important to reducing uncertainty.
virtual tools by a single firm as highly important.
The results show very little variation between owners,
Interestingly, while over half (55%) of large architects
architects and contractors, providing a high degree
do feel BIM by a single firm is important, only a quarter
of alignment on this issue. For more information on
(24%) of contractors agree, perhaps acknowledging the
contingencies used by owners, see page 52.
growing, successful use of BIM by GCs and multiple

Mitigating the Seven Top Factors


That Cause Uncertainty

Seven key causes of uncertainty were studied in the The number scores in the matrix are the percentages of
Understanding Uncertainty section of this report. (See all respondents that rated a particular factor as having
pages 11 to 24.) To examine mitigation potential from either high or very high mitigating impact on each
another angle, respondents were asked to rate the specific cause of uncertainty. Color coding indicates six
relative effectiveness of 13 specific factors on those top tiers of perceived effectiveness ranging from red (scores
causes of uncertainty. above 80%) to purple (scores below 40%).
The Mitigation Matrix on page 45 summarizes these
findings. The matrix is organized, left to right, by primary Top Five Strategies for
responsibility for the causes: Mitigating Risks
Owner-Related Issues (Owner-Driven Changes and
Better Communication Among all
Accelerated Schedule)
Project Team Members
Design Team-Related Issues (Design Errors and
Better communication among all project team members
Design Omissions)
in early stages of the project is clearly identified as the
Contractor-Related Issues (Construction Coordination
most impactful factor versus every one of the top causes
and Contractor-Caused Delays)
of uncertainty. This underscores the main objective of
Unforeseen Conditions, for which no specific party is
this research, which is to encourage an informed and
primarily responsible
open dialogue as early as possible in a project. Such an

SmartMarket Report McGraw Hill Construction 44www.construction.com


Opportunities for Performance Improvement
Mitigating the Seven Top Factors That Cause Uncertainty continued

approach allows a team to acknowledge and manage Interesting variances occur between the scores of the
Managing Uncertainty and Expectations in Building Design and Construction data

uncertainty and its impacts, rather than relying on three parties for this factor.
contracting strategies that avoid and transfer risk, and Owners scores are consistent with architects and

operating under the prevailing patterns of misaligned and contractors on the topic of owner-driven changes.
often unrealistic performance expectations. However, owners have noticeably less regard for the

impact of accelerated schedule (70%) than contractors


Greater Leadership or Involvement
(90%) and architects (88%).
by Owner in All Stages of design and
Construction This difference in perspective may stem from owners
Greater leadership or involvement by owner in all stages belief that in most cases an accelerated schedule is
of design and construction follows as the second-most identified early in the process and is the responsibility of
important factor for all respondents. This is especially the design and build team to plan for and execute against,
true regarding accelerated schedule (83%) and owner- requiring no special level of owner involvement. By
driven changes (81%), which is not surprising since these contrast, owner-driven program or design changes are
causes are so closely related to owners. often surprises to the rest of the project team, and they

Impact of Strategies on Mitigating the Seven Top Causes of Project Uncertainty


(According to Owners, Architects and Contractors)
Source: McGraw Hill Construction, 2014

Scores Above 80 Scores 70 to 79 Scores 60 to 69 Scores 50 to 59 Scores 40 to 49 Scores Below 40

Owner- Construction Contractor-


Accelerated Design Design Unforeseen
Driven Coordination Caused AVERAGE
Schedule Errors Omissions Conditions
Changes Issues Delays

Better Communication
Among All Project Team
Members in Early Stages 88 96 94 88 93 79 79 88
of the Project
Greater Leadership or
Involvement by Owner in
All Stages of Design and 81 83 78 71 59 53 73 71
Construction

Use of Team-Based
Alternative to 64 70 75 71 72 49 65 67
Design-Bid-Build

Appropriate Contingency
Dedicated to This Issue 79 70 73 48 54 57 79 66
by Owner

Use of BIM 53 64 76 69 76 47 55 63

Shared Liability Across


the Project Team for
Problems Created by 48 59 71 62 63 53 58 59
This Factor

Use of Lean Design and


Construction Practices 28 48 32 31 39 32 28 34

2_10_Mitigation Matrix_#02 McGraw Hill Construction 45www.construction.com SmartMarket Report


Opportunities for Performance Improvement
Mitigating the Seven Top Factors That Cause Uncertainty continued

therefore merit closer involvement by and leadership and suppliers engage in integrated, model-based
Managing Uncertainty and Expectations in Building Design and Construction data

from the owner to manage with the least disruption. construction processes.
For more information on the value of BIM in reducing
Use of Team-Based Alternatives to
project uncertainty, see page 49.
Design-Bid-Build
Ranking third overall, the use of a team-based alternative
to design-bid-build is viewed as most impactful related
Additional Strategies for
to design errors (75%). This probably stems from the
Mitigating Risk
sometimes adversarial culture of a design-bid-build Shared Liability Across
project, where design errors are often sources of great the Project Team
contention. Unfortunately, fewer owners (62%) rate it In sixth place overall, shared liability across the project
highly, which points to a need to help owners understand team for problems created by this factor scores high
the potential benefits of team-based alternatives. with less than six in 10 overall (59%), but it is rated
relatively well for design errors (71%), especially among
Having an Appropriate Contingency
owners (78%).
Dedicated to Specific Issues
Although this finding could be interpreted as a
Having an appropriate contingency dedicated by
desire by owners to avoid and transfer risk and liability
the owner to the specific issue in question ranks
to other members of the project team, it can also be
fourth overall and is seen as especially relevant to
seen as an opportunity to engage with owners in
these four issues:
a constructive dialogue related to alternative team
Owner-driven changes (79%) not surprisingly garners
structures such as integrated project delivery, where
a top rating from more architects (83%) than owners
liability and reward are shared among participants in a
(74%), highlighting the need to discuss in advance how
collaborative environment.
these will be managed (re: professional time as well as
construction budget) when they occur. Use of Lean Design and Construction
Unforeseen conditions (79%) shows a similar diversity Practices
of perspective between contractors (96%) and owners Half (48%) of the respondents identify the use of lean
(76%), understandable because contractors have to design and construction practices as an effective
directly contend with the cost impact on a project. The mitigating factor for uncertainty caused by an
average is pulled down by architects (67%), who are accelerated schedule. This makes sense because of the
typically least directly affected. powerful schedule-oriented elements of lean (e.g., pull
Design errors (73%) earns consistent ratings across planning, etc.), and its focus on all parties making and
all three parties, indicating a general consensus on keeping commitments in an open and integrated process.
its importance. Compared with all the factors, the relatively low
Accelerated schedule (70%) is again led by contractors scores returned for lean likely reflect unfamiliarity
(79%) over owners (65%), reinforcing owners relative rather than informed negative judgment. This is
reluctance to implement extraordinary measures supported by the findings published in the McGraw Hill
related to it. Construction Lean Construction SmartMarket Report,
which quantifies the low general awareness level in
Use of BIM
spite of the outstanding benefits.
Use of BIM ranks fifth overall and is most closely aligned
For more information about how lean construction
with design errors (76%) and construction coordination
practices mitigate uncertainty on projects, see page 58.
issues (76%), two areas where a model-based process is
particularly effective.
It scores lowest (47%) with contractor-caused delays,
which may be because many of these kinds of delays
are typically not directly related to the design, so models
are not perceived as being effective for mitigation. This
may change as more trade contractors, fabricators

