Construction Management Case Studies A Lifetime of Lessons

Construction Management
Case Studies
A lifetime of lessons-learned
examined over 275 practical
examples
by Len Holm
2022
Notes
Contents
Page
Preface v
List of figures xi
Chapter 1 Project owners and developers 1
Including discussions regarding owner’s representatives
and sustainability
16 case study examples
Chapter 2 Design teams: Architects and engineers 21
Chapter 3 Construction company organizations 37
Chapter 4 Preconstruction, Including
permits 51
Chapter 5 Contracts 67
Including procurement, delivery, and pricing methods
Chapter 6 Estimating and bidding 83
Including marketing, proposals, and interviews
Chapter 7 Scheduling and schedule
control 105
Including liquidated damages
Chapter 8 Jobsite operations 115
Including means and methods, jobsite organizations
and field personnel
Chapter 9 Superintendents 131
Page
Chapter 10 Subcontractors and material
suppliers 147
Chapter 11 Communications 161
Including drawing reading
Chapter 12 Construction controls 175
Including quality and safety controls,
and construction management tools such as submittals
Chapter 13 Cost accounting and cost
control 189
Including pay requests, activity-based costing,
and lean construction techniques
Chapter 14 Change orders and claims 201
Including negotiations
Chapter 15 Construction completion 221
Including punch list, close-out, testing, and inspections
Chapter 16 Leadership 237
Including ethics and careers
Chapter 17 Advanced case studies 253
16 case study examples and potential advanced exercises
Chapter 18 Applied construction projects 295
12 case study projects
Appendices:
Abbreviations 307
References 315
Author background 316
Preface
I have been gathering real and interesting project experiences over the past
50 years. Some of those have been great, and others not so. But we can
learn from all of our experiences, regardless. I have been sharing a few of
those in my other books (see references in appendix) as short boxed-in
examples. With this book I have gathered over 275 case study examples or
stories all in one place. Writing the book was very fun. Exploring these
project experiences caused me to reflect on what happened, the good, the
bad, and the worse, and what I will do next time. I hope it will have the
same result with readers. The origins of the stories are primarily from the
hundreds of projects I have participated in. Some date as far back as when I
was only 10 years old working for my father’s company and others current
as of this writing. The experiences are not hypothetical, but they reflect
actual construction projects. My involvement has ranged from carpenter
and foreman through project manager and senior project manager,
construction company owner, estimating and scheduling consultant, and
now as owner’s representative and expert witness.
Most construction management textbooks use hypothetical examples. The
case study examples here outline activities and behaviors of actual project
owners, designers, general contractors, project managers, superintendents,
and also real craft workers, such as carpenters and electricians; and real
subcontractors, such as earthwork and drywall, etc. It takes people to build
buildings, and the examples included in this book explore the relations
among all these built environment participants. The actual names have all
been removed so any connection with real companies or individuals is
coincidental. After finishing the book the reader will have added many
important construction management tools to their toolbox.
There are many practical uses for the book. First of all, it is fun to read. One
finds themselves saying: “Did that really happen? Why did he or she do
that? This of course wouldn’t happen on my job.” But of course strange
things do happen, especially on construction projects. There is a lot of
money at stake, and money causes people to do some uncharacteristic
things. Some of their actions are unethical and others, unfortunately, may be
illegal. This book could work as a standalone course in a construction
management or construction engineering university program, especially at
the senior undergraduate level or at the master level. It would be perfect for
a course seminar. Complete project descriptions from Chapter 18 could be
combined with specific examples threaded throughout the book and
presented in a class or seminar, even debated. It would also be a good
accompany book for any construction management topic such as
estimating, scheduling, contracts, project management, claim resolution,
and others. The book would be a perfect fit for an industry seminar
conducted for construction professionals or internal training for a
contractor. If you could add only one construction management book to
your library, this one would be a good choice.
I have written two case study books prior, Who Done It, 101 Case Studies in
Construction Management, 2nd edition, published by Amazon and more
recently 101 Case Studies in Construction Management published by
Routledge. The second book added brief topic narratives and figures and
tables to the first book. Both books are written in more a “who done it” or
“Where’s Waldo?” fashion, forcing the reader to solve the problem or
debate (who is at fault?) in somewhat a mystery novel approach with no
clear villain. Although this new book asks questions of the reader as well,
the answers as to why something occurred and what is the right approach
are either readily apparent in the narrative or are resolved from logical
deductions and practical experience. Each of these stories provide a lesson
regarding the proper approach to numerous construction management
issues. As indicated, a handful of my boxed-in examples from my other
publications have provided seed topics for a few of these case studies. But
now those examples are expanded, with additional background, which
allow the reader to draw conclusions from these scenarios.
With this book I am intentionally staying away from excessive academic
jargon and not getting into the weeds with respect to complicated
terminology. This material was not developed as someone’s doctoral
dissertation; it is rather a practical and easy to read tool for students and
professionals alike to learn more about construction management. In
construction we use many abbreviations, acronyms, and slang, it is almost a
different language. I have included many interesting construction terms (but
no expletives!) in the body of the work; these also being applicable tools for
the construction student and professional. The focus of this book is
primarily on the construction contractor. These examples are geared for
construction management and construction engineering students and
construction professionals wanting to enhance their management
capabilities. The book’s focus is on practical construction management
tools learned through a lifetime in the industry. As presented, these lessons
should help contractors successfully build their projects.
The book includes 18 chapters organized along many popular construction
management topics; from owners and architects through estimating,
contracts, operations, and close-out. Each chapter includes a list of 15 or so
case study examples specific to that chapter topic. Many case studies
overlap with other topics. For example: “The owner and architect let
documents for bid and an estimate and schedule are prepared resulting in a
contract agreement. Over the course of construction many cost, schedule,
quality, and safety issues arise. Hopefully not too many safety issues! Pay
requests are developed monthly and change orders occur throughout. The
project is closed out and of course both good and bad construction
leadership examples happen on every project.” So this example could have
been included with many chapters, but I have placed it where the lessons
learned can be emphasized the most. These types of overlaps are outlined
with every chapter. Every chapter also includes photographs of actual case
study projects and other pertinent figures.
The 18 chapters each begin with a brief overview or introduction of the
topic and then the case study examples are examined in detail. There are
over 275 case studies and many have sub-parts (A, B, C), resulting in
approximately 100 additional examples. Every case study begins with an
introduction to the topic, such as contracts or change orders and their
applications to a specific example project. Then a unique project experience
is introduced and examined and often a conclusion is reached. Questions
are raised within the body of each case study and others are posed at the
end. All-in there are thousands of questions raised and if a facilitator
combined some of the advanced cases from Chapter 17, or the projects from
Chapter 18, with shorter detailed examples presented in earlier chapters, the
possibilities are limitless. A few blank lines have been included after each
case study allowing the reader to take notes and resolve some of the
questions posed. A separate long list of all the case study titles is available
from the author.
The chapters are presented in the relative order a true construction project
would experience. The project owner and architects are first introduced, and
then construction organizations are examined. The construction process
from preconstruction and contracts is followed through to project close-out.
The book can be read in the order introduced below, or the reader is
encouraged to dive into a topic that is of interest at that time, such as
scheduling. Because other case studies and chapters are referenced with the
introduction of each chapter and also within individual narratives, the
reader can follow that thread throughout the rest of the book, for example
from schedule to estimate and contract to claims and close-out.
Chapter 1 includes 16 case study examples focused on the individual or
company at the top of any project organization chart, the project owner or
client. Real estate developers in the private construction arena often take a
unique path, and these are also discussed. Ideally each client has a
designated owner’s representative and their role, along with owners’
outlook on sustainability goals, has been included. The next Chapter 2
examines the role of the design team and their relations to project owners
and general contractors (GCs). 15 different case study examples include the
roles of the project architect and design engineers. Construction company
organizations is the title of Chapter 3. These 15 different cases discuss GC
and construction management (CM) home office issues and how the home
office connects with project owners, architects, and most importantly, the
jobsite teams. Contractors hope to be contracted early in the design process
and negotiate preconstruction contracts with their clients. This affords them
an opportunity to influence the design and potentially reduce or eliminate
other prime contractors which may also be interested in the project. Chapter
4 includes 15 interesting examples of preconstruction services and permit
coordination. Just about every chapter and every case study have some
connection with construction contracts discussed in Chapter 5. The contract
is the most important document on any construction project and its
connection to estimating, organizations, scheduling, close-out, change
orders and others is paramount. There are 14 examples included here which
examine the contract agreement, or sometimes, the lack of a good
agreement.
Chapter 6 focuses on the important CM building block of estimating and
bidding. If a contractor cannot prepare accurate cost estimates and
successful bids, they will soon be out of business. There are 18 applicable
case studies in this chapter involving estimates, estimators, bids, marketing,
proposals, and interviews. Dozens of other cases in other chapters also
connect with this important building block. Chapter 7 includes the other
basic CM foundation building block, scheduling and schedule control.
These 15 interesting examples discuss the schedule as both a date and a
document and the role of schedulers. Liquidated damages are a risk every
contractor should consider when bidding or signing a contract and these are
explored as well. Jobsite operations is a very broad topic and is the focus of
Chapter 8. 15 case study examples have been included in that chapter which
cover the contractor’s choice of means and methods, the jobsite
organization or team, and field personnel. This discussion includes the
project superintendent (also the focus of the next chapter), project manager,
project engineers, foremen, and the most important team members,
construction craftsmen. The role of the contractor’s field general, field boss,
superintendent, and a lot of other well-deserved titles is then explored with
17 specific examples in Chapter 9.
Unfortunately many CM books focus solely on the role of the GC or CM
and lightly cover the role of the companies which perform 80% to 90% of
the work, subcontractors (or specialty contractors) and material suppliers. A
complete case study book could be written based on subcontractor
activities. 14 specific examples are included in this Chapter 10 but scores of
others in the book connect with specialty contractors. Construction
communication tools are the topic of chapter 11. Communication skills are
a valuable leadership trait and this applies to construction as much, if not
more, than any other industry. The 15 cases in this chapter are not the only
ones in the book which involve communications, essentially all 275
examples are about communications, or lack of effective communications.
Chapter 12 on construction controls builds on the jobsite operations
introduced in Chapter 8. Schedule control and cost control have their own
dedicated chapters, but quality control and safety control are case studied in
these 15 examples. Discussions of many CM tools including submittals are
evaluated here as well. Communication discussions from Chapter 11 and
this chapter on construction controls have many overlapping themes. The
‘control’ area which often gets the most CM focus is cost control. Chapter
13 combines cost control with cost accounting, pay requests, activity-based
costing, and lean construction techniques. These 16 case study examples
focus on all these important jobsite cost areas.
Many of the hundreds of examples in this book unfortunately (or
fortunately depending on your perspective) connect with change orders and
claims. Dispute resolution and negotiations have been added to the mix of
16 high-profile case study examples included with Chapter 14. Chapter 15
includes 15 examples discussing one of the most important, but arguably
the worst performed, contractor function – construction completion. There
are many physical and managerial activities necessary to successfully close
out a construction project. Many good and bad examples of these activities
are covered including punch list, testing, and inspection. If a contractor
wants to receive its retention, which often approximately equals its fee, it
needs to expeditiously close out the project. During the early organization
of these hundreds of case studies into chapters, at one time it appeared that
all would be included in Chapter 16 on leadership. Many cases included in
other chapters have a direct connection with this chapter. 18 specific
examples of ethics, career choices, and construction leadership are
examined here. The role of the construction leader is not covered in other
business leadership books and the reader will find these experiences as
valuable lessons learned.
Chapter 17 is the longest chapter in the book. 16 case study examples were
identified and separated from the previous chapters as they are more
advanced. These stories are complicated and invite a longer read and
potentially outside research. Some of these unfortunately ended up in post-
project claims and provide a direct connection with earlier Chapter 14.
Chapter 17 concludes with a long list of potential advanced exercise ideas.
Chapter 18 introduces an additional 12 unique projects. These project
descriptions include the project owner’s choice on procurement, delivery,
pricing, and contract formats. Interesting questions are posed regarding why
one of these choices might have been made and could there have been a
better alternative. Many of the hundreds of case examples discussed earlier
in the book are based on these 12 projects. If the reader finds one of the
longer and more involved case studies from Chapters 17 and 18 intriguing,
it is relatively easy to make a direct connection with another example or
two presented in the previous 16 chapters. Each of the 28 case studies in
these last two chapters could form the basis for an hour or a day-long
debate for students or industry practitioners in a workshop or training
seminar.
Appendices at the back material include a list of abbreviations for all of
those included in the book plus many others which are common in the
construction industry. The appendices also include a list of applicable
references and a brief background on the author. A glossary was not
included in this book due to space limitations but an extensive separate
construction management glossary is available pro gratis from the author if
the reader is interested.
My career has been blessed with many positive experiences. But the best
part of these 50 years has been working with so many talented construction
professionals and built environment participants, although some of them
were unconventional, and others may have been challenging. We did a lot
of things right; actually many things! I have worked with thousands of
knowledgeable project owners, architects, engineers, general contractors,
subcontractors, project managers, superintendents, and especially the
craftsmen. My thanks to all of you for providing me a lifetime of lessons
learned that I am able to share with others.
I have not provided answers to all the questions raised in the book, at least
not yet. In many cases the answers are implied or obvious, but there are also
many potential ‘suspect’ answers depending on the reader’s experiences.
Different companies approach construction management from different
angles as do different facets of the industry, residential versus commercial
versus heavy civil, for example. Also union versus merit shop labor
differences may result in alternative solutions, as would geographical
differences. The ‘opinions’ of the reader and therefore the correct ‘answers’
will vary; and this is healthy. I am happy to give you my take on a case
study or two if you send me a note. If you have any other questions about
the material, or recommendations for changes for future editions, please
feel free to contact me direct at holmcon@aol.com. Whether you label them
as stories or case studies or lessons learned or examples, I hope you enjoy
all these experiences.
Len Holm
Please respect the author’s copyright and not copy for distribution
individual case studies from the book. Thank you.
List of figures
The following figures represent actual case studies and examples described
in this book. Many of the photographs are from projects that are used in
more than one chapter. Many could also be connected with the advanced
examples in Chapter 17 or the project descriptions in Chapter 18. If the
reader was interested in a power point of these figures, or photographs of
other cases, please contact the author.
Book cover: Connects with case studies 5.3, 8.1, and 8.7, steel trusses
Figure 1: Connects with case studies 1.12 and 18.2, executive townhomes
Figure 2: Case study 2.12, apartment architect
Figure 3A: Case study 3.9, residential equipment
Figure 3B: Case studies 3.11, 8.4, 8.10, 13.3, and 16.7 nuclear power plant
Figure 4A: Preconstruction flow chart
Figure 4B: Case study 4.4, tile mockup
Figure 5A: Case study 5.6, campus research building, competitive GCs
Figure 5B: Case study 5.13, contract requirements
Figure 6: Case study 6.6, self-erecting tower crane estimate
Figure 7: Case study 7.14, school schedule
Figure 8A: Case studies 8.6 and 11.8, Alaska prefabrications, schedule
Figure 8B: Case study 8.13, post tension cables
Figure 9A: Case study 9.1, two superintendents, parking garage
Figure 9B: Case studies 9.7 and 8.15.A, superintendent, labor
Figure 9C: Case study 9.16, superintendent, messy site
Figure 10A: Case study 10.6.B, mechanical
Figure 10B: Case study 10.14, off-site water pipe tunnel
Figure 11: Case studies 11.11 and 7.10, power plant, dome hanger schedule
Figure 12A: Case study 12.4, plywood footballs
Figure 12B: Case study 12.11, five foot elevation problem
Figure 12C: Case study 12.12, concrete tilt-up
Figures 13A and 13B: Case study 13.15, timber frame
Figure 14A: Case studies 14.9, 6.1, and 8.3, steel truss miss-fits, painting
Figure 14B: Case study 14.16, bridge fire
Figure 15A: Case study 15.1, paint shop and louver damage
Figure 15.B: Case study 15.3, framing error
Figure 16A: Case study 16.3, Law of the Lid
Figure 16B, Case studies 16.12 and 8.9, clean rooms
Figure 17A: Case study 17, CM/GC organization chart
Figure 17B: Case study 17.14, dome ceiling tiles
Figure 18: Case study 18.12, brewery rendering
Notes
1
Project owners and developers
Including discussions involving owner’s
representatives and sustainability
Introduction
Most discussions of construction management focus on the contractor,
especially the general contractor (GC), and that is arguably warranted. Most
of the case study examples in this book, if not all, also include discussions
of the GC. But contractors would not have any work if it were not for their
clients, or project owners. Project owners include both private and public
entities. This chapter includes both of these ownership types and the
different ways they interface with their design and construction teams. Real
estate development involves improving property in the hope of making a
profit. Many real estate developers are interesting characters and there are
plenty of lessons to learn from our experiences on their projects, some good
and some bad. Because GCs need project owners, it is important for them to
understand their clients’ motivations and their businesses. Ideally each
owner organization has a single point of contact. It is difficult for a GC’s
project manager and superintendent to report to a building board,
committee, or board of directors. This single contact is known as an
owner’s representative, resident engineer (for public work), or an agency
construction manager. This chapter includes the following case studies
related to project owners, developers, sustainability, and owner’s
representatives:
1.1: Lucky developer
1.2: New owner’s representative
1.3: No loyalty
1.4: Black-listed PM
1.5: Team play
1.6: Multiple-multiple primes
1.7: Collaboration meeting
1.8: Green agent
1.9: New partner, new deal
1.10: Short pants
1.11: Users
1.12: Noisy furnace
1.13: Leverage
1.14: Mitigation fees
1.15: Sustainability trade-offs
1.16: Arm waving
Case studies throughout this book connect with multiple chapters. Case
studies in this Chapter #1 also connect with many other chapters including:
Case study #1.4.B – Chapter 16, leadership
Case studies #1.5 and 1.7 – Chapter 11, communications
Case study #1.10 – Chapter 12, construction controls, safety
Several case studies connect with Chapter 4 on preconstruction
In addition, multiple case examples included with other chapters also

