Island-Style Construction

Developers are ditching the bid process and bringing contractors in early to lower costs and save time on projects. But beware: Closer cooperation requires sharper eyes

November, 2005

David Carey, president and chief executive officer of Outrigger Enterprises, Inc. remembers when, in 2001, the company was renovating the Wailea resort and came across a “design anomaly” in one of the pools. In other words, Carey says, “When you jumped in, you’d hit the bottom.”

If Outrigger had used the traditional method of first designing the renovations with an architect, then going out to bid to find a contractor, Carey says Outrigger would likely have found itself witness to a rendition of the blame game between the architect and the contractor. “We would probably still be in litigation,” says Carey.

Outrigger employed a different approach for the project, one that is becoming increasingly popular in Hawaii, say industry experts. The approach, often called design-assist, is to bring on a contractor to work with the owner and architect at the onset of a project, to ensure that the work is effectively priced early on and the scheduling is realistic.

In Outrigger’s Wailea renovations, the company went a step further and gave the contractor full control – and responsibility – of building the project once the plans were set, an approach called design-build. So when the pool was found to be faulty, Outrigger had one person to talk to, the contractor. “Instead of having an argument with our architect, our pool designer, our contractor and our subcontractor, we went to our general contractor and said ‘You fix it,’” Carey says.

Kurk Clagstone, vice president and regional manager of Pankow Hawaii, says the clear-cut nature of design-assist and design-build is one main reason he believes owners are increasingly gravitating toward it. “I think owners are realizing the bid process many times can be adversarial,” says Clagstone.

Most importantly, by bringing in the contractor early, Clagstone says, owners benefit from finding out early the true costs and scheduling. “Many times a project is shelved, because they have taken it out to bid and they find out they are 20 percent over budget or three months beyond the schedule,” Clagstone says.

Carey, as chair of the Punahou building committee, even brought the approach to the construction of Punahou’s new middle school, to establish a much-needed guaranteed maximum price.

Ted Matheny, a principal in Thompson Matheny, notes it is important that the owner understands the construction process, because, without the bidding process, there is no built-in check-and-balance for such things as cost. “It takes a little bit more on the owner’s side to make sure that the numbers are right,” says Matheny.

Design-assist also takes more flexibility, Matheny says, because the costs and time frames are fluid as the owners, architect and contractor fine tune the project. Matheny says some owners want a hard number right away, something they can take to the bank for financing.

Karen Nakamura, chief executive officer of the Building Industry Association-Hawaii, says there are no hard numbers, however, she is hearing that big projects are increasingly using these approaches and she expects more will with the rising cost of construction.

Says Clagstone: “Everybody likes it, because there are no surprises; because everybody is on the same page.”

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Scott Radway