SmartMarket Report McGraw Hill Construction 46www.construction.com


Data: Owner Advisory Group Insights on Opportunity for Improvement Data

Owner Insights on
Mitigating Uncertainty Data Findings

Owner Leadership- An informed and active owner solves


Managing Uncertainty and Expectations in Building Design and Construction data

Related Factors a lot of problems in the project.


Most of the Owner Advisory
Group (OAG, see page 60 for
more information) agrees that by getting people who have lived contractor defines the final outcome
their role is critically important to through and dealt with some of through shop drawings and the work
mitigating uncertainty. these issues out there solving installed in the field, and the designer
John Moebes, Crate & Barrel, problems, and not just pointing out cant read the contractors mind
states it clearly: An informed problems for the owner to solve. regarding exact means and methods
and active owner solves a lot of Boyd Black, University of Chicago, that will be employed to achieve
problems in the project. You can agrees, saying, We dont always the design intent. He favors an
have really great contractors, have the expertise to ask all the integrated approach whereby teams
sub-trades, architects and right questions to make sure we assign responsibilities to the parties
engineers, but if the owner isnt have a really solid basis of design best-suited for them in advance.
driving that project well and or owner project requirements This avoids uncertainties caused by
responsibly, theyll be hamstrung. document. He feels that this is a duplicative efforts and definitely
He also wishes more architects great leadership opportunity for reduces field changes.
would become owners because design teams to help owners be One of the leading proponents of
I think theyre some of the best more successfully engaged. integrated project delivery (IPD) in
trained people to be owners and the U.S., Eric Miller, Sutter Health,
lead construction. Integration-Related recalls, We went into integrated
Craig Russell, Disney, makes the Factors project delivery to be able to predict
important point that because they Moebes, Crate & Barrel, observes cost and predict how long it was
pick the team and decide on the that theres still resistance [to going to take.
strategy for the project, owners integration] because people are However, through that process
have ultimate responsibility for the afraid of scope shift or liability shift. Miller came to realize that designers
outcome of the project. And for architects, theres a lot more and builders have typically never
Don Vitek, Whirlpool, is committed you have to know on an integrated really looked at each others work,
to early and consistent owner team. But when I look at some of the ever. Now as we watch the groups
involvement. I encourage teams architects that we work with now work together and do the conflict
to share issues or questions with and the sheer amount of means resolution, theyre all getting
me early. Dont try to prepare and methods that they know and smarter. Theyre all starting to
everything to the utmost degree theyre not afraid to talk about, its realize that even though their job
before our first review. Show me staggering compared with what it is tough, there are other jobs out
design iterations, or get into some was 10 years ago. I think we need there that might be just as tough.
of the construction details so that a message to younger architects Theyre starting to be a little more
I truly understand the dynamics. coming into the industry now respectful. But there are drawbacks
Otherwise theres a lot of churn that about integration, and what they as well. Any time you bring multiple
is not value add at all. could and should do as they start people together, it takes more
Chuck Hardy, GSA, is also a and advance their careers that would time. When you get 10 people in
hundred percent behind the make integration better and a room, time is spent on things
need to get better at our planning more achievable. that arent always productive. He
and our direction, so what were Craig Russell, Disney, believes also finds gaps ... occurring as we
giving people is clear. But he co-participation provides the logical start sharing responsibility. When
also highlights the importance opportunity to reduce duplicative everyone shares responsibility,
of experienced contractors and work between the design and no ones really responsible. So you
architects to support the owner, construction team members. The have to watch that.

McGraw Hill Construction 47www.construction.com SmartMarket Report


Data: Owner Advisory Group Insights on Opportunity for Improvement Data continued

Owners shared other ways What Im finding is that Black, University of Chicago,
Managing Uncertainty and Expectations in Building Design and Construction data

they achieve the benefits of an the contract has less has recently started using term
integrated approach. agreements with architects,
to do with it than the
Jerry Lea, Hines, says, We cant do engineers and contractors who get
real IPD. But by bringing contractors
attitude of my staff. the idea of working collaboratively
in to review the design drawings together for small projects on
for feedback, Im trying to get that to do with it than the attitude of my tight budgets and time frames. We
benefit without the IPD contract. staff. Now that my PMs have had a meet with our client together. Then
During design development taste of integrating, being involved we tell the team, Heres the budget
Black, University of Chicago, and working together as a team, the and schedule. Work together and
sends RFPs to select key trades contract is less important. They know get it done. The projects that we
to be design assist partners. But the benefit of getting parties together implemented it on so far are going
we dont find all trade contractors early so theyre doing it on every better than anticipated.
are up to the challenge yet. He contract because the predictable Lean construction is also gaining

also integrates the AEC team with outcome is improving. traction. Russell, Disney, is
facility operations about things Hardy, GSA, agrees that influenced by the ride systems
like potential shutdowns, to personnel are a critical element to vendors on his projects. They
engage their practical expertise project delivery strategy. With are manufacturing thinkers from
in the project. limited resources, we have to do aerospace and automotive, and
better at tying team selection to have been working in a much more
Hardy, GSA, believes the results of
project delivery selection, because lean way for a long time. Comparing
this research show that we need to
everybody isnt skilled in the same it to building construction
continue to push what I was going to
sets. Its a lot easier to change the sometimes makes me feel like were
call the conversation [about greater
delivery method you choose than incredibly backward. Hardy, GSA,
integration], but in fact, we need to
to suddenly make [different] people agrees: Forward-thinking last
stop the conversation and begin the
appear. Youre dealing with the staff planner and lean activities are just
action. I think it was George Patton
you have, so play to their game. At not as common in the industry as
who called it the Ready, aim-aim-aim
the end of the day, its the personnel they should be.
mentality. We need to actually do
who are going to deliver and drive
something about this. Moebes, Crate & Barrel, cautions
the best solution.
against overreliance on any of
Alternative approaches are gaining
Team Formation and support among some of the owners:
these approaches as a cure-
Project Execution- Craig Russell, Disney, has
all. I collectively refer to that as
Related Factors successfully garnered internal
whiz bang, and whiz bang cant
Miller, Sutter Health, says, solve a bad owner or no owner
support for IPD, often a difficult
Unfortunately, the traditional involvementor if you dont have
hurdle. Happily, we have some
delivery method sets everybody good team chemistry. If anything,
extraordinarily enlightened
up to spend an inordinate amount it can probably make it worse. If
contracts people who see the
of energy watching how much we dont have the right team, good
significant promise to our sustained
it costs to install what you said things just wont happen.
practice [being] much better off [by]
you could install. Its focused on
going that way.
piecework. And breaking that mind-
Vitek, Whirlpool, addresses
BIM-Related Factors
set is extremely difficult. To shift All of the OAG members are engaged
uncertainty by doing a lot of design-
that paradigm, he does a lot of with BIM. Their comments are
build, noting, the primary reason
GMP (guaranteed maximum price) included in the sidebar on BIM and
for that is to have the responsibility
projects as well as IPD. What Im Uncertainty on page 49. n
in one place versus two and tying it
finding is that the contract has less
together contractually.