connect with this chapter on project owners and developers including:
Case studies #4.2 and 4.6 regarding preconstruction
Several examples from Chapter 6 on estimating
Case study #9.12, superintendents
Case study #11.5, communications
Case study #13.5, cost accounting
Many case studies from Chapter 14, change orders
Three case studies form Chapter 15, construction completion
Case study #1.1: Lucky developer

Many participants in the built environment aspire to become real estate
developers; they want their chance at ‘big money’. But not all developers
achieve success. There are many more variables in play with a development
project than a brick and mortar construction project, including timing and
some luck. This sole proprietor developer had a ‘golly-gee’ personality. He
relied on his reputation and good nature to receive permissions and
cooperation that other developers would not dream of. And when he made a
mistake, his sincere apologies usually got him out of a predicament. His
approach was similar to Detective Colombo. It was difficult to tell if he was
naïve or playing designers, contractors, the city, and the bank. And like
Colombo, he always seemed to land on his feet with market timing and turn
mud into gold. He sometimes sold a completed and fully leased project at
twice its value. He didn’t gamble or drink alcohol or curse which are
sometimes traits of built environment participants, especially contractors.
This author offered to take him to Las Vegas as his good luck charm. Why
did bankers and contractors accept him? Could he have benefited from a
slick business partner with an MBA? What characteristics have you
observed with successful real estate developers and conversely those who
were unsuccessful? Have you considered becoming a developer? It takes a
lot of experience, access to financing, knowledge of market timing, and
some luck!
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Case study #1.2: New owner’s representative

A private college had just broken ground for a new classroom building.
They had entered into negotiated agreements with repeat design and
construction firms early in design. The preconstruction (precon) phase had
been very successful. The owner’s representative was promoted and had
become busy planning for another long-range and much larger project. She
employed a new project manager (PM) who also had school construction
experience, but for a public university. All of his experience had been on
lump sum bid projects both at the previous university and in the military
prior to that. He was a ‘plans and specifications’ (specs) type of guy. He
required documentation from the architect and general contractor (GC) that
they were unaccustomed to – especially for this client. He challenged many
verbal ‘deals’ that had been arranged before he arrived. Most of his
correspondence included references to drawings, specs, and the contract,
often with attached highlighted snips. Put yourself in the shoes of any of the
following parties. How would you feel about the current project approach?
What would you do to change things? How might this project turn out?
A. Original owner’s representative,
B. New owner’s representative,
C. Project architect,
D. GC PM, and
E. GC superintendent.
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Case study #1.3: No loyalty

There are different rules for procurement of construction services between
public and private project owners. General contractors (GCs) which focus
on private work often are trying to develop long-term relations with their
clients. It is the contractor’s hope that if they perform well on project ‘A’
(let’s say that was competitively bid), they will be short-listed on project
‘B’ (negotiated or bid), and eventually be awarded project ‘C’ on a
negotiated basis with no competition. This actually happens in the private
arena, maybe with a few more steps added in. Why can’t a public owner do
this? Why do some private owners choose to bid work and others negotiate
work? How do you suppose a GC project manager and superintendent feel
when they worked tirelessly on project ‘A’ only to have project ‘B’ awarded
to their competition? Does it matter if ‘A’ was either bid or negotiated?
What might be come considerations project owners use to select a
negotiated contactor?
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Case study #1.4: Black-listed PM

How involved are project owners with selecting individual team members
from general contractor (GC) and subcontractor (sub) teams? Does an
owner have a say? Do contractors consider an owner’s interests as well,
especially when proposing a team? Several other case studies in this book
discuss similar issues. Following are two opposing examples of the push
and pull of individual GC project managers (PMs).
A. Assume advanced case study #17.6 as background for this case
study or another similar project from your experience. After
completing what appears to be a successful project with a repeat
client on a lump sum bid basis, the two parties (project owner and
contractor) now agree to enter into a negotiated agreement on a new
project. This new project is similar to the one the PM and
superintendent just completed with the same client. They have the
experience to pull this project off successfully as well. The only
hic-up on the last project was the delay caused by the owner’s
vendors and the resultant overtime premium spent by the GC and
liquidated damages enforced by the owner due to finishing late.
When the client engages the GC’s chief executive officer (CEO)
none of these issues are brought up by either party. Everyone is
excited about the new project.
The experienced PM and superintendent team participate actively during

the preconstruction phase, sharing their valuable lessons learned
regarding constructability, cost savings, schedule, quality control, and
safety issues. The owner’s representative (rep) and architect appear to be
very pleased with the team. Two weeks before demolition is scheduled
to occur the owner’s rep calls the GC’s CEO and requests a change in
the team. Although he was pleased with the contactor on the previous
project, he indicates there is a chemistry problem with the proposed PM
and requests a change. Can an owner pick and choose from among the
GC’s personnel? Can a GC do the same with its subs? Does a contractor
have to comply? What does the contract say about this? What is this
costing the client? Should the CEO tell the client ‘take it or leave it’ and
stand up for his people? If the CEO complies, what does he tell the PM?
Does she get fired? Does she quit?
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B. This medical office building project was proceeding just fine with
respect to quality, safety, cost, and schedule concerns. The GC’s
PM1 was occasionally a little rough around the edges when it came
to communications with the project owner and the architect. He
pushed all the team members, including his own, to be as efficient
as possible. He had little tolerance for errors and incompetency. The
project architect mentioned that the PM1 was not the most pleasant
to work with to the GC’s chief operating officer (COO). Within a
week the COO showed up at the owner rep’s office and introduced
a new PM2. The COO did not provide an explanation of why the
change was being made other than he thought PM2 would be a
better fit for the project. The owner’s rep met PM1 out on the
jobsite and asked what was going on. He was totally caught off
guard and had not been approached by the COO and was not aware
he was being pulled off the job. Although the owner’s rep and PM1
had ‘words’ a few times, the owner appreciated the PM’s dedication
and results. And he was also very upset about the unprofessional
way the GC’s front office was handling this. The owner’s rep called
the COO and said “no way”. He was happy with the GC’s PM1 and
demanded that he stay on the project. Can an owner make this
demand? Why did the COO handle it the way he did? How should
this have been dealt with in a professional fashion on everyone’s
part?
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Case study #1.5: Team play

This case analysis includes two different examples of team collaboration,
both of them successful, but neither includes the complete ‘team’.
A. The project owner’s representative (rep) had a nasty reputation. He
had gone through many local members of the built environment
community, including architects, engineers, general contractors
(GCs), and subcontractors (subs). He even had a bad reputation
with the city. His office was across the country from this project
site. He worked for a large corporation and managed projects in
multiple states. See also case study # 13.1. He only purchased
design and construction services via competitive bids. Why did he
choose bidding over negotiating? He then would take whatever
actions he could to cause these companies to lose money – so it
seemed. He felt everyone was against him and was cheating his
company. What motivated this guy?
On the current project the local architect, their engineers, the GC, and
mechanical and electrical subs banded together to protect each other’s
interests with respect to this owner’s rep. They didn’t partake in
anything illegal, but was this unethical? The GC’s project manager
would schedule a day-long meeting with these stakeholders a few days
before the out-of-town owner’s monthly visit. They would resolve as
many requests for information and submittals as they could. At the
monthly owner-architect-contractor meeting the owner’s rep would try
to stir the pot and pit one team member against the other; but they stood
strong. The owner’s rep was not pleased, yet this was the only project at
this site in the last 10 years that did not result in a lawsuit or a
bankruptcy. Was it successful?
B. In another project the owner was not the one who was excluded but
it was the contracted owner’s representative. The owner and GC
and architect all knew each other. They all lived and worked in the
same small town. But the current project was bigger than any of
them had participated prior so the owner and architect decided to
engage the services of a third-party owner’s rep. The owner’s chief
executive officer was also concerned about a need for transparency
and did not want any of the company’s board members thinking
there were any ‘sweetheart deals’ going on. The owner’s rep was
from out of town and would visit the jobsite once every other week.
The three primary parties would unofficially meet without the third-
party owner’s rep, often informally, and discussed the project and
made decisions. On one hand, the contracted owner’s rep was
offended. On the other hand, the project was running very smoothly.
Should he object? Should the three local parties who pass each
other in the grocery store or at their kid’s baseball game not be
allowed to say hello? Where do you draw a line between being
polite, social, and making business decisions?
How do you define successful teams? Who won with these examples?
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Case study #1.6: Multiple-multiple primes

A multiple prime (also known as ‘five primes’) delivery method is best
reserved for owners with in-house construction experience. Why is that?
List a few owner types that could work this way. What are some (can be 4,
5, 6…) of the types of contractors which might make up a multiple prime
delivery team?
An architect designed an executive home for her and her husband and their
young family. She had taken some construction management courses at the
local college and was confident she could also manage the construction
aspect. The architect had received an all-in price from a general contractor
(GC) she thought was 20% too high. This same GC would end up as the
shell GC discussed below. The GC’s fee she would save could be invested
in new furniture for the house once completed. At least that was her plan.
These are some of the contractors and suppliers she hired.
Civil contractor to perform earthwork, site utilities, and asphalt
scopes;
Small GC to construct the concrete foundations and slab-on-grade
(see case #11.12);
‘Shell’ GC to frame and enclose the house including siding and
roofing. This GC also installed the windows purchased direct by the
owner/architect;
Plumbing and mechanical subcontractor;
Electrical subcontractor;
The owner/architect purchased expensive clear vertical grain
(CVG) fir cabinets direct and negotiated an install price from the
shell GC. She took the same approach with kitchen appliances
which were commercial grade and size;
Other finish material suppliers and subcontractors were mixed in
including drywall, flooring, painting, and doors;
Similar to the cabinets and appliances, the owner/architect
purchased plumbing and lighting fixtures and negotiated
installation with these respective subcontractors.
How much do you think she saved with this multiple prime delivery? How
much of her time did it take to manage the project? Why would contractors
take just a piece of the project? Do you think they would resent their lost
fee potential? Who provides the overall warranty on a multiple prime
project? Did I forget to say she had two young children at home, another on
the way, and a full-time regular job?
Post script: The project was finished successfully, but with a few hic-cups:
The foundations did not fit with the shell structure.
The wall framing did not accommodate mechanical and electrical
rough-in.
The kitchen cabinets did not fit with the kitchen appliances. The
shell GC took pleasure in cutting the CVG fir cabinets down to
size.
There were numerous other change orders from all parties. Would it
surprise you to find out the final price was 10% over the original
GC’s quote?
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Case study #1.7: Collaboration meeting

All successful projects are designed and built with teams. It is very unusual
for a single individual to be 100% responsible for all aspects. This author’s
custom home master-builder father was as close as I have seen. In addition
to the traditional owner-architect-contractor (OAC) team (and
subcontractors) there are inherent teams within teams as reflected in these
examples.
A. This first project is similar to case study #1.5A where the design
and construction teams met and collaborated ahead of the monthly
owner meeting. Another construction consumer also met ahead of
their regular OAC meetings but it was an internal meeting. Some
may find it constructive to debate alternate opinions or positions in
public. Do you subscribe to that practice? But in construction when
clear direction is often needed, especially at the jobsite level, and
during construction, lack of clear direction from a project owner (or
designer) can be disruptive to the construction process. Have you
witnessed examples of both good and bad clear and decisive
decisions from a project owner? This owner was a very large
organization which had a ‘council’ which represented many
different interests. The council would routinely meet, in private, and
debate their position on a variety of topics. When the council met
publicly, they were always of one voice and all public votes were
unanimous. Even when outside interested parties attempted to
influence an alternative, they wouldn’t budge. Does this sound like
collusion? But in the private built environment community does
that matter? When the owner later met with their design and
construction teams in the OAC meeting their direction was always
clear.
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B. Another large family-owned business decided to build a personal

ski lodge. The parents were elderly and were not engaged in the
project or the business, they had turned it over to their adult
children years ago. The family had four children who were all
married. They would meet to discuss the design and construction
aspects of the ski lodge. The contracted third-party owner’s
representative (rep) was invited to these monthly family meetings.
But instead of working things out behind closed doors, as discussed
in the previous example, these siblings and spouses debated quite
vociferously, in front of the owner’s rep. It was awkward. Should
they have done so? But if the family cannot voice their opinions
behind closed doors, when can they? There were not any other
designers or contractors at the monthly family meetings. Maybe this
was considered ‘behind closed doors’.
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C. How do large corporations with many divisions get anything done?
Imagine you are the general contractor (GC) project manager (PM)
or superintendent working on new a building for a publicly traded
client. The company does a lot of construction and your firm has
bid some of their projects and has negotiated others. Of course you
would prefer negotiated work, and need to take care of your client
to stay in their good-graces, but you need to make a profit as well.
The client has a designated in-house owner’s rep. This is a good
thing for a contractor so that you do not have to answer to a board
of directors or a task force or a corporate officer without a design or
construction background. Explain why this is. What sort of
companies try to manage their construction projects in-house with a
‘board’ or task force? This particular company has many divisions
and it should be the responsibility of the owner’s rep to coordinate
all of those interests but that doesn’t always happen. How do you
deal with eight different division heads taking daily project tours,
arm waving, challenging, and providing conflicting directions?
Wouldn’t it be great if they took their site tours all at the same time
and the tour was conducted by the owner’s rep, with you in
attendance? But it doesn’t always happen that way – maybe
intentionally on their part (experience). How do you deal with all of
these people? Don’t offend them. You don’t want to be black-listed
from future work.
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What happens in the weekly OAC meeting if the GC’s PM and
superintendent disagree in front of the project owner? What happens when
the project architect and structural engineer disagree? What happens if two
members of the owner’s organization are not of the same mind?
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Case study #1.8: Green agent

How does one become an owner’s representative? What are their
qualifications? As a college professor and industry professional I am often
asked by someone first entering the industry how they too might become an
owner’s rep. What would be your advice? Typically, I respond by
recommending they go to work for a general contractor (GC) for 10 years,
then seek employment with a large construction management (CM)
company before branching out on their own. If you are the boss, everyone
expects you to have the confidence to make informed decisions. Are you
ready for that responsibility?
A realtor and his young ambitious assistant wanted a larger slice of the pie.
Isn’t this how many built environment participants become real estate
developers? Unfortunately, it is (opinion). But they did not know exactly
who they were or what they wanted to do, other than to be the boss and
make a lot of money. Their current project lacked a focus, budget, schedule,
and they could not even spell ‘pro forma.’ Under the advice of another
experienced developer, they contracted the services of an experienced
owner’s representative who functioned as an agency CM. This is what the
CM faced, or discovered, in the first month:
The realtor and his assistant represented themselves to the CM as a
developer. When tasked as to what type of developer these two
were it boiled down that they were not a developer at all, but rather
a development agent (DA), which is a new term. They were not a
fee developer, nor a horizontal developer and they did not have any
financial stake in the project. How might you classify these two
individuals?
The DA was representing the interests of a property owner who
wanted to develop a block that had been in his family for
generations. The owner did not have any design, construction, or
real estate experience. Was he then really the ‘developer’? The DA
team kept the new CM isolated from the property owner. Why did
they do that?
The DA had arranged for all of the design companies and
consultants to contract with the property owner direct. This
included the architect, surveyor, geotechnical engineer, structural
engineer, demolition contractor, abatement contractor, traffic
consultant, civil engineer, permit expeditor and others. None of the
contracts went through the DA. Why would an architect agree to
this? Why would the other designers do this? How much did this
save the project? What risks do all of the parties assume? Why did
the DA team arrange the organization in this fashion? What work is
the DA doing? Why didn’t the DA run these companies’ costs
through their own books and make a profit on them? An
organization chart might be helpful here.
The DA wanted to purchase the elevator and windows right away as
they had heard these were long lead scopes (is this
true?), even though the project was still in conceptual design. How
long are these lead items and when should they be procured and
who should let these contracts?
A tenant had not yet been identified for the building. In fact, a
tenant type (restaurant, office, condominiums, laboratories, etc.)
had not been settled on. When should both of these decisions be
made during the design process? Do you design the building around
a use or user, or do you fit the use and user into a pre-established
building design? The DA pushed the design to proceed without
these decisions.
If you were the agency CM, what actions should you take? Would you go
over the DA’s head and talk with the property owner direct? What risks
might you be taking? Should you quit?
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Case study #1.9: New partner, new deal

This negotiated mixed use project was proceeding through early design
phases just fine. All the team members had been chosen and were actively
participating in the preconstruction process. The project scope grew, as
many do, and suddenly the owner decided it was too big for them to
finance. The owner had control of the dirt and was going to become an end-
user in the new building but did not have any real estate experience. They
sought out and engaged in a 49%-51% partnership with a professional
developer (51%). The new partner came in like a ‘bull in a China shop’
(although I have never seen an actual bull in China shop, have you?) and
dismissed all the preconstruction team members, including:
Agency owner’s representative,
Realtor,
Architect (and all engineers and sub consultants),
General contractor,
Land use attorney, and others.
Why would the new developer change out the whole team? Does a new
president keep his or her predecessor’s cabinet? What are the advantages
and disadvantages? They did retain the geotechnical engineer and the
surveyor, but why them? The project went through a complete redesign
with other targeted tenants. Three years later the ground has not been
broken. Did the property owner error?
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Case study #1.10: Short pants

A young hip company was excited about building their first new office. The
company was owned by a young high technology couple that had created a
new popular computer game. The husband wore short pants and tennis
shoes year-round, even though this area experienced four distinct seasons
and was prone to plenty of rain and snow. He visited the jobsite daily and
walked every inch of it but there were a couple of problems:
He would come in his normal attire and did not don any PPE, even
though the superintendent repeatedly offered it to him, handed it to
him, and had his name put on it. What elements comprise PPE and
what benefit does each element provide?
The owner would also chat it up with every craftsman on the job.
He knew them all on a first name basis. They appeared to
appreciate the attention. He wanted to know what they were doing,
why in that way, and could he take a turn with the tool or piece of
equipment? Should they let him?
The contractor and owner were getting along great. The project was
proceeding just fine with respect to quality, cost, schedule, and safety –
despite the owner’s visits. Payments were being made very promptly.
Should the new owner be banished form the site? How should the craftsmen
be instructed? They of course cannot be rude, but where do you draw the
line? If OSHA was to see the owner and his short pants and sneakers and no
hard hat, would the project be fined or red-tagged? If it was fined, who
would the fine be levied against?
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Case study #1.11: Users

A third-party owner’s representative (rep) has a place in the construction
industry. A third-party owner’s rep may also be known as an agency
construction manager (CM). Many project owners do not have in-house
experienced design and construction professionals. Many owners are first
time and maybe one time builders. It would not make sense for them to
employ a full time in-house owner’s rep. Large, institutional builders, such
as Boeing, Microsoft, and Amazon, have many experienced in-house CMs.
These companies are constantly procuring design and construction services.
Name three more large institutional owners which likely have in-house
owner’s reps. Small real estate developers typically have some expertise in
the built environment, but not necessarily are they experienced in all facets.
In this case they may procure the assistance of a consultant or an agency
CM. What is the difference between an agency CM and an at-risk CM?
Following are three examples of real estate developers who procured, used,
but did not receive complete service from their CMs.
A. This was the first of many projects for this developer. He hired an
agency CM who assisted with both the architect and general
contractor (GC) selections and contract executions. The developer
did not ask the CM to the ground breaking or ribbon cutting
ceremonies. The GC’s project manager knew this was not proper
and apologized to the CM. The CM was not asked to attend
meetings, review pay request, or help throughout the construction
project but was only re-engaged one month after occupancy to help
resolve several pestering disputes. Was this fair to the CM? Should
he help with the disputes? Why did the owner exclude him? Most
contractors would prefer to only work direct with the client (why?),
but this is not always true. Why might a GC want an owner’s rep to
help a first time developer? This same arrangement happened for
six projects after this one between the developer and the CM. Was
the CM being used?
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B. Two young real estate developers (also cousins) inherited several
parcels of bare real estate from their fathers. One was an attorney
by trade and the other an accountant. That is a good combination!
They had dabbled in small tenant improvement projects prior but
were now considering a large downtown speculative office
building. What does ‘speculative’ mean with respect to real estate
development? The cousins engaged the services of an agency CM
to assist with designer and contractor selections. The CM also
reviewed and negotiated the construction price. After construction
started the CM’s participation dwindled. The developer was
inserting her (the agency CM’s) name on the bottom of all
correspondence with the architect and GC as being carbon copied,
but not actually forwarding any of the paperwork to her. Why were
they doing this? Is it ethical? Does the CM have any liability?
Should she be paid for this? The CM continued to support the
developer on a variety of other projects. Her role lessened with each
project. What was happening here? Was the CM being used?
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C. A first time developer hired an architect and began design of a
mixed-use project. The architect suggested to the developer that he
hire an agency CM. He received two proposals, one from a large
CM firm for a lump sum of $2 mil and one from a sole proprietor
for a not-to-exceed $160,000, billable on an hourly basis. Why such
a big swing? Can you guess which one he hired? The sole
proprietor CM was very engaged early in the project with contractor
selection and start-up. The developer slowly began excluding the
CM from meetings with the architect and GC. Why would he do
that? The developer would engage the CM from time to time, all the
way through close-out. His final cost was only $80,000. What
happened to the $80,000 he did not invoice the developer for?
Should the CM require steady hours each week? If you were the
CM, why would you stay involved? The developer built several
other projects. The two maintained their friendship, with the
developer often calling (or emailing) for free advice. Was the CM
being used?
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Case study #1.12: Noisy furnace

We all have plenty of advisors. Real estate developers have many
professional and qualified consultants and advisors, from bankers and
attorneys to accountants and leasing agents. Designers and builders work
for developers and also advise or suggest alternate materials and methods to
their clients. Do some of these ‘advisors’ have a vested interest? How can
developers (or project owners) know what suggestions to incorporate?
This residential developer was building a series of five story executive
townhome projects. See Figure 1 and also case #18.2. For permit reasons,
not every ‘story’ was technically a story (height limits and zoning). The
project included (you might want to draw this sketch): Partially below-
grade bottom floor garage and bedroom suite; main floor living and kitchen
spaces; loft floor with office; master and guest bedroom floor; and occupied
roof including a penthouse and bath. The design-build (DB) mechanical
subcontractor (sub) suggested the developer move the furnace from the
garage to a closet adjacent to the top floor master bedroom to be more
efficient. Why also might the sub suggest this? What are the advantages for
both the sub and the developer? Should the sub give the owner a credit for
the change? Many residential projects utilize DB mechanical and electrical
subs. Why is that? How can that be both a benefit for a developer and a
potential risk?
These townhomes sold for an average of $2 mil each. They had excellent
downtown and water views. Buyers complained to the developer that the
furnace was too noisy and kept them awake. The builder spent a
considerable amount of money on acoustical consultants. He tried
everything imaginable to soundproof the top floor furnace closet. What
construction modifications would you suggest? The buyers sued him for
latent defects. Will they succeed? Can the sub be found liable? How will
this be resolved? Does this example give value engineering a bad name?
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Figure 1
Case study #1.13: Leverage
A. Developer ‘A’ has $1,000,000 in cash. He buys a commercial
building for $800,000 and puts $200,000 worth of improvements in
it, all out of his own pocket. At the completion of the project he
sells the building for $1,200,000. This represents a $200,000 profit,
or 20%, which most of us would feel is a substantial return on our
investment (ROI). Was this a conservative approach? How much is
at-risk?
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B. Developer ‘B’ also has $1,000,000 in cash. He buys 5 similar
buildings each costing $800,000 but only puts 25% down on each
project with his own money or $200,000 for each building and
borrows the balance of $600,000 for each building from the bank.
He now has $1,000,000 of his own money in these projects and has
borrowed $3,000,000. He then borrows an additional $1,000,000
against his equity in the buildings and puts $200,000 worth of
improvements in each project. This developer eventually also sells
each of his five improved properties for $1,200,000 for a total of
$6,000,000. He owes the bank a total of $4,000,000 for the 10
loans. This leaves him with $2,000,000. Based on his original
investment of $1,000,000 he has realized a $1,000,000 profit, or
100% ROI. This is leverage. Note that the interest cost of short-
term loans, were omitted from this scenario for simplicity.
Developers usually pay for the loan from the loan proceeds itself,
just as they would pay for building materials such as carpet. Was
this an aggressive approach? How much did he have at risk?
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C. Now assume developer ‘C’ has the same investment to make but
buys 10 similar buildings and only puts 10% down for each one.
Assuming the same purchase cost, improvement cost, and sales
price, how much total did he make and what was the ROI? You
have heard of the risk-reward tradeoff. Do these three developers
match that comparison? How much would each have lost if they
didn’t sell, assuming they did not declare bankruptcy and honored
their obligations to the bank? But would they take that approach?
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Case study #1.14: Mitigation fees