SmartMarket Report McGraw Hill Construction 48www.construction.com


Sidebar: BIM

BIM and Managing Uncertainty

M
cGraw Hill If teams are coming [into the project] like-minded
Managing Uncertainty and Expectations in Building Design and Construction

Construction has
around BIM, it definitely helps reduce the overall
tracked the growth of
building information uncertainty Owners Advisory Group.
modeling (BIM) through the
surveyed for the 2013 Business modeling from the primary design
SmartMarket Report series since
Value of BIM in North America team to do their design in
2007. Since then, the number of
SmartMarket Report. BIM as well. He continues
North American companies that
Reduced errors and omissions that BIM is very beneficial not
have been involved on a BIM project
is the top BIM benefit among all only to get a better coordinated
increased from 28% to 73% and is still
respondents, and reduced rework set of drawings, but its a great
growing, while almost all companies
is named top by contractors. tool for the contractors. I think
surveyed globally report increasing
Fewer claims and litigation every contractor we use now, if
their level of BIM implementation
grew by 40% as a BIM benefit they dont get a BIM model, theyre
once theyve started.
from 2009 to 2012 going to do one anyway.
Another perceives that depending
Use of BIM to
Address Uncertainty Owner Perspectives on whether youre an architect,
BIM is also demonstrated in contractor or owner, youre using
Contractors from 10 different regions
this SmartMarket Report to be BIM for different intentions, and I
were surveyed for the 2014 Business
an important tool for reducing think we need to get better aligned
Value of BIM for Construction in
uncertainty on complex projects. around the intentional use of BIM.
Major Global Markets SmartMarket
93% of project owners who use But he continues, I agree whole-
Report. Many findings relate to
BIM on their projects report a heartedly that if teams are coming
reduced uncertainty.
high level of satisfaction with [into the project] like-minded
Four out of the top six BIM benefits
project quality, versus non-BIM around BIM, it definitely helps
reported by contractors are
owners (84%). reduce the overall uncertainty.
related to reducing uncertainty:
In addition, 50% of all respondents One owner cautions that
(#1) reduced errors and omissions
to the research in this report believe An [inexperienced] owner
in construction documents; (#2)
that BIM reduces overall uncertainty saying [to an inexperienced
improved collaboration with
when used by a full project team; and team] I want 10 more pounds
owners and design firms; (#4)
its reputation precedes it because of BIM on that project, is not
reduced rework; and (#6) better
almost one third (32%) of owners going to help that project.
cost control/predictability.
not using BIM also agree about its Lastly, one owner whose internal
The top three preconstruction
efficacy for reducing uncertainty. staff uses BIM, shares that, the
BIM activities help reduce
In fact, every owner in the number of people [using BIM at
uncertainty: multi-trade
Owner Advisory Group reports that their company] always locked to
coordination, visualization of
BIM is being used on their projects, their computers now is quite high.
design intent and modeling for
and in some cases their internal You dont have the same sort of
constructibility evaluation.
staff is developing BIM capabilities. unit cohesion within your team
The top three construction
Their comments on the effectiveness that you really need. As a result,
phase BIM activities also help
of BIM to reduce uncertainty include he says, Were doing a lot more
address uncertainty: model-
the following. social management to get the
driven layout in the field, model-
One notes that both the integration BIM people up out of their cubes
driven prefabrication and status/
enabled by BIM and its growing use and talking. [Its] an interesting
progress monitoring.
by contractors are positive trends. sociological problem that were
Uncertainty-reducing benefits also Weve seen really, really good trying to manage more effectively.
scored well among the owners, benefit when major subcontractors Asked how, he says, Were having
architects, engineers and contractors such as piping and HVAC use more lunches. n

McGraw Hill Construction 49www.construction.com SmartMarket Report


y
ud
st
se

Project Culture Fostered by Integrated


ca

Project Delivery (IPD) Is Key to Success


MaineGeneral Medical Centers Alfond Center for Health
Augusta, Maine
Managing Uncertainty and Expectations in Building Design and Construction

MaineGenerals Alfond Center for Health: 10 months early,


$20 million in added value, 100% satisfaction.

T
en months ahead of members waived their right to sue achieving LEED Silver certification or
schedule, some $20 million one another. They put into place an better; using evidence-based design,
returned to the project umbrella insurance program that standardization in prototypical
in value-added savings, covered everything and everyone, rooms and products, and LEAN
LEED-HC target exceeded by a full and rolled the insurance premiums process improvement techniques;
level, over 90% in-state workforce, into the project costs. The insurance and completing the project on
and 100% owner satisfaction across structure generated, in effect, a firm schedule. The team identified five
a list of measurable items: by any aligned to the project good. priorities or lenses for decision-
standard, MaineGeneral Healths Its an inspiring way to work, making in pursuit of these objectives:
newly completed Alfond Center for says Ellen Belknap, president of patients and families, physicians,
Health got a lot right. SMRT, architects to the project with staff, safety and cost.
Owner, architects and construction TRO Jung|Brannen. It allowed us to It wasnt something you wrote
manager unanimously attribute take our armor off. When youre not down and walked away from,
the projects success to a delivery protecting your turf, you release the says Steve Evers, principal at TRO
process that generated a culture and energy spent finding fault, and you Jung|Brannen. Every meeting started
a set of strategies for establishing just solve the problem. with a reiteration of the project
expectations, holding to them and Co-location in a Big Room mission and guiding principles, and
managing uncertainties that could environment throughout design the priority lenses were applied to
have otherwise undermined them. and construction completed the every decision.
integration of the project team and Throughout the project,
Cultivating a Culture incubated the advantages of the an iterative process of
The biggest project of my life, and IPD process. communication and consultation
Im going to do it a different way with stakeholders kept quality
than Ive ever done a project before? Expectations for Project and expectations on track. The
I must be crazy! Chuck Hays, CEO Quality team engaged interdisciplinary
at MaineGeneral Health, remembers As a road map for the project, the user groups in lean processes to
saying to himself when he IPD documents articulated a set of maximize spatial and procedural
committed to an integrated project conditions of satisfaction, such as efficiencies, for example, and
delivery (IPD) process. But it was bringing the project in under budget generated BIM models, cardboard
the best thing Ive ever done. Id do it and adding value to the outcome; mock-ups and full-scale mock-ups
Anton Grassl/Esto

again in a heartbeat. maximizing the employment of of key project components for user
Under the IPD contract, team local labor and local subcontractors; groups to approve.