Real estate developers are not fond of paying city mitigation fees. These
may also be known as development fees or extraction fees. Do you know of
other terms? Some developers say they are ‘ransoms’ but that is technically
not correct. These fees are in addition to traditional building permit costs.
Mitigation fees are sometimes allocated for a certain purpose and other
times are a lump sum per lot or per apartment unit or are a percentage of the
total development costs. These fees are needed to cover the municipality’s
infrastructure cost associated with expansion. Mitigation fees are intended
to partially cover the city’s costs for additions or improvements such as:
Fire protection including equipment and stations;
Police protection including new cars;
Sewer mains and sewage treatment plants;
Water mains;
Roads and bridges;
Public transportation including busses;
Libraries;
Parks and recreation facilities;
Schools, and others.
Can you think of other public infrastructure needs that development

expansions might be required to cover? Although developers complain that:
“How could my project possibly result in the requirement for a new library
or a fire truck?” Technically they are correct. Each project paying its fair
share is better than the ‘last man in’ approach. A study of real estate
development will use the analysis that ‘each real estate development project
should pay for itself.’ The last man in scenario is similar to the ‘straw that
broke the camel’s back’ phrase. Essentially none of the first 99 projects
justifiably required the need for a new sewage treatment plant. But when
the community added its 100th project, the need was justified. It would not
be fair for project #100 to pay for the entire sewage plant, but rather it
should pay for 1%. This is the intention of mitigation fees – but for some
developers it is a tough fee to swallow. Each project needs to pay its fair
share.
An example project experienced this real time when a first time developer
bought the last two parcels in this business park. All of the other buildings
were up the hill from these last two sites – which were tied together legally.
One of the sites was swampy and unbuildable so the developer chose the
drier site for their corporate office building. The city approved their request
for permit but with a caveat. The developer was required to improve the
swampy lot and build a storm water retention system that would serve the
entire business park. It appears that all of the uphill neighbors had allowed
their storm system to flow downhill (it does that) and collect in the swamp,
which was the lowest site. Was this fair to the new developer? What if each
of the prior building owners had paid their fair share into a city fund and
now had enough to warrant a new storm system? Can the last developer
charge their uphill neighbors? Could the city now go back and charge all
the previous builders? Is there any wonder why these two lots sat for five
years after all other development was complete?
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Case study #1.15: Sustainability trade-offs

Today it is very important that we all practice sustainability, especially in
construction. Every generation is more sustainable or ‘greener’ than the last
one. It is unfortunate that we did not recognize these needs 50 years ago.
But is achieving sustainability in construction the most important objective?
Some feel that is the case, but others not so. What are other important
objectives from the project owner’s, designer’s, and contractor’s
perspectives? List three for each. Consider some of the following issues
when adopting sustainability into your next project.
Many city, county, and state jurisdictions have already adopted
green measures into their building codes, so building green is
mandatory.
But achieving a level of sustainability which violates a building
code and potentially impacts the public safety is not allowed.
For a developer, they think of pay-back. How long does it take to
pay back a green investment made today that will save energy costs
in the future? Often a seven-year payback period, or faster, is
necessary to make an improvement viable.
Architects must consider surrounding complimentary uses and
design features in new building designs. The city also wants new
projects to fit in. Can a sustainability feature cause a project to not
fit within a neighborhood?
Architects also have their own design preferences and standards
that must be compared to a developer’s interests. Does the architect
require more sustainability features than a developer wants to pay
for? Does a developer want to push the green envelope beyond
what is comfortable with their design partner?
Developers work with a pro forma which measures the feasibility of
a new project. Essentially does the project ‘perform’ or does it pay?
Can the sales price exceed the development cost? Can sufficient
rent be generated to cover the loan costs? If sustainability features
cause the pro forma to ‘not pencil’ then the project may not be
pursued.
How does the ability to control quality and safety impact
sustainability decisions for a contractor?
Does a developer consider enhanced marketability of a new project
if sustainability features are incorporated?
Do building owners consider how their employees feel about
working in a green environment? Does it attract new employees?
Does a neighborhood or community have any say in the
sustainability attributes of a newly planned building?
What sustainability tradeoffs have you experienced? When project owners,

architects, or contractors were presented with a needed decision regarding
adopting or rejecting a green feature on your project, what factors did they
consider?
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Case study #1.16: Arm waving

Some developers make it difficult for their general contractors (GCs) to do
them a good job. This example developer drove a fancy European sports car
and always wore designer clothes. Is this a stereotype? He frequented his
jobsites and had good relations with the GC superintendents. Unfortunately
he did not follow all of the contract rules with respect to communications.
The developer often missed the weekly owner-architect-contractor meeting.
Would you suggest the other two parties proceed and meet without him?
The developer would arm wave changes while at the jobsite and did not
follow up with written direction to either his architect or the GC. He would
even make field changes with the subcontractors (subs) direct. Can a project
owner talk with subs direct? Can he ‘direct’ them? Should the GC’s
superintendent or subs incorporate these changes? They of course cannot be
rude to their client, but how do they tell him no? What should the architect
or GC’s project manager do? Many of these arm waving episodes resulted
in extra costs to the contractors. How would you recommend they
document the costs? The developer was offended when presented with
after-the-fact change orders. He was asking for favors (minor in his
opinion) from the field crew and didn’t expect to pay extra for them. He
thought they were all friends. How can this be resolved amicably?
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Notes
2
Design teams
Architects and engineers
Introduction
A great architect once said “There would be no built environment without
contractors.” And there would also be no built environment without
architects and designers. Project owners and contractors need their design
team members. Architectural organizations and their motives, contracts, and
fees are different than that for construction companies. It is relevant that
contractors understand these differences. There are many alternative ways
project owners contract with the prime architect and supporting engineers;
there is no one size fits all solution. There are also many variations with
how their fees are structured. Responsibilities of each of the design team
members affects their relations with the project owner and contractor. Case
study examples in this chapter help explain some of these relationships.
This chapter includes the following case studies related to designers,
architects, and engineers:
2.1: Architectural help
2.2: ADA advice
2.3: Leaking garage
2.4: Architectural fees
2.5: Give two to get one
2.6: Pay request signatures
2.7: Safety voice
2.8: GC’s architect is ‘low-value added’
2.9: Design QC
2.10: Come up with my estimate
2.11: Architect’s inspections
2.12: My architect
2.13: The intern
2.14: Design team
2.15: 700 sketches
Case study #2.6 – Chapter 13, cost control, pay requests
Case studies #2.7, 2.9, and 2.11 – Chapter 12, construction controls,
safety and quality control
Case study #2.10 – Chapters 6 and 16, estimating and ethics

connect with this chapter on the design team. Essentially there are not any
project owner or contractor examples without a design element. Many of
the case studies in Advanced Chapter 17 and Projects Chapter 18 include
the essential role of the design team.
Case study #2.1: Architectural help

You might find this strange coming from a builder, but we need architects.
Many developers purchase architectural services on the cheap (experience).
They either contract with them at a fee so low that the design team cannot
possibly do an adequate job, or they shorten the design schedule, or they
dismiss the architect after the building permit has been applied for.
Reviewing some other case studies in this book, and from your professional
experience, how might else project owners unfortunately lesson the quality
of the design of a project? If the architect is dismissed at completion of
design development and permit application, who responds to questions
from the city? Why do city plan reviewers prefer to talk only with architects
or engineers? Who responds to contractor bid questions and issue addenda
without an architect on the payroll? Assume the project owner negotiates
with a general contractor (GC) and asks them to ‘fill-in-the-blanks’. Why
would you as a GC do this? What conditions might you impose? Many
architects today do not play a role in change order and pay request reviews
in a traditional project. Why is that? Who then takes that role? Who
performs the punch list inspections? What risks do all parties take without a
full-service architectural firm? Guess what, this happens.
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Case study #2.2: ADA advice

Do building codes incorporate Americans with Disabilities Act (ADA)
requirements? Is it the architect’s or contractor’s or city’s responsibility to
meet ADA requirements? Who inspects for lack of ADA compliance? What
happens a year after a project is completed when a person with a disability
(employee, guest, other) discovers a building is not in compliance? What
happens if they are hurt?
A young project engineer (PE) was anxious to show everyone he worked
with how much he had learned by attending the local college and taking
construction management courses. On this particular project he noted (in his
opinion) that the restrooms had not been designed properly. He wrote a
request for information (RFI) to the architect (without the project manger’s
(PM’s) knowledge) where he flagged this potential problem. Should general
contractor (GC) PMs review every RFI and submittal generated by their
team before sending to the design and/or project owner teams? The
architect responded to this RFI with: “Thank you for discovering this
potential problem. You obviously know more about ADA requirements than
we do. Please make sure you build all facets of the project to comply with
ADA.” And this architect was a personal friend of the GC’s PM! Why did
the architect do this? Isn’t it the GC’s responsibility to point out all
discrepancies? Contract language typically indicates this. But what about
‘potential’ discrepancies? Did the PE overstep? As the GC, what do you do
now?
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Case study #2.3: Leaking garage

This case study is also connected with case #5.8. The two different issues
were isolated and settled at different times therefore blaming one on the
other is not relevant.
The project developer engaged his usual tenant improvement (TI) architect
to design a five-story post-tension (PT) cast-in-place (CIP) concrete parking
garage. This was of course not the architect’s specialty but he lined up other
engineers with this knowledge including civil (CE), structural (SE), and
mechanical engineers (ME) but they contracted with the developer direct.
Why didn’t the architect hire them as sub consultants? This might be a good
place to sketch a quick organization chart. The project was completed
successfully utilizing a negotiated general contractor (GC) with extensive
experience in CIP parking garages, especially with PT. At completion the
garage become completely operational for the developer and his adjacent
business. Two years after completion the GC receives a nasty letter form the
developer’s attorney. The letter accused the GC of being negligent and
itemized several issues they characterized as ‘latent’ defects. The major
ones are listed below. How long is a typical warrantee period? What are
latent defects? How are they proven? Can an owner recover for these and if
so for how long?
A. The garage roof leaks. The garage did not have a typical roof as an
office building does, but rather the top floor of the garage –
occupied by cars – acts as a roof. This floor was not specified to
have a waterproof membrane. The contractor sealed it, as with any
other slab, to facilitate curing. Concrete is porous and as rain
eventually found its way through cracks, it dropped on expensive
cars below, carrying with it a white sludge, possibly from lime or
cement. Many of these cars were Porches, BMWs, and Mercedes
and you can imagine the response from their owners.
B. The garage walls leak all around the perimeter on all floors, where
the floor slabs meet the CIP concrete outside walls. An expansion
joint had been designed by the structural engineer to allow
movement. These were PT decks and because much of the garage
was below grade (only the top floor was visible at ground level)
there was not a great solution allowing for cable stressing and a
pour-back closure slab. Maybe you should draw a sketch. Over
time, as all of the slabs moved, the expansion joint experienced
wear and tear and that same cement-laden rain from above damaged
more cars.
C. The adjacent storm water control vault leaks. Every new building in
this city is responsible to handle its own storm water in what is
known as a ‘100 year storm’. How often do 100 year storms occur?
In the Pacific Northwest they occur about every other year, or so it
seems. All five levels of the garage collected rain water in a piping
system designed by the ME. That water was taken to this storm
water vault which was designed by the CE. Concrete usually
associated (in this case attached) to a building is customarily
designed by the SE but because of the vault’s use, it fell under the
CE’s jurisdiction. Water temporary held in the vault would
unfortunately travel horizontal through the vertical garage wall and
leak into the garage and damage more cars. The vault did not have
an internal liner on its sides or bottom. Typically these vaults are
stand-alone structures and evidently, if separated and isolated form
a new building, any leakage would find its way back into the
ground, which for some CEs, would be ideal.
D. Because the architect was a small company there was not a strong
design oversite present. Parking garages are customarily driven by
the structural engineer, but there are still several other design
elements including parking garage equipment, signage, striping,
paint, electrical embeds and others. Should the SE be the prime
designer in a concrete structure and should the architect be a sub
consultant to the engineer? Would the SE want that?
The developer and his attorney blamed the GC for all of these leaks and
design shortcomings and expected them to not only design and implement
repairs, but to pay for a couple of dozen car paint jobs. Will the developer
be successful? Since the contract has expired, do the dispute resolution
clauses in the contract still apply? Why doesn’t the developer file a claim
against his TI architect or the engineers? Does the developer have any
culpability here?
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Case study #2.4: Architectural fees

Architects often assist project owners with a variety of contractor selection
and contracting processes, including:
Procurement decision: Bid or negotiate;
Delivery decision: Traditional general contractor (GC), design-
build, construction manager (CM) at-risk, agency CM, and others;
Pricing methods: Lump sum (LS), cost-plus fee, or guaranteed
maximum price (GMP);
Contractor selection;
Occasionally construction estimate reviews, and others.
Architects often have an opinion about the accuracy of a contractor’s

estimate (my opinion). But how is an architect’s contract value structured?
Their total price is often referred to as a ‘fee’, but this is different than a
GC’s fee. A GC’s fee is a combination of home office overhead and profit
that is a percentage add-on to the cost of the work. The designer’s fee
represents their cost of the work plus overhead and profit. It is their all-in
price. The typical choices for a designer’s fee are:
Percentage add-on to the construction cost, such as 10% of
construction.
Hourly billable rates which are ‘loaded’ and include overhead and
profit and sometimes materials. This may also be known as time
and materials rates.
Lump sum fee.
GMP fee billable based on agreed hourly rates.
A. The architect’s sub consultant fees may be structured similar but

they likely favor the LS approach. If the fee is a percent of
construction costs, but the construction value is preliminary (say a
budget of $8 mil), then when the bids come in (say now $10 mil) is
the architect then in line for a change order? Which of the above fee
options favors the architect and which favors a project owner? The
answer is likely that it depends. What would be the advantages to
either party for each method? This author had two experiences with
different architects when each accepted a LS contract but at the end
of the project presented their clients with an additional invoice
because they had overspent. In both cases they cited changes which
occurred during the project which impacted them. In both cases the
owner paid, one at $1 mil and the other at $500,000. Would a
contractor have gotten away with this? When should changed
conditions be brought up? Shouldn’t designers receive change
orders the same way contractors do? Why are they generally
reluctant to bring these issues up as they occur?
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B. Would your answers to any of these questions related to an
architect’s fee change if you were aware that the project owner had
worked the proposed architect’s fee down when they executed a
contract? For example an architect proposed a fee of $1 mil but the
project owner was able to negotiate a fee of $800,000 in their
contract. Why would an owner do this (and they do!)? In in this
scenario, if the architect actually spent $900,000 and approached
the owner at the end of the project for an adjustment, would the
owner agree to a change? Owners negotiate construction contract
values down with architects and GCs, and GCs do the same with
subcontractors. If a GC or subcontractor (see drywall subcontractor
in case study #15.11) overspend and approach the owner after
construction for an adjustment, will the owner agree? Estimated
costs versus contracted values versus actual expenditures are often
the basis for after-the-fact construction claims. Some examples of
this are included with Chapter 14. Do architects ‘claim’ owners as
well?
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Case study #2.5: Give two to get one