continued

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MaineGeneral Medical Centers Alfond Center for Health
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Schedule and workflow, and weekly work


Managing Uncertainty and Expectations in Building Design and Construction

Project Facts

st
In construction manager Robins plans signaled any aspect of the

at
and Figures

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& Mortons near-70-year history, project that was veering off track,
which includes over 1,200 healthcare so team members could address Owner
MaineGeneral Medical Center
projects in the last 10 years alone, impediments promptly.
the Alfond Center for Healths Standardizing more than 250 Architect
construction finish rate of 25,600 headwalls and 170 inpatient TRO Jung|Brannen and SMRT
square feet per month stands as the bathrooms also enabled them to take Construction Manager
firms record. The team completed advantage of prefabrication which Robins & Morton
the entire design and construction sped up the work and helped level General Contractor
process 10 months ahead of the workforce curve. In particular, HP Cummings
schedule, saving the owner some $1 prefabrication of 52,382 square Size
million in financing costs per month. feet of exterior wall helped meet 640,000 square feet
Key to this achievement were lean an aggressive schedule to get the Construction Start
methodologies, prefabrication and building closed in before Maines August 2011
the IPD process. winter set in. Construction Completion
Among its suite of lean To speed decision-making August 2013
methodologies, the team used pull across the project, the project Cost
planning to develop the project implementation team had full Project: $312,000,000
schedule. Evers describes this authority to implement any decision
Construction: $224,000,000
approach as a constant pull of with which they all agreed. Only
information following the sequence controversial decisions were referred LEED Certification
of activity on the site. Production to the senior management team. anticipating LEED-HC Gold
of drawings was structured around Decisions could be made onsite,
three sets: footprint, core-shell says Hays. To retain ultimate control Results
and floor plan. Once issued, each of the project, the owner held a right
Financing Costs Saved:
set was considered locked, so that of veto over any decision; but with $10,000,000
construction could proceed while the that came the understanding that a
Value Added Savings:
remainder of the project continued veto would open up discussion on
$20,000,000
in design. Issuing architectural schedule and cost.
Schedule: Completed 10
drawings ahead of engineering
months early
inevitably entailed what Evers Cost
calls pain points, which the team The IPD structure motivated all In-state Labor Force: 91%

managed by staying staffed up parties to control project costs. A lot


through construction to coordinate of our fee was at stake, says Robert
as issues arose. Gambrell, senior vice president at
Early involvement of Robins & Morton. It drives people updated estimates and worked out
subcontractors boosted the drawing to help solve a problemnot out of solutions to maximize value within
schedule, saving time on design greed, but out of pride, because your budget. The concept of a change
development by allowing project partners expect you to perform. order became irrelevant, and the
details to be generated as shop The subcontractors presence at contingency pool went unspent.
drawings. Subs also collaborated the co-location site gave the team a As a result of the integrated
in developing the construction strong handle on costs, and allowed process, the design and construction
schedule, so that it represented what a process of Target Value Design, of the Alfond Center for Health
the trades themselves had said they as opposed to after-the-fact value became, says Belknap, not so
could do. Daily stand-up meetings engineering. Every two weeks the much managing uncertainty, as
onsite facilitated coordination team downloaded design changes, maximizing opportunity. n

McGraw Hill Construction 51www.construction.com SmartMarket Report


Opportunities for Performance Improvement

Contingencies as a Means of Mitigating Uncertainty

The topic of budget contingencies as a potential Percentage of Projects That Included a


Managing Uncertainty and Expectations in Building Design and Construction data

mitigating factor for many of the aspects of uncertainty Contingency Conducted in the Last Five Years
appears frequently throughout the research. (By Player)
To baseline the current practices related to Source: McGraw Hill Construction, 2014

contingencies, owners were asked:


Owners
How frequently they have contingencies
Architects
How frequently they share information about
Contractors
contingencies with the project team
If they employ a standard risk management process to 100%
establish contingencies 81%
How frequently portions of contingencies are allocated
42%
to separate project risks
32%
To contrast with those responses, architects and
76%99%
contractors were asked how often they establish
8%
contingencies and how frequently they are aware of
owners contingencies. 29%
25%
Percentage of Projects With 51%75%
Contingencies 1%
As can be seen in the chart at right, there are differing
14%
perspectives on the share of projects that carry
contingencies. 15%

Owners 26%50%
On average, almost all owners (97%) have 3%
contingencies on at least some portion of 7%
their projects. 9%
Most owners (81%) have contingencies on every
1%25%
one of their projects.
4%
Architects and Contractors 7%
Nearly all architects and contractors (99%) report
18%
at least some portion of the projects they work on
carry a contingency. No Projects Included a
Far fewer architects and contractors have them on all
Contingency
their projects. For architects, only 42% report that all 3%
their projects carry contingencies; 32% of contractors 1%
report the same. 1%

2_11_PerformProjsIncludingContD1D2_#01

SmartMarket Report McGraw Hill Construction 52www.construction.com


Opportunities for Performance Improvement
Contingencies as a Means of Mitigating Uncertainty continued

Owner Communication With Teams Percentage of Projects on Which Owners


Managing Uncertainty and Expectations in Building Design and Construction data

About Contingencies Inform Design Team or Build Team About


As can be seen in the chart at right, the existence of Contingencies (According to Owners)
contingencies is often held confidential by owners, which Source: McGraw Hill Construction, 2014

may explain the disparities in the frequency with which


Design Team Informed
firms report that their projects have contingencies (see Build Team Informed
page 52).
51% of owners always tell their architect, but only 37% 100%
always tell their general contractor. 51%
On the opposite end of the scale, 25% of owners say
37%
they never tell their architect, and 37% say they never
26%99%
tell their contractor.
On average, owners share contingency information
8%
with their architects a little over half the time (58%) and 10%
with their contractors 43% of the time. 1%25%
16%
Allocation of Contingencies 16%
The processes for establishing and managing
contingencies vary significantly for owners24% have 0%
a standard risk assessment process to determine a level 25%
of contingency for a particular project, and only 37% 37%
allocate a contingency into separate project risks.
As can be seen in the chart below, among those who
allocate for separate project risks, unforeseen site or
construction issues typically receives, on average, the
largest allocation (30%), with owner/scope changes (20%) 3_2_Improve_ContingInform_D7_#01
and design issues (20%) trailing.