An ambitious project manager (PM) was trying to develop a niche for
himself and his company in the food processing (FP) industry sector. See
also case studies #3.5 and 6.3. He took classes, attended seminars, joined
professional associations, and was seen at every FP industry event. He
wanted to understand as much about their business as they did. What are
some other ways the PM might have immersed himself into the FP
industry? The industrial engineer (sort of a hybrid mechanical and civil
engineer) who designed most of the FP work in this state was an
acquaintance of the PM. The PM bought him lunches, gave him tours of the
company’s projects, and treated him to professional sporting events. Are
these appropriate actions to ‘market’ a designer? Is this ethical? Will the
designer give you a project just because you bought them a ham sandwich?
But the engineer did not bring the PM any work. This case may be a ‘you
can’t get one until you’ve got one scenario’. What is another way to get
your first project in a new market sector? The PM was frustrated. What do
you think was happening? The PM asked a SPM at work who was his
mentor: “Why won’t that industrial engineer give me any projects?” The
SPM’s response: “You have to give him two projects first in order for you
to get one in return.” This didn’t seem fair to the PM, but it worked out. Do
you have a mentor at work? Get one, or two. Do you mentor someone else?
Do so. Many years and many successfully completed projects later, the PM
and engineer have long lost count who is owed the next one. How should
construction (or design) projects be awarded to a company?
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Case study #2.6: Pay request signatures

Have you had the opportunity to use the AIA pay request cover sheet, form
#G702? This form requires a notarized signature from the general
contractor (GC), usually the project manager, and one from the project
architect. Most architects today exclude, in their contracts with the project
owner, anything having to do with construction cost. This includes original
estimate development or review, construction change order reviews, and
pay request approvals. Why is that? Since this is an AIA form, developed
by architects, which requires an architect signature, why don’t they sign it?
Banks are wary of real estate developers asking for too much money up
front in the form of a construction loan, and also excessive monthly draws.
Why would a developer inflate these amounts? Is that illegal? Is it
unethical? Since the entire project cost, and loan amount (these are different
amounts) will eventually be released to the developer, why does the bank
care how much is released each month? Most architects typically will not
sign the pay request as discussed above. The bank does not trust the
developer to validate the contractor’s monthly draw for several reasons. So
who authenticates that the contractor is really due $1.3 mil this month or
that the project is in fact 35% complete? Many banks employ the services
of a third-party inspector who only does this type of work. They visit the
site once monthly, review a draft pay request, and sign where the architect
was supposed to sign when all complete. What do you suppose is the
professional background for these inspectors? In some cases the bank will
accept the review of an agency construction manager (CM) under contract
with the developer. Why might they trust the CM more than the developer?
Why not just trust the GC?
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Case study #2.7: Safety voice

Who is ultimately responsible for construction safety on a jobsite? Who all
are ethically responsible? Does this include the architect? Following are
two examples of safety-sensitive architects.
A. An architect came into the jobsite trailer after a site walk and asked
the owner’s representative (rep) to step outside. The architect had
witnessed an obvious safety violation and needed to tell someone;
he was quite shaken. Who should the architect speak directly with?
Is the owner’s rep the individual responsible for safety on a project?
The architect told the owner’s rep his company did not allow him to
discuss (or observe?) safety issues on the construction site, but he
couldn’t let this issue pass. He felt talking with the owner’s rep in
lieu of the general contractor’s (GC’s) superintendent would
provide him with a safe distance. What is his company afraid of?
Does he have any liability a) if he didn’t report the violation, or
conversely b) now that he has reported the violation?
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B. Another architect on another project was on a site walk with her
structural engineer. She observed one drywall installer standing on
the top rail of a scissor lift 20 feet in the air and not tied off. The rail
is only one inch wide. This first guy was working with another
installer who was hanging out a window opening and was also not
tied off. Neither of the two had a spotter. If there was a spotter,
would their actions then be acceptable? The two designers observed
these safety violations and walked past. About 30 feet down the hall
the architect said to her engineer: “Wait, I cannot let that go.” She
returned to the drywall installers and read them the riot act. She
then went directly to the GC’s superintendent and shared her
observation. The two installers were removed from the site that day
and their company received a formal written reprimand from the
GC’s office. What are the proper procedures for:
Planning for and preventing a potential safety violation?

Stopping a safety violation while in progress?
Reprimanding employees?
Removing employees?
Notifying a subcontractor?
Terminating a subcontractor?
Involving OSHA?
Have you observed a safety violation? Did you do anything about it? If you
didn’t, and someone was injured, would you feel any responsibility? Do
you suppose the architect’s employer will reprimand her? I hope not.
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Case study #2.8: GC’s architect is ‘low-value added’

This example general contractor (GC) offered design-build (DB) services to
their clients. Many GCs do the same, but without any internal design
support. If they land a project, they either contract with a designer or joint-
venture. But this GC hired an in-house architect to support marketing the
DB delivery method. His time would be charged to DB jobs, but when they
didn’t have this type of work, he wasn’t really qualified to do anything else.
A study of activity-based costing would therefore likely categorize him as
low-value added. Do DB GCs actually design in-house? Do their employees
have associated professional design licenses and do they ‘stamp’ the
drawings? Does the contractor then carry errors and omissions insurance? Is
an internal architect a marketing play? Is this GC assuming more risk than
normal?
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Case study #2.9: Design QC

Who performs a quality control (QC) check on design drawings? Do each
of the design disciplines (structural, mechanical, electrical, civil engineers)
perform their own? Do they check other drawings for cross referenced
work? Does the architect take responsibility for a QC inspection of the
entire set, including the specifications? They will tell you they
accomplished all of this. Do designers rely on questions and QC assistance
from:
The project owner during design development?
The city during permit review?
Contractors during bidding and resolution with addenda?
Contractors during preconstruction and early construction activities
with request for information and submittals?
Contractors throughout construction with change orders?
The answers to these questions are ‘yes’. Do any of the design firms take
any responsibility for document errors? Do they pay for discrepancy change
orders? Is that the purpose of errors and omissions insurance? What do the
contracts say?
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Case study #2.10: Come up with my estimate

Not many architectural firms estimate construction costs in-house anymore.
They use to. Why the change? Most rely on general contractor (GC)
estimates or consultant estimates. This example small architect did a lot of
work for the state. It was a contract requirement that they provide
construction cost estimates with each progress design submission. Are those
estimates considered budgets or bids? How accurate are they? Is the
architect held responsible in any way for the accuracy of their estimates?
The architect had a deal with an estimating consultant to provide these
estimates on an ongoing basis but that estimator retired. A new estimating
consultant was engaged to provide this service. This is what he was told by
the architect on the first project:
I have you budgeted for $2,500 for your efforts.
Your total estimated construction costs are to come in between
$50,000 and $60,000. That is what I told the state this small
remodel project will cost.
What is wrong with this picture? Consultants usually work on an hourly
basis. If their billing rate is $100 per hour and they spend 40 hours
preparing an estimate, their effort will cost their client (project owner, GC,
or architect) $4,000. They do not work on a lump sum basis. And if the
result of the estimator’s research is that the proposed project, as designed,
will cost $100,000 that is their estimate. They have to back that up. There
are plenty of ethical rules here. Why did the architect provide this direction?
What should the estimator do? If the architect’s estimates continue to be
$60,000, but the project is bid by GCs at or above $100,000, what then?
How would the architect explain the discrepancy? Are they liable? What
happens next?
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Case study #2.11: Architect’s inspections

This example is similar to the safety case presented earlier in this chapter,
except related to construction quality control (QC). The (very) old
American Institute of Architects (AIA) contracts use to include terms such
as ‘construction supervision’, ‘approvals’, and ‘inspections’. Very few AIA
contracts today, if any, include these terms. Why the change? It is not
necessarily your architect’s fault or desire, but more their insurance carrier
and legal advisors. Most of this (supervision, approval, and inspection) has
been shifted to the contractors. What is slightly ironic is the AIA contracts
still include terms such as ‘right to reject’. Is failing to reject therefore an
implied approval? Some architectural firms actually do not want their
employees going to the jobsite, getting out of their cars, performing a job
walk, and inspecting the quality of work installed. What if they did this
inspection, but missed an item? Is that then considered approved?
So who performs these tasks today? In many cases it is the owner or
owner’s agent and third-party inspectors. It is not the city. What does the
city inspect for? Much of this responsibility has been shifted downhill to the
general contractors who in turn have shifted it to their subcontractors. See
also case study #15.12.A regarding roof inspections, and others. So put your
owner’s hat on. Who do you expect is inspecting construction workmanship
and is looking out for your interest? How has this current shift affected
construction costs? Has the cost of architectural construction administration
services been reduced to reflect this movement? What is fair?
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Case study #2.12: My architect
An experienced real estate developer worked predominantly with one local
architecture firm. It was a mid-sized firm with 20 employees. The team
built several executive homes, apartment and condominium buildings, and
was recently expanding into a mixed-use development (MXD) which
included a podium retail level and underground parking. The finished
building is shown in Figure 2. After the permit was received on this 90 unit
MXD project, the developer terminated his agreement with his (friendly)
architecture firm but hired one of the more experienced architects away
from the company to work for him direct. She was engaged to review
submittals and respond to requests for information. As the project
progressed, she also became engaged in designing changes including the
retail level tenant improvement projects. Why did the developer do this?
How would his long-term relations turn out with his previous architecture
firm? What risks do the original architect, this newly hired individual, the
developer, and the construction team take with this new arrangement?
Figure 2
The architect who the developer hired was not the prime individual in the
original design and whose stamp was on the permit set of drawings. When
it came time to apply for a certificate of occupancy from the city, the city
only wanted to work with the original architect. Why is that? The developer
had to re-engage the architecture firm and have them buy-in to all the
changes he and his own architect had made. Do you suppose he had to pay
for this? You know the phrase, ‘what goes around comes around’.
Post script: After completion of this one project the architect, who had left
her firm, went back to work for them, now as a partner with a share of the
profits. The developer would continue to engage his original friendly
architecture firm for future projects.
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Case study #2.13: The intern

This case study includes examples of leadership, career growth, marketing,
and a bit of ethics, all as they relate to a general contractor’s (GC’s) project
manager (PM) and the owner of an architecture firm. The PM had chosen
hospitality, especially hotels, as his area of specialization. See also case
studies #3.5 and 6.3. There was one architecture firm in this state who
designed more hotels than all the other companies together. The PM knew
the owner of the architecture firm. They would see each other at industry
events. The PM gave the architect tours of his projects and included him
with notices of the GC’s projects, including their hospitality work. But the
architect never seemed to send any hotels the PM’s way. What
recommendations would you have for the GC’s PM in order for him to
market this architect?
The PM was currently on a large project and needed some extra help in the
office. His company said he was on his own as all the current project
engineers (PEs) were tied up. His company also had a custom of not hiring
new PEs right out of college, and certainly never a summer intern. The
president felt that all PEs would work for two years and then move to
another GC. Essentially they ‘jump ship’. Is that true? The president would
rather let a competitor train a new graduate and then later hire them, rather
than his company train the PE for the benefit of another GC. Have you
experienced this?
The PM was complaining about being overworked and the lack of home
office support to a friend who was also a mid-level architect in the same
hotel specialist design firm. His friend let him know that the owner of the
company had a daughter who was studying construction management (CM)
in a nearby university. The GC’s PM decided to break from custom and
reached out to the CM student and ultimately hired her as a summer intern.
Will the PM get in trouble from his employer? Should he have done this or
just buckled down and worked longer hours?
The intern did so well that the PM tried to get her to not go back to school
that autumn and continue on with the project as the PE. Was this a
compliment or was he just using her? Was this unethical? Shouldn’t
students focus on finishing school first? She rightfully returned to college
and the GC hired her full-time after graduating the next June. She would
turn out to be a very successful PE and PM for that original company, and
today she is a vice president for one of their competitors. I guess she
eventually did jump ship. But coincidently (or maybe not so) the owner of
the architecture firm was grateful to the GC PM and he was awarded
several significant hotel projects in the following years. Is this how
contractors get work? Does it matter how they get new work, as long as
they get work?
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Case study #2.14: Design teams

When project owners hire general contractors (GCs) they typically choose
the GC based on price or experience or fee or combination of other
qualifications, but they do not choose the GC’s subcontractors (subs). The
owner may be involved in selection of the mechanical and electrical subs,
especially if they are design-build, but not the drywall sub or carpet sub or
glazier. This does happen as discussed in case study #8.15 and others.
Architecture firms are typically chosen by project owners in the same
fashion. The owner chooses the prime architecture firm, typically based on
experience. Architects rarely ‘bid’ their fee as GC’s bid a construction
price, but they might ‘propose’ a fee. But when an owner hires an architect,
are they also hiring the complete design team such as mechanical, electrical,
structural, and civil engineers and others? Also similar to the GC case study
#10.12, architects have preferential sub consultant firms, but are they
locked in to second-tier designers or can a project owner also participate in
the selection process?
This example project owner felt that ALL architecture companies ONLY
work with one design specialist in each area. You can tell by the capitals
that this author disagreed. Their request for proposal (RFP), advertised
nationally for a major project, required the architects to name their
complete teams. The initial long list of interested parties was 80, shortened
to 15, and five were interviewed. Each of the five design teams was headed
by an architecture company, but had approximately 10 sub consultants
named. The interview process was lengthy and involved. It seemed that all
the sub consultants attended the interviews as well. The project owner had
several stakeholders and all were represented at these interviews and had a
vote in the selection. What the owner’s team realized through this RFP
process was that they liked individual components, or companies, for each
of the five teams, but no one team was exactly perfect. So the owner chose
one architecture firm and then asked them to team with specific second-tier
members from the various proposed teams. Wait a minute, can the owner do
this? Will the architect agree to this? Will the sub consultants, for example
the mechanical engineer, who initially teamed with architect B, now join the
successful team of architect A? And will the structural engineer from
architect C now join architect A? How about the engineers on architect A’s
original successful proposal team who ended up empty-handed? You get the
point. Was this ethical? If the various engineering companies do not mesh
with the chosen architect, or they do not perform, will the owner take
responsibility?
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Case study #2.15: 700 sketches

In construction we use the generic phrase ‘plans and specifications’ to
describe a set of contract documents (in addition to the contract) needed to
build a project. But the term ‘plans’ is not technically correct as there are
several different views in a typical set of drawings including exterior
elevations, building sections, details, and others in addition to ‘plan’ views.
Contractors also prepare many preconstruction plans including a safety
plan, quality control plan, subcontract buyout plan, and others. Likely the
phrase ‘drawings and specifications’ is more correct.
This residential architect did not produce drawings or specifications but
rather a book of sketches was their typical set of contract documents. They
were an experienced company that focuses on executive custom homes.
Their clients did not know the difference and this approach worked just fine
with repeat builders. But when competitive bids were needed, or an outside
estimator was involved in verifying the contractor’s price, it became
problematic. Sure they would prepare a dozen or so sheets of drawings
necessary to obtain a building permit, but beyond those sheets the builders
had to look through a large three-ring binder with 700 sketches in it.
The sketches were professional, prepared electronically, and all numbered.
But it turns out many of the sketches were generic and applied to many
standard house designs but none specifically. And there were sketches in
the set that did not apply to the project at hand at all but not removed from
the book. What are some potential problems you can envision with a book
of sketches in lieu of drawings and specifications? During construction of
any typical commercial or heavy civil project it is common to receive
sketches post contract from the design team to document minor
discrepancies. They still require good construction management procedures
to track and incorporate. What has been your good and bad experience
working with design sketches? Have you ever worked on a project
completely designed with sketches? Was it successful?
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Notes
3
Construction company
organizations
Introduction
It is important that the jobsite team of project manager and superintendent
understand how their construction company is organized and what
motivates the ‘front office’. We are of course not in charge of the
organization, or the home office overhead costs, but much of what we do at
the jobsite level affects the corporation. Different companies organize
themselves differently, this includes areas of specialization, accounting, and
management procedures. This chapter includes examples from very small
sole proprietor contractors to a couple of the largest in the world. The case
studies examine how the construction company interacts with its clients, the
design community, and their own employees. The roles of many of the
home office employees are also examined. This chapter includes the
following case studies related to construction company organizations:
3.1: No room with a view
3.2: Stacks of paper
3.3: Shell versus TI

3.4: One project JV
3.5: Make yourself valuable
3.6: Moving expenses
3.7: Home builder’s home office
3.8: Branch office shutdown
3.9: Residential developer’s equipment cost
3.10: One-focus, one-job contractor
3.11: Nuclear engineers
3.12: Trading local
3.13: Project controls specialists
3.14: Residential organization
3.15: My reputation is at stake
studies in this Chapter #3 also connect with several other chapters
including:
Case study #3.5 – Chapter 16, leadership, careers
Case study #3.13 connects with several chapters including Chapter
11 (communications), Chapter 12 (construction controls), and
Chapter 16 (leadership)
Case study #3.15 – Chapters 5 and 16, contracts and leadership
Several cases also connect with cost accounting and cost control in
Chapter 13.

connect with this chapter on contractor organizations including:
Case study #9.13, big job superintendent
Case studies #13.13 and 13.14, cost control, activity-based costing
Case studies #16.3 and 16.12, leadership
Case study #3.1: No room with a view

Businesses use a lot of office configuration options in hopes of developing
an atmosphere of communication and creativity for their employees. One of
the country’s largest engineering-procurement-construction (EPC) design-
build general contractor (GC) company has its offices in several skyscrapers
in one key metropolitan area. Typically an entire floor, or more, will be
dedicated to a large project. The upper-floor water views from some of
these buildings is spectacular, but the employees do not receive that direct
job benefit. They are all seated in rows of desks without partitions and each
desk faces the center core of the building – they have their backs to the
view! What are some advantages with working for a large EPC versus a
small sole-proprietor GC? Imagine this is your first design or construction
project out of college. Your boss sits directly behind you and his or her boss
sits behind them. You feel like you are always being watched. Did you get
to work on time? How long were you in the coffee room or rest room? Did
you leave early? Did you receive or make any personal phone calls or text
or emails? Draw this configuration with six or so desks in each row. The
conference rooms and supplies and common areas are all located in the core
of the building. Now draw one which you feel would bring more enjoyment
and potentially creativity for the employees. But be mindful they don’t
spend the entire shift daydreaming about their dream boat in the bay
beyond.
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Case study #3.2: Stacks of paper
A young estimator was asked to cover for his boss while the chief estimator
took a two-week vacation. The boss always had a large stack of paper on
this desk. He was a very busy man, or so it seemed. The subordinate had
previously noticed how the pile would slowly move from one side of the
boss’s desk to the other, but in total never was reduced in size. During the
vacation the junior estimator sat at the boss’s desk and decided to do him a
favor and resolve some of this outstanding work. He was surprised to find
most of the quantity take-offs, pricing recap sheets and subcontractor quotes
were five to ten years old and none of them related to their current projects.
The estimator filed some documents and recycled others such that when the
boss returned he would be welcomed to a clean desk top. The junior
estimator was confident he would receive praise. Instead the boss was
furious. Some people work form a clean desk, with only a document or two
on it (this author) and others cannot see their desk due to the clutter. What is
your approach? What are the advantages and disadvantages with either
scenario? What was the chief estimator really doing with his large stack of
paper? Did the junior estimator error? Shouldn’t he really have just kept to
his own affairs and ‘stayed in his lane’? Should he report the incident to the
boss’s boss? Will he do it again?
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Case study #3.3: Shell versus TI

Some general contractors (GCs) do building shell work, without finishes or
mechanical and electrical work, and others just do tenant improvement (TI)
projects, all interior finishes. And some GCs do both. What are other areas
of specialization? Where does your employer fit in? Should the same GC
which constructs a building shell (no finishes or mechanical or electrical)
also perform the TI work? Assume a real estate developer builds office
building shells and hopes to attract a tenant and enter into a long-term lease
agreement. Assume also the tenant is in charge of and will pay for their own
TI work. Should the same architect who designed the shell also design the
interiors? What if the shell was 75% complete and the tenant wanted to do
some of their work concurrently? Would the tenant have a right to interrupt
any of the shell construction activities to make a constructive change which
would enhance their project? Can you have two GCs on the project at the
same time? Could there be union issue? Who is responsible for safety? Who
pays for temporary utilities? How about
dumpsters/sanitation/security/insurance and other responsibilities? What if
it was just one GC but they had two different project managers and
superintendents? Should the same subcontractors work on both the shell
and TI? What sort of warranty issues might arise? Don’t worry if you do not
have answers to all of these questions; none of us in the industry do either.
It can be complicated. The answer often is: It depends!
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Case study #3.4: One-project JV

A shopping mall client offered a new $100 mil negotiated contract to a
large local general contractor (GC1) but it came with a stipulation. A
competing contractor, who was also a developer, was selling the property to
the mall client. This felt like a slight conflict of interest to all the competing
GCs during the request for proposal process. Do you agree it was a conflict
of interest? The caveat the owner gave to the successful GC1 was it had to
‘partner’ with the land owner/contractor and form a one-project joint
venture (JV). Neither of the two GCs were pleased with this arrangement
even though the owner increased the fee by 1% which was slated for the
new minority partner. The reason the owner gave was they wanted to keep
the developer’s interest throughout this project in hopes of favorable land
purchases in the future. Now do you feel this is a conflict of interest?
The conditions of the JV arrangement between the two GCs was GC1
would make all the decisions and staff the project and GC2 was allowed
only a junior project engineer (PE) to join the jobsite team. Would you have
wanted to be this PE? The minority partner was also allowed to audit the
project’s cost accounting records. If you were the PM for the majority
partner, how would you approach your new partner? How would you
include them so they trusted you? If you were the minority GC2 would you
be happy for your 1% fee for not doing any work or would you push for a
larger role?
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Case study #3.5: Make yourself valuable

As a young project engineer (PE) or assistant superintendent you are not
always aware how your company came to have a contract for your project.
Was it bid or negotiated? Is this a repeat client? Did someone in your firm
have a connection or relation with the client? The fact is construction
opportunities for a contractor do not just walk through the front door.
Something, or more likely someone, made it happen.
This general contractor (GC) chief executive officer (CEO) was known to
put pressure on all his employees to bring work to the company. He would
announce at company meetings: “I can hire project managers (PMs) and
superintendents like you off of the street, but an individual who brings work
in is truly valuable”. Don’t all contractors have marketing specialists?
Wouldn’t a salesperson be better equipped to bring work in than a PM or
superintendent? If you were a prospective project owner, who would you
rather hear from? Make an argument both ways.
One PM took this challenge and was very successful in negotiating and
bidding work. But he was a builder at heart and prided himself in not only
landing a new project, but also successfully accomplishing the construction
work and returning a fair fee to his employer. But after several successful
marketing endeavors which lead to construction projects, this PM found the
CEO was assigning his newly-landed project PM responsibilities to his
colleagues and he was told to go after another project. He wasn’t pleased
with this new arrangement. The PM did not want to be a full-time salesman.
He felt he was being taken advantage of. When a project was later
completed successfully everyone seemed to forget it was he who brought
the project in and conversely when there were problems with projects, all
were quick to point the finger in his direction – he sold a promise they
couldn’t deliver on. This included even the client and architect. Why would
he be blamed? Think about a few potential problems (cost or schedule or
quality or safety related) and construct a scenario. This example is similar
to case study #16.15.B. How could the PM return to his previous
arrangement of building the work he brought in? What do you suppose
became of this individual?
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Case study #3.6: Moving expenses

Which of these moving expense scenarios is best for the employee, lump
sum or cost plus? Which is best for the contractor? Are they both ethical
approaches? And which is best for an open-book client who pays for
contractor moving expenses to a remote site?
Lump sum: The contractor has a complicated calculation that considers the
distance the employee must move (say from the home office to a remote
site), the amount of family members the employee has, and the length of
time they have been with the company.
Example one: This young project engineer (PE) and his wife had only been
with the company for one year and they were moving across the country
and were given $10,000 as a lump sum moving expense stipend. The PE
threw away all his belongings (they had only been out of college a short
while and hadn’t accumulated much anyhow, at least nothing new) and
crammed whatever they could in the back seat of their compact car and
trunk and hit the road. They stayed at cheap motels and ate fast-food the
whole way. When they arrived at the site they bunked with another
employee in his dank basement for a week while they searched for an
apartment. The couple caught a terrible cold, but they banked nearly $7,500
from that deal. Was this a good move for the PE? What would you have
done?
Example two: Another unethical engineer married a woman with two
children which increased his stipend to $20,000 and after the move they
annulled the marriage, and she realized a $5,000 check for her short-term
agreement.
Cost plus: The same contractor caught wind that many employees were
moving on the cheap, maybe too cheap, and maybe uncomfortably cheap.
They decided to completely turn the table and pay their employees
whatever the cost of moving would be.
Example three: A project manager was moving from a remote site back
across the country to the main office. He and his wife always had a passion
for antique furniture, and they were living in an area that had a lot of heavy
antique oak furniture that they could purchase very cheaply. They bought as
much of it as they could afford, even borrowing money to do so, and
planned to sell it back in the big city for a sizable profit. They had a
beautiful convertible car that would have been wonderful to drive across the
country and enjoy the scenery but instead they had the car shipped and they
flew first class. Once they arrived at their new destination, they rented a
nice sedan and set themselves up in a downtown five-star hotel. They ate
out at all the best restaurants. They were given two weeks for the move and
the PM showed up to work on day 15. Was this ethical of the PM? What
would you have done?
What would be the fairest way to manage this for a project owner on an
open-book project where the contractor’s management employees were paid
moving expenses and that money was a reimbursable cost from the owner?
Can you propose a compromise, or even a third option to these two
scenarios which would be better for both the employee and the contractor?
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Case study #3.7: Home builder’s home office
This small but successful custom and speculative home builder was
organized as a sole-proprietor and utilized the cash accounting method of
recognizing revenue and expenditures. The business owner was also the
project manager, superintendent, lead carpenter, and on weekends estimated
new projects. His wife was the bookkeeper, interior decorator, assisted with
marketing, and often was seen picking up materials in her husband’s pickup
truck. He invoiced his clients his time at $2 per hour above union scale, his
crew’s actual wages straight through, and marked up materials and
subcontractors by 10%. He did not factor his home office or equipment
utilized in his home office into his billings. He also did not invoice for his
wife’s wages, his pickup truck, or his shop/warehouse. He made a decent
and fair income, due to an outstanding relationship in the community for
quality work and fairness, but when it came time to replace his pickup truck
and radial-arm saw, he had to dig into his personal savings. List five
recommendations you would make to this builder. Address estimating, cost
control, and invoicing. If he incorporated your recommendations would he
lose any of his clients? With your recommendations how much do you
suppose he could improve his bottom line? Assume he made $100,000
annually on $1 mil of work.
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Case study #3.8: Branch office shutdown

This example commercial general contractor (GC) had followed a repeat
negotiated client to a new city and opened a branch office with expectations
of additional work. The additional work did not materialize, for a variety of
reasons, and the contractor had only one competitive bid project in backlog
for the next year. They shut down their nicely-appointed rental office and
laid off most of the office personnel. The branch manager and his
receptionist moved to the jobsite trailer and assumed the roles of project
manager (PM) and administrative assistant/cost engineer. The PM which
had previously been assigned to that job stepped down into the project
engineering role. They survived that year, expanded into a permanent office
the following year, and are now the largest GC in that city. Was it a mistake
to branch out to a new city? How/when/why should a contractor start a new
branch office? How many projects should they have in backlog? How did
this end up as a good example for activity-based costing?
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Case study #3.9: Residential developer’s equipment cost
A large residential contractor was also a developer and would build 1,000
homes each year on speculation of sale in several different tracts
comprising 100 to 300 homes per tract. The four equity owners of the firm
also owned a separate equipment rental company which rented equipment
to the construction division. Why do many construction executives set up
separate companies such as this? What are the advantages and
disadvantages of internally owned equipment companies versus third-party
equipment companies? Each residential tract was set up as a separate
Limited Liability Company and had individual project managers (PMs) and
superintendents responsible for financial management affairs at the jobsite
level. The company owners did not want any equipment sitting idle or cost
coded to home office overhead. Why was that? The jobsite teams would
routinely see equipment charged to their projects by the home office
equipment clerk that was not necessarily on their project and were
powerless to do anything about it. See examples of idle residential
equipment in Figure 3A. If you were a PM for this builder, how might this
practice impact your fee projections? Should the PMs journal-entry these
costs back out of their projects? Should they confront the company owners?
Should they quit? If you were renting a compressor from an outside third-
party equipment company, and you returned it, would you still be charged
rent?
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Figure 3A
Case study #3.10: One-focus, one-job contractor