The findings about contingencies offer an important


opportunity to bring a great deal more structure and
process to contingency setting and management in a
constructively collaborative environment.

Allocation of Contingencies by Owners (According to Owners Who Allocate Contingencies Into Separate Risks)
Source: McGraw Hill Construction, 2014

More Than 40% 21%40% 11%20% 6%10% 5% or Less

Owner/Scope Changes Unforeseen Site or Construction Issues Design Issues Requiring Clarification
2%
4%
9%
14%
18%
27% 31%
15% 13%
42%
16%
22% 22% 43%
22%

Median: 20% Median: 30% Median: 20%

McGraw Hill Construction 53www.construction.com SmartMarket Report


2_13PerformPercentContingencyD9_#02
Data: Owner Advisory Group Insights on Opportunity for Improvement Data

Owner Insights on
Mitigating Uncertainty Data Findings

Contingencies From an inside-the owners view, a contingency


Managing Uncertainty and Expectations in Building Design and Construction data

All of the Owner Advisory is seen as [part of] the project cost. If they
Group (OAG, see page 60 for manage the project within that cost, its a
more information) members
success. So theyll track that like its the last
use contingencies.
Don Vitek, Whirlpool, always
glass of water they have in the desert.
carries a project contingency
outside of what the contractor or three-party contract with shared calibrate this kind of incentive to get
design builder has. savings on risk and reward, but were the desired results. If I put that just
John Moebes, Crate & Barrel, showing everybody exactly what ahead of them, I can get them to run
relies on contingencies for the our number is and how that number for it. If I put it too far ahead of them,
unforeseen condition in the field, is moving. So if theres an error or theyll ignore it.
or what we call the aberrant omission, or unbought scope or
inspector who throws something something, were showing everyone Subcategories of
at you that is not even in the code how thats affecting our number and Contingency
and causes a cost issue. how its coming out of our overall Most of the OAG members do not
Chuck Hardy, GSA, adds that project contingency. subdivide the contingency into
from an inside-the-owners view, He says this creates an interesting separate categories of risk.
a contingency is seen as [part of] shift in attitude. The first time we Moebes, Crate & Barrel, says,
the project cost. If they manage showed them exactly how much Weve tried to, but then you end up
the project within that cost, its a money we had in the pro forma just moving the money around.
success. So theyll track that like its budget to do a store and made it clear Jerry Lea, Hines, however, always
the last glass of water they have in we cant exceed that, I thought they carries a contingency specifically for
the desert. would like that level of transparency. non-negligent design issues. We
But I think it made them all a little take 3% of the construction contract
Telling the Project Team bit more nervous because we amount and give that to our [internal
About a Contingency suddenly made them responsible. staff] construction managers in the
Although they have contingencies, Not accountable. Were accountable. field to manage the normal errors
most say they do not share details But responsible. When the owner and omissions type change orders
about them with project teams. Boyd doesnt reveal that contingency, then that occur on any job. He expects
Black, University of Chicago, sums everyones just blissfully in the dark. them not to use it all, though. Weve
it up when he says, I found it to Eric Miller, Sutter Health, goes been tracking this for the last few
be a constant fight with the design even further on his IPD projects. years, and the actual is less than
team why Im not letting them use When setting contingencies he two, but to make sure we have
that money. Hardy, GSA, agrees: maintains a separate owners enough, we typically carry three.
Its like saying you have a couple bucket as well as a shared team Of course if it is an unusual project,
weeks to float on the schedule. Those bucket. Starting within guidelines a big renovation or something, then
couple weeks will get filled. that address project size and that metric will change.
Moebes, Crate & Barrel, takes complexity, he then works with the When Hines acts as a development
a radically different approach by team to set the shared contingency manager for a third-party client,
sharing his entire project budget, because its one bucket of money there is often an educational
including contingency numbers with that they all draw down. If they dont process required regarding
the design team, general contractor draw it down, a percentage of it goes design contingencies. They dont
and main sub-trades. We only back to them, which can increase understand that if you try to make an
started doing this two years ago. their profit to a capped level. So I use errors and omission claim against
Its kind of a twist on IPD [integrated contingency more as a carrot than a an architect for something that
project delivery]. Theres not a stick. But he is still learning how to isnt negligence, youre wasting

SmartMarket Report McGraw Hill Construction 54www.construction.com


Data: Owner Advisory Group Insights on Opportunity for Improvement Data continued

your time. Unless they are truly Some owners just is a simple matrix of uncertainty
Managing Uncertainty and Expectations in Building Design and Construction data

negligent in the standard of care in dont understand the factors that might cause problems
the industry, youre going to have to business well enough and estimates of their cost impacts.
pay for whatever that thing is. Were to get that they need He assigns a probability to each
doing a project right now where I am one based on the specifics of the
a contingency.
struggling to get them to understand particular project, then calculates a
that minor coordination is just a fact risk score. He uses the risk score to
of life and theyre going to have to 50 cents of. So, on those jobs our determine the right contingency for
pay for it. Some owners just dont change orders are less than 1%. He each project.
understand the business well enough began this process in Houston, but Boyd Black, University of Chicago,

to get that they need a contingency. it has now spread nationally. Ive creates a customized contingency
He also carries a separate got contractors around the country management plan when the budget
construction contingency for the who have heard about this, and is developed that reduces by phase
risk of being a general contractor, theyre saying, Cut me in on some through design, and again through
and being responsible for all the of that. And every time weve done the riskiest parts of construction.
subs and delivering the project on it, we spend less than half of the John Moebes, Crate & Barrel,

time. I explain that it is not the risk for [3% budgeted] contingency, and the assigns a contingency quickly
errors and omissions in my drawings general contractor has gotten a nice for the sort of project weve built
because I have my own contingency fee increase. We started out at 2.5%, 20 or 30 times and then adjusts
to deal with that. But he uses market and today were tracking between it for special conditions. With a
pressure to keep their pencils sharp. 1% and 1.5%. So if I can take the 3% seasoned team, I might reduce it a
When the contractor bids to us, I thats in my budget, and off-load that little bit, or dial it up for a new team
tell him, If you need a contingency, risk to the contractor for 1% to 1.5%, member, an unusual design or a
include it in your price and tell me Ive done a pretty good job. location with high seismic [activity]
what it is. And hes in competition, or aberrant inspectors. n
so hes got to think about how much Standard Process to
contingency to add that wont cost Establish Contingency
him the job. The Owner Advisory Group varies in
Recently he has developed a how they establish contingencies.
way to have contractors also take Craig Russell, Disney, says his