This specialty contractor constructs only concrete footings. The contractor
has a home office overhead (HOOH) of $300,000 and an average annual
revenue of $3 million (mil). What percentage is their HOOH? Is that a
reasonable amount? They typically place 10,000 cubic yards (CY) of
concrete footings in a year at a job cost of $2.7 mil, which averages to a
very competitive $270/CY. The company only works on one job at a time
and employs a field management team of one superintendent and one
project manager who are job-costed. Applying a study of activity-based
costing (ABC) to this company results in allocating all home office
overhead, both fixed and variable costs, to their job cost because they have
only one division and only one product and only one field management
team. The $300,000 is added to the $2.7 mil to yield a total of $3 mil which
results in an ABC unit price of $300/CY. But in this case, does it matter?
Assume the company doubles the size of its HOOH and adds 5,000 CY of
foundation walls and 7,500 CY of slab-on-grade to their volume at values
of $2.5 mil and $2 mil respectively. How much is that per CY? Explain why
the three different concrete systems have different assembly costs. Now
reallocate the HOOH costs for all three systems. They also add two more
PMs and superintendents for these scopes of work and cost those
individuals to their respective systems. Does that affect any of these results?
What is their new volume? What is the HOOH percentage?
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Case study #3.11: Nuclear engineers

This large international design-build construction company went through a
major transformation during the mid-1980s when it laid-off over half of its
engineering workforce and replaced very experienced licensed nuclear
engineers with younger engineers at a much lower salary. Examples of their
projects are depicted in Figures 3B and 11. They also increased their hiring
of internationally educated engineers, paying them less than the U.S.
engineers under the premise that their international degrees were not as
acceptable, even though these engineers could operate a calculator and
design pipe and wire and concrete just as good as their U.S. counterparts.
This new workforce struggled with incorporating new energy codes and
building codes, especially after the Three Mile Island nuclear incident.
Eventually the contractor hired many of the laid-off experienced engineers
back, but this time as consultants at twice the wage they had been receiving
as full-time employees. Simply reducing or eliminating costs is not always
a cost savings move. Is this contractor loyal to its employees? Do you
suppose the employees are loyal to the contractor? If the re-hired engineers,
now consultants, could earn a higher wage or fee with a competitor, would
they stay? Was the contractor potentially discriminating against older and/or
international engineers?
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Figure 3B
Case study #3.12: Trading local

This example small general contractor (GC) built quality custom and
speculative homes in his rural county. He had a great reputation and never
had to compete for work. Even though he was a residential GC, he was
union and only employed union carpenters, laborers, cement finishers, and
subcontractors (subs). He believed strongly in ‘trading local’ which to him
meant you bought your clothes from the only clothing store in town and
didn’t travel to the ‘big city’. The people he traded with would in turn
employ him to build their homes and commercial building projects. He
purchased his gas for his personal cars and business equipment from the
local gas station, even though the proprietor was a little more expensive
than another station 15 miles away. The GC had built the business owner’s
home as well.
The gas station owner later hired a contractor from out of town to build an
investment apartment project. Consequently, the local residential GC did
not purchase any gas from this station again. Why did the GC retaliate like
that? Do you suppose the gas station owner cared? Did this cost the GC in
the end? What benefits are there for trading local? Use this analysis for
hiring an out of town contractor (GC or subs) and them importing their own
craftsmen and construction equipment.
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Case study #3.13: Project controls specialists

An international design-build contractor has a group of cost, schedule,
quality, and safety controls specialists in a separate division outside of the
design and construction divisions. The controls division places their
individuals within each design discipline and jobsite construction team.
These individuals report directly back to the upper-management in the
home office, bypassing the group supervisors they are observing, essentially
calling the last planners out for any cost or schedule over-runs or quality or
safety infractions. The lead controls engineer on this large industrial project
would task his area engineers to essentially find and report to him where the
job was behind schedule or over budget, so that the lead could take the
information ‘up the ladder’ to his superiors in hopes of a reward. As a
result, it was very difficult for the controls engineers to obtain honest
information from the design and construction teams. Why are the controls
specialists in place? Are they there to help successfully complete the project
or are they enforcement? If cost engineers and schedule engineers are not
integral and part of design or construction teams, but rather are there to
report delays and cost over-runs, then trust does not exist between the
parties. In order for cost engineers and schedulers to get realistic
information from those that are performing the work, the designers and
builders need to be confident that they will not be punished with that
information later. The area engineers should have been on the job to assist
the designers and builders, providing schedules and cost control reports as
tools to help with the tasks at hand, rather than using them as a negative
reporting tool. How might this system be modified to benefit all the parties,
and most importantly, the project? Maybe draw an organization chart for
this example.
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Case study #3.14: Residential organization

The residential construction industry is often maligned as unsophisticated
and prone to quality, safety, cost, and schedule mishaps. Some of the case
studies in this book reflect this. Is it necessarily the case that commercial
contractors are better than residential? This author was raised by a
residential builder and has built and managed many successful residential
projects and therefore residential deserves another look. I have had the
opportunity to work as an agency owner’s representative for several multi-
million dollar executive home projects. There are builders in this industry
sector that manage their projects in a very similar fashion as successful
commercial projects are managed. Some of the construction management
(CM) tools these contractors use include:
Formal copyrighted contracts;
Open-book auditable cost-accounting systems;
Weekly coordination meetings and associated meeting notes;
Monthly pay requests with detailed schedules of values;
RFIs, submittals, change orders, and other CM communication
tools.
Many of these residential contractor employees have worked, or will later

work, in the commercial sector as well. Many larger commercial
subcontractors have residential divisions. Do you have a bias in favor of
one industry sector (residential, commercial, heavy civil) over another?
What are some advantages for an entry level project engineer or assistant
superintendent in each of these sectors?
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Case study #3.15: My reputation is at stake

What is the difference between a construction manager (CM) and a general
contractor (GC)? Some will say the CM is involved with design-build, but
not always. Some CMs are brought onto the team early to assist with
preconstruction services, but so are GCs. An agency CM does not have any
financial stake in the project, but a construction manager at-risk (CMAR)
and GC both do. A CM can actually be an individual within a large
construction company and on a large construction project such as a utility or
industrial facility. In this case the CM supervises both superintendents and
project managers and potentially design engineers. This is the arrangement
in case studies #8.4, 11.11, and 11.14. In some states it is just semantics and
how they offer construction licenses. But for some in the built environment
industry, a GC typically employees some direct labor, such as carpenters to
build forms and laborers to place concrete, whereas a CM does not employ
any craft labor and hires all subcontractors (subs). But of course a GC can
sub out the entire project as well. Most builders will say they wear both CM
and GC hats. The answer is, it depends. Which do you work for?
This example CM supposedly fit the CMAR analysis. They had been
contracted by a first time developer to build a shopping mall where an old
horse racing track use to be. The developer also engaged a consultant to
review the CM’s estimates and schedules. The CM had earlier
recommended an architect for the project and had solicited subcontract
proposals. When it came time to negotiate the guaranteed maximum price
(GMP) the CM offered the developer a deal to save 1% off of the entire
contract value by contracting with all the subs and suppliers direct. There
would be approximately 50 of these firms on this large retail project. This
means the CM will not charge for liability insurance, which approximately
equals 1%. The CM will still perform all the jobsite management activities
which include:
Everything spelled out in the jobsite general conditions estimate;
Draft subcontract agreements and purchase orders (POs) but for the
developer to sign, not the CM:
Monitor project schedule: and
Chair weekly owner-architect-contractor meetings.
The CM will charge the same 7% fee they were to include in the GMP on
the total cost of the work. What is going on here? Is this a good deal for the
developer? Is this a good deal for the CM? Why were they proposing this
change of plans? Do you suppose they do this as a regular course of
business?
The construction consultant was not comfortable with this deal, especially
with a new developer. The developer’s architect did not offer an opinion on
this proposal. Why was that? Would a very experienced developer accept
this deal? This example is not the same situation as described in multiple
prime case #1.6. The construction consultant worked the CM over on this
proposal, in front of the developer. He challenged why the CM would still
need a 7% fee since they were no longer guaranteeing any of the typical
project controls including:
Cost control,
Schedule control,
Quality control, and
Safety control.
The CM’s chief executive officer claimed he was offended and indicated his
reputation was still at risk and that warranted the fee. What reputation?
What fee do you feel is justified by this revised arrangement? The
consultant’s fee proposal for the CM was very low. Who is now
contractually responsible for these controls? Would it be:
The architect?
The construction consultant?
The CM?
The developer?
Any or all of the 50 subs and suppliers?
This contractual arrangement is also known as a ‘pass-through contract’.

Residential ‘builders’ will propose this same arrangement for unsuspecting
home buyers with the buyers signing all the subcontract agreements and
POs and the ‘builder’ charging a fee percentage on the total cost. You may
have seen their advertisement in a front yard of a house under construction:
“Be your own contractor”. Have you experienced these arrangements? Are
they fair? What risks do all of the parties assume?
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4
Preconstruction
Including permits
Introduction
Everything we do in the built environment before construction occurs is
part of the preconstruction phase as depicted in this Figure 4A. This chapter
focuses on the general contractor preconstruction teams and processes that
interface with the project owner, architect and engineers, and
subcontractors. This discussion explores preconstruction services, contracts,
and fees, Preconstruction services includes everything from estimating and
scheduling to BIM, lean, and value engineering. Applying for and receipt of
building permits are critical to achieving project success and therefore the
owner-architect-contractor team’s interface with the city are also explored
in these examples. Although communication is the primary subject of
Chapter 11, many construction communication tools are part of the
preconstruction phase including early submittals, construction control plans,
mockups and others are discussed in these case studies as well.
Preconstruction Construction
Figure 4A
This chapter includes the following case studies related to preconstruction

and permits:
4.1: Laboratory interstitial floors
4.2: Maintenance staff
4.3: Laboratory mockup
4.4: Red and yellow tiles
4.5: BIM versus bid
4.6: Precon plans
4.7: Sewer easement
4.8: Unpermittable
4.9: Freecon
4.10: Cupcake permits

4.11: Similar but different schools
4.12: What goes around comes around
4.13: Value engineering
4.14: Lean
4.15: Church donors
studies in this Chapter #4 connect with many other chapters including:
Case studies #4.2 and 4.6 – Chapter 1, project owners
Case studies #4.3, 4.4, and 4.13 – Chapter 12, construction controls,
submittals
Case study #4.7 – Chapter 11, communications
Several cases also connect with Chapter 16, involving leadership
and ethics
connect with this chapter on preconstruction including:
Several cases from Chapter 1, project owners,
Case study #9.7, superintendents
Case study #12.3, construction controls, quality control
Case study #14.14, change orders
Case study #4.1: Laboratory interstitial floors

One very important role for a general contractor or construction manager
(CM) during the preconstruction (precon) phase is to provide
constructability input to the design as it progresses. This was a new cutting-
edge six-story biotechnology facility. The project owner flew its design and
construction team to all the latest comparable facilities in the country, with
the goal their new project would be the ‘best’. Typical with biotechnology,
pharmaceutical, medical, electronics and similar projects, this one was
driven by its mechanical, electrical, and plumbing (MEP) systems. The
mechanical contract itself would end up costing one third of the total
project cost. Much of the MEP work typically occurs in laboratory (lab)
ceiling spaces. This particular project owner had six other facilities and
experienced very expensive remodel projects due to constricted MEP
system ceiling access. The owner and designer decided during early
programming to utilize an unoccupied interstitial floor between every
occupied laboratory floor to house all of the MEP work. All of the systems
normally located above ceiling spaces would be located in the interstitial
floor. This essentially resulted in a structure that was 12-stories tall, with six
of them occupied.
The precon CM came up with a creative idea for the interstitial floor
structure. It would be suspended from the concrete floor above with
structural channels. Small W5 junior beams would connect these channels
and a lightweight concrete composite topping slab would create the
interstitial floor. The clear space would only be seven feet high, which was
tall enough for craftsmen, and the MEP systems could afford an efficient
horizontal layout. Pipes and ducts and conduits could then turn 90 degrees
and serve the laboratory floors above and below. Future remodel projects
(and maintenance) would allow the craftsmen to work in the interstitial
space, standing firm on a concrete deck rather than from ladders or scaffold
or scissor lifts, and not disturb the ongoing clean operations of the labs.
Provide examples of how this system had cost, schedule, quality, and safety
advantages both during and after construction. Prepare a comparative first
construction estimate of the interstitial deck described here and a
conventional eight inch cast-in-place deck with associated concrete
columns and beams. Core-drilling later through a concrete deck is messy
and noisy and expensive. This new system did not require core-drills for
later changes. I didn’t tell you how that was accomplished. Brainstorm a
resolution.
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Case study #4.2: Maintenance staff
A new hospital design was greatly influenced by men and women wearing
jeans and blue work shirts with their names on them. The facility director
had extensive design and construction experience. The maintenance staff of
the existing campus included a group of 30 licensed electricians, plumbers,
pipe fitters, carpenters, and sheet metal workers. They cost-effectively
accomplished many ongoing remodel projects without designer or
contractor involvement. For this new project, the facility director would
include his whole maintenance staff (different mechanics at different times)
in meetings with the architect, mechanical and electrical engineers, the city,
and the preconstruction (precon) contractor. He felt that since these men
and women would ‘run’ the hospital once complete, their input on what
works and what doesn’t was well worth their attendance at precon
coordination meetings. Was this overkill? What type of input might these
people provide regarding manufacturers, details, filters, electrical panels,
materials, control systems, etc.? What happens when only executives of the
client interact with the design team? What happens if only the architect
interacts with the city? What happens if no one interacts with the builders
(or potential builders) before ground breaking? Use a lump sum versus
negotiated procurement comparison for your explanations.
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Case study #4.3: Laboratory mockup
Submittals are one vehicle used by contractors and designers to assure what
will be purchased, fabricated, delivered, and installed is what the design
intended and what the project owner wants. Submittals take on a variety of
formats including shop drawings, samples, mockups, and others. Mockups
can be expensive, and if required, are typically described in the bid
documents. A hotel room, medical exam room, or an apartment unit are
examples of complicated and expensive mockups that involve many
subcontractors. Contractors often resist building mockups as this work is
performed out-of-sequence and is difficult to schedule.
A laboratory (lab) client that experiences 75% turnover, or remodels, every
three years wanted their new facility built with extreme flexibility. To this
end, the design team specified a complete and operational lab mockup to be
built in a vacant warehouse next to their new project. As is often the case,
the construction manager (CM) and major subcontractors objected and tried
to value engineer the mockup out of the project, but the owner refused to
budge. The mockup was estimated to cost $50,000. Why do contractors
want to eliminate mockups?
During the course of the mockup construction (as major earthwork
operations were underway next door) the owner and designer, true to form
(author’s opinion here, and throughout) began changing the design. They
changed finish materials, pipe and conduit runs, and casework design and
the construction team was paid for the changes. The builders’ short-term
frustrations would give way to long-term benefits. The owner was going to
spend a lot of money on this project, and the changes at the mockup level
cost pennies compared to what they would have cost in the new 300,000 SF
building.
But there were other benefits. The CM used the mockup as a bid
‘document’ with its finish subcontractors. They were all required to visit the
completed mockup and submit a bid form confirming their understanding of
the quality expectations. The mechanical and electrical subcontractors used
the mockup throughout the course of the building construction as a training
tool. They would have their new crews remove and reassemble process
systems. They would also use this opportunity to find creative ways to
preassemble their work. Even the project owner used the mockup to host
fundraising events and tour potential new lab scientists through.
Mockups should be looked upon as ‘get-tos’ and not ‘have-tos’ as should
all aspects of the submittal process. They are ways to finish and confirm the
design process and are early steps in construction quality control. Have you
been involved with creative mockups? Other than these examples, how
might mockups be used successfully? What types of materials and systems
would lend themselves to be mocked-up? The next case includes some
unique examples. How might mockups negatively impact a project?
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Figure 4B
Case study #4.4: Red and yellow tiles
Mockups are a valuable tool in construction as reflected in the previous
case study. This medical office building (MOB) included a complicated
exterior brick design. The architect had visited an old part of town and
desired to combine early 1900s brick, terracotta, and tile details with a new
building’s façade. Four-foot wide punch windows (pre-hung) were to be
framed in a small 8-foot wide by 12-foot high precast concrete panel that
was recessed into the brick wall. The panel would have bright glazed tiles
in all primary colors cemented to the concrete panels around the windows.
An extra precast concrete sill was included below the window and
additional brickwork returned the assembly to the outside brick wall. This
system also interfaced with waterproofing, metal studs, insulation, and
flashing. Take a shot now at drawing this feature.
The general contractor (GC) attempted on several occasions to value
engineer (VE) the complicated mix of materials and subcontractors and
suppliers out of the project. Even the project owner was skeptical about the
use of bright primary colored tiles, especially the red and yellow tiles. The
whole MOB was supposed to blend in with the naturally forested
neighborhood. The architect prevailed and the mockup was built on site.
When should mockups be built? How are they paid for? What
subcontractors and craftsmen should work on mockups?
All the preconstruction team met at the jobsite on a sunny day. The process
of building the mockup allowed the construction team to work out some of
its means and methods. They weren’t as negative as they had been when
early sketches were exchanged. The project owner said okay, but wanted
the red and yellow tiles replaced with earth tones. The blue tiles matched
the sky, especially that day, and the white tiles blended with the vinyl
window frames. What happened next appeared to be staged but was quite
impromptu. The architect walked 30 feet away and cut some scotch broom
and wild rhododendrons – both in full yellow and red bloom. Everyone
laughed and congratulated each other and the detail was approved. The GC
chose to cast the concrete panels on-site, stacking them, which saved
considerable cost. The project was a big success. List some of the different
subcontractors and suppliers who would be needed for this assembly.
Develop a short estimate and/or schedule for construction. Make whatever
assumptions as necessary. What other VE opportunities do you see?
Post script: The mockup stood for the duration of the project and was one of
the last things removed when the GC demobilized. Several trades used it as
a training and quality control tool when new craftsmen came to the job. A
photograph of the finished project is shown in Figure 4B.
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Case study #4.5: BIM versus bid
Similar to other relatively new construction management concepts such as
lean and sustainability and activity-based costing, building information
modeling (BIM) has its place in the built environment. But the question is,
does it have a place on all projects? Consider some of these options when
analyzing the following two examples:
Public versus private projects,
Large projects (size and value) versus small projects,
Complex projects versus simple projects,
Sophisticated contractors,
Traditional design-bid-build versus other delivery methods such as
design-build or construction manager at-risk,
Lump sum versus cost plus or guaranteed maximum price (GMP)
projects, and
Bid versus negotiated projects.
A: A private university teamed with a national architect and a major local