on the risk of errors and omissions contingencies are totally project-


in the drawings, without an IPD specific. Our projects arent the
contract. Anytime you can create most technically complicated
an alignment of interest, then youre things in the world, but theyre very
more likely to succeed. So, for any complex from the standpoint of
issues that arent a legitimate scope the number of moving parts and
change, instead of contractors just disciplines and details. Wed love
passing through the subs claims for to say [our process of establishing
additional cost, I say, Im going to contingencies] is scientific, but it
give you a separate 2% contingency ends up being a wonderful blend of
to cover those kinds of costs. And science and art.
at the end of the job, whatever isnt Chuck Hardy, GSA, on the other

spent, Ill split with you, 50/50. Now, hand, says, GSA has a standard
they are negotiating the hell out of with set numbers for new
those subcontractor change order construction and renovation.
claims. Because every dollar that Eric Miller, Sutter Health,

they push back on the sub, they get developed a Risk Register, which

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Utilizing Design-Build-Bid to Minimize Uncertainty


Crate & Barrel
United States

I
n 2008, Crate & Barrel deployed We looked at the design-bid-build works with an architect and comes
Managing Uncertainty and Expectations in Building Design and Construction

a new method for delivering process and said, We think there are up with a structure from the design
retail projects at locations certain elements of our buildings we side and engineering side, he says.
throughout the United States. could improve on if we rejigger that You wait until that process ends,
Dubbed design-build-bid, the process, he adds. then you start a new process with
process utilizes multiple-prime Although Crate & Barrel has a the general contractor and the steel
contracting between the owner recognizable brand and look, each fabricator. They are taking part of
and key specialty contractors with of its stores is unique. Although your time and money to deliver that
an integrated approach early in common elements are used, there to you.
the design process. That phase is is no prototype design for entire
followed by a traditional design- stores. In the past, the company used In-House Design Process
bid-build method, where a general traditional contracting between it and Early in the process, Crate & Barrel
contractor is hired under a stipulated an architect as well as a construction prepares a schematic design model
sum contract for the remaining manager. Moebes said the company in-house to show design intent
portions of the work. wanted to embrace an integrated and obtain internal approvals of
In bypassing the traditional project delivery (IPD) ethic, but the overall concept. Concurrently,
hierarchical relationships among without the three-party contracts the structural engineer is released
design teams and construction used on many IPD projects. Instead, to begin reviewing the schematic
teams, John Moebes, director of Crate & Barrel targeted specialty design model and establishing a
construction for Crate & Barrel, contractors that could have a direct preliminary foundation, upper-level
says the company has realized impact on a projects critical path. and roof-framing plan, including
significant savings on budget and One of the first opportunities brace frame locations.
schedules, while reducing many of pursued was structural steel.In From there, other key disciplines
the uncertainties on projects. the traditional approach, the owner can be involved, modeling MEP,
Image courtesy of Crate & Barrel

Rendering of a new Crate & Barrel store in Sarasota,Florida, scheduled to open Fall 2014.

continued

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exterior skin and other critical tons. Crate & Barrel claims that its including shipping in its process
Managing Uncertainty and Expectations in Building Design and Construction

components. The teams work structural steel costs dropped 38% reduces costs and improves
together in BIM to help with between 2005 and 2009. reliability. With our customers, we
coordination and visualization. Rob Rutherford, president of guarantee the stores get product,
Create & Barrel reports that failure SteelFab, Charleston, S.C., a steel he says. We take every measure
of spatial visualization on its part fabricator that has worked with possible to make sure product
is the root cause of the majority Crate & Barrel since it began this gets to customers on time and in
of the owner change orders on new process, says he sees a greater good condition.The construction
previous non-BIM projects. This push for innovation by working industry doesnt do that very well.
process allows owner stakeholders directly with Crate & Barrel. They Materials are needlessly damaged
to approve proposed concepts with are outside-the-box thinkers, always or needlessly lost. With steel we
confidence and avoid adjustments in trying to think of a better, smarter, took some of our supply chain,
the field during construction. faster way to do things, he says. logistics knowledge and applied
From there, the project architect [Moebes] takes every step in it to shipping structural steel.You
can assume full control of the the process and challenges us to might put [materials] in a container
owners model to develop higher streamline something or make and ship it.You might ship via barge
levels of detail. it simpler. or train.Thats a retail approach to
Although Crate & Barrel has early Because SteelFab and its shipping that saves money. n
and direct engagement with key engineering partners have worked
engineers, the company expects with Crate & Barrel regularly for
those engineers to have an ongoing more than six years, Rutherford Project Facts

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relationship with fabricators. says the team has a relationship and Figures

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Moebes says this presented an initial that helps reduce uncertainty. Its
Owner
challenge because most structural amazing how little conversation Crate & Barrel
engineers arent used to this process. has to happen sometimes, he
Type of Project
We kept hearing contractors tell us says. When you work consistently
Retail Stores
that the structural system [designed together on projects like this, youre
by the engineer] wasnt particularly always on the same wavelength.
practical and they would have to Rutherford says that SteelFab Budget Benefits
spend extra time on it, he says. is now regularly part of the early After instituting its
Since engineers arent [typically] design development process for design-build-bid delivery
partnered with fabricators, they dont Crate & Barrel projects. Were on method, Crate & Barrels
know much about what makes a steel a project with them now where average costs in 2009
structure expensive. the steel and HVAC will determine compared to 2005 were:
This process allowed the structural if this project happens or not, he
Hard Costs: -58%
team to have early discussions says. We need to have this building
designed, planned and evaluated Structural Steel: -38%
and come up with best-value
propositions on dozens of aspects from a cost standpoint before it Framing and Sheathing: -53%
of Crate & Barrel projects. They did becomes a project. What we do is Concrete: -56%
it in a way that gave best value to us part of making the business case for
HVAC: -55%
and gave them better profitability, a project.
he says. It was about finding the One of the most recent advances Plumbing: - 59%

most efficient options for all parties. for Crate & Barrel is to take over Electrical: -65%
Since then, Moebes says Crate & shipping of its construction
Fire Protection: -65%
Barrel has seen its average structural materials. As a retailer, shipping
steel needs on projects drop from is a core competency for Crate Finish Carpentry: -71%

around 200 tons each to around 150 & Barrel, and Moebes says that

McGraw Hill Construction 57www.construction.com SmartMarket Report


Sidebar: Lean

Lean Processes to Reduce Uncertainties

By driving waste out of projects, users of lean construction methods


Managing Uncertainty and Expectations in Building Design and Construction

aim to reduce project uncertainties. Collaboration and communication


through the use of a variety of practices and tools have helped
improve predictability, tighten schedules and align expectations.

W
ith the goal of Lean allows you to have the With Last Planner, youre trying to
increasing value conversations you need to have to drive out uncertainty of outcomes,
by driving waste overcome constraints, she says. he says. The biggest challenge is
out of projects You can accomplish more from a the uncertainty between trades. As
and improving predictability, schedule perspective if you have jobs have gotten more complex by
lean construction takes dead everyone from the team working nature of the buildings and systems,
aim at project uncertainties and together and an owner who has an that uncertainty is the greatest
expectations. A highly collaborative understanding of when they need to hindrance to achieving schedule.
process, lean seeks input from key make decisions. That includes [the Lean addresses that. Using Last
team players early and often, owner] asking questions about the Planner, [percent of plan complete]
using a range of principles information that they need to make is a reflection of someones ability
and practices. those decisions. to deliver something when they say
Beikmann says engagement they will deliver it.
Collaboration between the design team and key
In the lean strategy, the earlier you subcontractors can be particularly Results
engage a full team, the better situated effective when trying to drive On a 1.9-million-square-foot retail
you are to add value and drive waste value. On a traditional project, and warehouse complex in North
out, says Bevan Mace, vice president you often dont get a chance to Texas, Turner created a Punchlist
at Balfour Beatty Construction. talk to the people who are building Prevention Program using the
Mace says value stream mapping itits forbidden, she says. If I Last Planner System to develop
is a key element of the lean process have a conversation with a drywall critical punchlist milestones and
that addresses the needs of owners contractor on the constructibility of a quality tracking metrics. As the
while considering the flow of design certain design detail, theres a better team progressed through the
and construction. If youre involved chance I can give the owner what various turnovers, they focused on
early in the business case stage for they want for a price that the owner continuous improvement, reducing
a project, you are able to determine can afford, as opposed to us just the number of punchlist items from
the critical drivers; not just for focusing on the owners needs and 7.1 per 1,000 square feet to 3.9 per
construction but for operations, fulfilling that without understanding 1,000 square feet.
he says. Design and construction the complications with building it. Turner has also seen the benefits
is waste to an owner. They have a James Barrett, national director of applying Target Value Design. The
business need and want to use the of integrated building solutions at Northeast Georgia Medical Center
facility, so you minimize that design Turner Construction, says lean tools, project team of Turner, HGA and
and construction period. such as the Last Planner system, can Perry Crabb delivered $3.6 million in
Bernita Beikmann, principal and significantly reduce uncertainties savings at the time of GMP contract
director of lean strategy at HKS, during construction. In addition to finalization by utilizing Target Value
says a collaborative strategy that setting milestones and identifying Design. Last Planner is also being
includes early engagement of key conflicts, the system does regular used on the project, which Turner
team members can reap significant look-ahead planning and measures credits for enabling the team to
benefits, including reduced errors, percent completion of plan to tighten the schedule and put them on
more accurate budgets and more determine if schedules are slipping track to deliver the 350,000-square-
predictable scheduling. and need adjustment. foot facility two months early. n

SmartMarket Report McGraw Hill Construction 58www.construction.com


Methodology:

Managing Uncertainty and Expectations Study Research

This study was conducted by Owner Firm Size: across three At least some proportion of firms
Managing Uncertainty and Expectations in Building Design and Construction

McGraw Hill Construction to size categories projects in the last five years are
investigate the levels of uncertainty BIM Involvement: at least some highly complex
and related costs experienced on with such experience Respondent knows if company
building construction projects in the uses BIM software
Screening Criteria
U.S. More specifically, this research Respondents company is
Architect: Currently works
sought to explore the following: headquartered in the U.S.
at architecture, architecture/
Causes of uncertainty and
engineering or multidisciplinary
their impacts
(with architect as lead) firm.
Analytic Variables Used
Contingencies used to account
GC: Currently works at firm that
in the Analysis
for uncertainties In addition to the analysis by the
is general construction/general
Expectations of team three player groups, periodically we
contractor or multidisciplinary firm
members during the design also include references to differences
(with contractor as lead).
and construction process by the following variables:
Architects and General Contractors:
Mitigation factors that players use Type of Primary Project:
Has worked on at least one
to compensate Commercial (n=101)
building project over $10 million
Institutional (n=214)
The research was conducted in construction value in the past
Owner Project Type:
between April 22nd and May 27th, five years, and fulfills one of the
Education (n=48)
2014, using an initial phone module following criteria for responsibility at
Healthcare (n=31)
to screen respondents followed their organization for new building
Office (n=31)
by an online survey among those and renovation projects:
Others (n=45) (Includes
who qualified. Direct project involvement
amusement, multifamily,
Familiarity with multiple projects
hospitality and retail.)
Survey Participants Working knowledge of factors that
Percentage of Highly Complex
315 construction professionals impact project uncertainty
Projects: Defined as involving
across three firm types155 Owners: Approximate average
highly customized design solutions
owners, 82 architects and 78 general total value of all companys building
that are systems-intensive with
contractorstook part in this construction projects over the last
detailed technical requirements.
research. The total sample size has a five years is $10 million or more,
<=50% (n=102)
margin of error of +/-5.5% based on a and fulfills one of the following
51%-99% (n=137)
95% confidence interval. criteria for responsibility at their
100% (n=76)
The sample list was drawn organization for new building and
Owner Company Size: Defined by
from McGraw Hill Constructions renovation projects:
average total project value in the
Dodge Database. Direct project involvement
past five years.
Quota groups were established to Client responsibility on all projects
$10M to <$50M (n=59)
achieve target representation by: Familiarity with multiple projects
$50M to <$100M (n=27)
Firm Type: architects, Working knowledge of factors that
$100M+ (n=69)
GCs and owners impact project uncertainty
General Contractor Firm Size:
Primary Project Type: commercial Currently employed (but not in
Defined by total value of projects
or institutional the automotive or energy/public
in 2013.
Owner Project Type: sectors utility industry)
<$50M (n=30)
include education, healthcare Architects, General Contractors,
$50M+ (n=46)
(hospital and non-hospital), office and Owners:
Architect Firm Size: Defined by
and other (amusement, hospitality, At least 80% of firms construction
2013 billings.
multifamily and retail) projects over the last three years
<$5M (n=49)
were a combination of commercial
$5M+ (n=31)
and institutional

McGraw Hill Construction 59www.construction.com SmartMarket Report


Methodology:

Owner Advisory Group

McGraw Hill Construction conducted Mr. Hardy serves as an ex-officio John Moebes
Managing Uncertainty and Expectations in Building Design and Construction

90-minute telephone interviews board member of the Construction Director of Construction


in July and August 2014 with an Managers Association of America Crate & Barrel
Owner Advisory Group, consisting and as a trustee for the Construction John Moebes joined Crate & Barrel
of recognized leaders from seven Users Roundtable. as the director of construction in 2006
different building types: education, and manages all capital construction
government, healthcare, hospitality/ Jerrold (Jerry) P. Lea projects. Prior to that, he was an
amusement, manufacturing, Executive Vice President associate principal at Good Fulton
commercial office and retail. These Conceptual Construction & Farrell Architects in Dallas where
owners shared their perspectives Hines he oversaw the firms development
on the survey results and offered Since 1981, Jerry Lea has been and use of workflow technology. He
examples from their experience to responsible at Hines for consultant is recognized as a leader in the use of
expand upon the findings. Selected selection and contract negotiations, Internet-based project management
comments appear in Owner Insights budgeting, scheduling, management tools, building information modeling
articles throughout the data. of consultants designs, and and digital document review to
contractor and subcontractor improve project performance.
Boyd Black bidding and negotiations for over
Assistant Vice President 100 million square feet of office Craig Russell
for Capital Project Delivery buildings, retail complexes, hotels, Chief Design and Project
University of Chicago sports facilities, clean rooms, Delivery Executive
Under Boyd Blacks direction the performing arts theaters and Walt Disney Imagineering
Capital Project Delivery group museums. Mr. Lea is an honorary Craig Russell is responsible for the
manages design and construction at member of the AIA, a member design, engineering, production,
the university. Mr. Black is currently of The Rice Building Institute installation and project management
a member of the Society of College Founding Board of Directors, a functions for Walt Disney Parks and
and University Planners, the US former chairman of the USGBC LEED Resorts projects around the world. In
Green Building Council (USGBC), the Core and Shell Committee and a addition, he shares responsibility for
AIA Center for Integrated Practice former member of the USGBC LEED WDIs legal, contracts, facilities and
Leadership Committee, the AGC Steering Committee. operations teams. He also currently
Industry Advisory Council and sits on the board of the LEAN
is a current board member and Eric Miller Construction Institute.
past president of the Board of the Director of Project Management
Construction Owners Association Sutter Health Don Vitek
of America. Eric Miller manages construction Director, Global Real Estate
over multiple hospitals and medical Program Management
Charles Hardy foundations in the East Bay and Whirlpool Corporation
Chief Workplace Officer Peninsula Coastal areas. Prior to this Don Vitek has worked in all aspects
GSA Public Buildings Service position, he served in administrative of real estate management, including
Charles Hardy serves as Chief positions at Kaiser Permanente and operations, analysis, transactions,
Workplace Officer at GSA Public the San Francisco Department of and design and development
Buildings Service. Prior to joining Public Health. During this same time, projects to date exceeding $750
this position in 2011, Mr. Hardy he also served as instructor for John million. He is currently responsible
served as the director of design OConnell Community College in San for developing new facilities and/or
and construction for GSAs Public Francisco, teaching adult classes for major expansions for the company
Buildings Service, Great Lakes Local 39 hospital engineers. on a global basis, resourcing and
Region, where he led the agencys performance management for the
ARRA operations in six states. Global Real Estate team.

SmartMarket Report McGraw Hill Construction 60www.construction.com


SmartMarket Report
Resources
Organizations and websites that can help you get smarter about
managing uncertainty and expectations on building projects.

Acknowledgements:

The authors wish to thank all the partners and individuals who participated in
bringing this report to the industry. In particular, thanks to our founding partner,
the AIA Large Firm Roundtable (LFRT), for helping to conceive the study and
McGraw Hill Construction
secure industry interest and support, as well as to Bryce Pearsall for his individual
Main Website : construction.com
support, Clark S. Davis for his leadership on this initiative and the members of the
Dodge : construction.com/dodge
Research Advisory Committee from the LFRT, John F. Halleran, H. Ralph Hawkins
Research & Analytics :
and R. Craig Williams, for sharing their knowledge and insights.
construction.com/dodge/
dodge-market-research.asp We would also like to thank our premier industry partners, including the
Architectural Record : archrecord.com American Institute of Architects (AIA), Autodesk and the Design-Build Institute of
Engineering News-Record : enr.com America (DBIA). We thank their participants on the Research Advisory Committee,
Sweets : sweets.com including Ken Ross Jr. and Deborah DeBernard from AIA, Philip G. Bernstein and
SmartMarket Reports : Angi Izzi from Autodesk, and Greg Gidez and Robert Nartonis from DBIA.
construction.com/market_research In addition, we thank our other industry partners in this research, including
the Associated General Contractors of America (AGC), Graphisoft and the Lean
Construction Institute (LCI), as well as their participants on the Research Advisory
Committee, including Sylvester Giustino and Michael F. Stark from AGC, Ransom
Ratcliff from Graphisoft, and Dan C. Heinemeier and Bevan Mace from LCI.
We also would like to thank the owners who agreed to participate in our
Owners Advisory Group for their insights into and honest appraisals of our
research findings. We would like to thank Boyd Black of the University of Chicago,
Charles Hardy of the General Services Administration, Jerrold P. Lea of Hines, Eric
Miller of Sutter Health, John Moebes of Crate & Barrel, Craig Russell of Walt Disney
Imagineering and Don Vitek of Whirlpool Corporation.
Finally, we want to thank the organizations that participated in a phase 1
survey identifying the core concepts to be pursued. In addition to the associations
already named as our premier industry partners and industry partners, those
research partners include the American Subcontractors Association, Construction
Management Association of America, Construction Owners Association of
America, the Construction Users Roundtable, Mechanical Contractors Association
of America, National Electrical Contractors Association and Sheet Metal & Air
Conditioning Contractors National Association.

Founding Partner Construction Owners Association of


Produced with
AIA Large support
Firm from
Roundtable America : www.coaa.org
Construction Users Roundtable : www.curt.org
Premier Industry Partners
Mechanical Contractors Association
American Institute of Architects : www.aia.org
of America : www.mcaa.org
Autodesk : www.autodesk.com
National Electrical Contractors Association : www.neca.org
Design-Build Institute of America : www.dbia.org
Sheet Metal & Air Conditioning Contractors
Industry Partners National Association : www.smacna.org
The Associated General Contractors
Other Resources
of America : www.agc.org
BIMForum : bimforum.org
Graphisoft : www.graphisoft.com
buildingSMART alliance : www.buildingsmartalliance.org
Lean Construction Institute : www.leanconstruction.org
Charles Pankow Foundation : www.pankowfoundation.org
Research Partners International Risk Management Institute : www.irmi.com
American Subcontractors Association : www.asaonline.com National Institute of Building Sciences : www.nibs.org
Construction Management Association National Institute of Building Standards
of America : cmaanet.org and Technology : www. nist.gov
Design and Construction Intelligence

SmartMarket Report
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