general contractor (GC) to design and build a high-technology
laboratory and classroom building. All parties committed to achieve as
many of the leading-edge current design and construction management
(CM) topics as possible, including lean construction techniques,
certified LEED gold, just in time deliveries, locally sourced building
materials, and others. Because the students on this campus are so
‘green’ and ‘techy’, the team also committed to design and build the $60
million project paperless. The architect and GC convinced the owner’s
representative that because of all these cutting-edge approaches, there
was no way to fix a lump sum or GMP construction cost estimate up
front. The GC therefore received a cost-plus fixed fee contract with a
4% fee. There would not be any physical copies of drawings,
specifications, requests for information (RFIs), submittals, meeting
notes, job diaries, and other typical CM tools. BIM was to be utilized by
all team members and each company required a full-time BIM operator
whose training was paid as a job cost. The BIM operators would have
their own weekly coordination meeting outside of the other standard
owner-architect-contractor, RFI, change order proposal, submittal and
other jobsite meetings. Because of electronic tools, such as BIM, the GC
reported upon completion the project was completed for 10% less than
if it had been built utilizing conventional paper CM tools. Can the GC’s
cost-effective claim be verified? What are the cost differences between a
conventional and paperless construction project? Who ultimately pays
for all the BIM coordination on a negotiated project? How much does
BIM save from the bottom line? Can a true cost comparison of any two
projects ever be conducted? Aren’t there always differences?
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B: The architect for another project convinced the school district to pay
them an additional $1 million in design fee to utilize BIM for all
architecture and engineering documentation on this $100 million public
high school bid project. The architect provided the school district with
several academic papers indicating BIM would improve design
coordination and reduce the quantity of change orders. Many of this
school district’s prior construction projects had finished in claims and
lawsuits due to change orders so they were willing to try this new
approach to design. The architect included a clause in the special
conditions of the construction contract requiring bidding GCs to include
$50,000 in their bid for “BIM support during the construction process”.
The low bidding GC indicated it had included this $50,000 requirement
but because it was a lump sum bid project, the GC’s estimate and cost
accounting records were closed book. If it turns out later that the GC
does not actively participate with BIM does the school have any
recourse? How are the subcontractors addressed? How might the as-
built drawings be prepared? If the GC says it is using BIM as an internal
coordination tool, but does not include examples with their RFIs,
submittals, change orders, and other forms of communication, how can
this contract clause be enforced? Does BIM work better for negotiated
projects?
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Case study #4.6: Precon plans

Many of the old-school superintendents did not trust any documentation
that came from the home office, and this ironworker turned general
contractor project superintendent was no exception. He would patiently sit
with the home office safety and quality control (QC) officers and nod in
agreement during the day-long preconstruction (precon) planning meeting.
The outcome would be two project specific (versus generic) safety and QC
plans. Explain the difference between generic precon plans and project
specific precon plans. This construction company took an active versus
passive approach to both quality and safety. But the bound and
professionally prepared documents would eventually be left behind the seat
in the superintendent’s pickup truck and he would arm-wave project
direction as he had always done prior, with admittedly some success, but
not always! How might these documents have been prepared such that the
superintendent would use them? Who on the jobsite team might be better
equipped (in this case) to implement these plans? Provide two active and
two passive measures for each of these important control systems.
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Case study #4.7: Sewer easement

If you cannot solve a problem the easiest solution is just to ignore it. Right?
Wrong! A $20 mil executive waterfront home project involved the joining
of four existing pieces of property. This was a gently sloping hillside
terminating at a lakefront with a downtown view. The four-level home was
to include an underground basketball court, lakeside pool, geothermal wells,
two elevators, two commercial kitchens, staff quarters, among many other
features most of us cannot even imagine. An agency owner’s representative
(rep) was employed by the family to look out for their best interests. In his
typical fashion he studied the drawings (paper at that time) and used
colored pencils and highlighters to trace out all of the systems and features.
This is a well-practiced form of ‘plan reading’. He found what appeared to
be an active six-inch sanitary sewer line running downhill vertically which
collected waste from the four homes above this expanded lot. Oddly enough
the city’s sewer main was actually just offshore in the lake. The vertical
branch sewer line was dead center in the new property but sort of faded
away on the utility drawing where the house was planned. The owner’s rep
extended the line on his drawing in bright red ink.
At a large design coordination meeting the owner’s rep pulled out his site
plan and brought it up: “Where does this pipe go? Currently it is heading
through the middle of our client’s new home. Do you propose it is
suspended in the basketball court or floating through the pool?” All of the
design team fell silent. They knew it existed. They then proposed several
weak alternatives, the best of which was a reroute around the new home.
But no one had engineered that solution. Can you reroute a sewer pipe
horizontal, without slope or fall? Unfortunately, the uphill owners had an
easement through the site and they were not interested in a reroute. Not
very neighborly of them, was it? What is an easement and where and when
is that supposed to be documented? What the neighbors really didn’t want
was this large home built between their four houses and the lake and the
view. The client had only secured an option on the property and leveraged
this sewer pipe as their excuse to get out of the deal. Who is at fault here?
Should the owner’s rep have kept silent? Why didn’t the architect and civil
engineer bring this up prior? Can the client claim any of their consultants?
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Case study #4.8: Unpermittable
Receiving permission to construct a project is not necessarily a given.
Permitting authorities have a large responsibility to protect the public and
make sure what is built complies with zoning, codes, laws, and is safe to
use. A developer had placed an option for $1 mil on a large piece of
riverfront property and tied it up in order to perform his due diligence or
feasibility study. In regards to a study of real estate development, what do
the terms ‘option’, ‘tied up’, and ‘due diligence study’ mean? The
developer and his feasibility team (architect, geotechnical engineer,
surveyor, and civil engineer) moved quickly through programming and
prepared conceptual design documents to run by the city. The grand plan,
and associated obstacles included:
1. This was going to be a mixed-use project including five wineries, a
restaurant, offices, and a warehouse. The current zoning was for
multi-family residential.
2. The building would be two-stories with a parapet height of 45’. The
targeted warehouse tenant needed high bay space. The current
height limits in this area were 30’.
3. The building would be built of structural steel and metal siding. All
of the surrounding structures were wood and masonry.
4. The steel building was heavier than most, but the geotechnical
report indicated the soil was soft and may require piling.
5. The city’s setback requirements were 30’ from adjacent property
lines and the street but the developer felt he could push this back to
25’ on three sides.
6. The fourth side of the building would front the river and required a
100’ setback but the architect had encroached on this with covered
outdoor usable spaces for dining. Do you know what it takes to get
a shoreline permit?
7. The water and sewer requirements generated by the planned winery
and restaurant tenants required larger services than were available
in the street, but the developer thought the city should increase their
service sizes.
8. A Native American tribe controlled the fishing rights on this river
and any development would require their permission. So far, all the
development in this area had included at least partial if not full
ownership from tribal members.
The architect was very positive that all this would be worked out and urged
the developer to release the hold on the property and proceed with closing.
Was this a reasonable recommendation? Why would a design consultant
make such a recommendation? If I told you the architect also designed
work for the property seller would that influence your answer? The
developer had his attorney call on all of the city council members and the
leadership from the Native American tribe and suggested they approve the
project. Is the attorney the right choice to represent the property buyer?
Does the city council issue building permits? Many developers are
aggressive and optimistic as this case study represents. Maybe some of that
is necessary. But how can the risk-reward tradeoff inherent in real estate
development be balanced with conservatism and good judgement? If a
consultant makes an incorrect recommendation, can they be found to be
negligent?
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Case study #4.9: Freecon
It appears, at times, that someone is always looking for something for free,
especially in construction. Contractors want to build construction projects
and realize a fair fee. They are not into it for free. Preconstruction (precon)
is that period of time before construction commences. For architects and
engineers, preconstruction primarily involves preparing a set of design
documents. Contractors participate in precon as well, but not as a general
course of business. General contractors (GCs) prepare budgets, schedules,
constructability reviews, and procure long lead materials, along with other
activities to support the design and owner teams during the precon phase.
The contractor’s ultimate goal during precon is to secure a construction
contract. What might be some other reasons a GC will choose to participate
in precon? How might a GC secure the contract? When would they not
secure a construction contract?
How much does it cost for a GC to participate in precon over a six-month
period? Does the owner pay for this help or is it free? Performing precon
for free was tagged as ‘freecon’ by an industry partner. Why would owners
want a GC’s early help but then not pay them for their work? Why should
an owner pay a GC a reasonable fee for precon? Why would a GC choose
to perform precon for free? Do you know of the phrase: ‘You get what you
pay for’?
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Case study #4.10: Cupcake permits
Aren’t all general contractors (GCs) well mannered? A small residential
developer/GC knew that he could be ‘short’ at times when things would not
be completed expeditiously and efficiently. He was an accomplished
carpenter and felt his time was better spent out on a jobsite rather than
waiting in lines at the county courthouse for a building permit. Instead he
would send his patient wife and their two toddlers to the rural permit office
which was almost one hour from their home and jobsites. His wife would
set her children up in a corner with crayons, juice boxes and peanut butter
and jelly sandwiches and she would patiently and surgically work the
permit officials. Other GCs would storm in, cussing and swearing, not
having shaved for a week, missing a few teeth, and wearing clothes that
would one day have to be cut off of them. Okay, maybe a few exaggerations
and generalizations here, but you get the picture. The GCs would pound
their fist on the counter and storm out shy of their needed permits. The
developer’s wife on the other hand brought the ladies behind the counter
(yes they were all women) cupcakes. She would offer to move paperwork
from one of their desks to another. The permit agents knew her children by
name and offered them candy. This husband and wife development team
always got their permits quickly. Was this unethical? Is this the way it
happens in the ‘big city’? Have you ever expedited a permit? What does a
permit expeditor consultant do? How can we all learn from this lesson – not
only as it relates to building permits, but in life?
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Case study #4.11: Similar but different schools
This experienced owner’s representative managed six elementary schools
built for the same school district with the same architect and the same basic
design (there were small differences) and built by the same general
contractor (GC). This was as close of repeat construction product that he
had ever witnessed in construction. But each of these schools were built in
different years, on different construction sites, utilizing a similar but
different mix of subcontractors (subs) and craftsmen, and each school had a
different school principal who had his or her own unique priorities. These
were public schools and all aspects of design and construction were subject
to open bidding. How did the same architect and same GC end up with each
project? Does the client benefit from repeat teams? Would it be beneficial to
have the same subs on each project? What role should an end-user, in this
case a school principal, play in design and construction of new projects?
Could they get in the way? Was anything unethical going on here?
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Case study #4.12: What goes around comes around
A very large private retail owner who on the average added one new
building to its campus complex on an annual basis, and performed many
remodel projects, entered into a lawsuit with the city and won. It appears
that a stoplight malfunctioned on a very busy holiday weekend when they
had a large sale planned. The light was not allowing potential customers
into their parking lot. The project owner proved negligence and was
awarded several million dollars in a civil lawsuit due to loss of sales. Can
you sue the city? Do you have a contract with them? The next year when
the retail owner needed approvals from the city for new project building
permits, street vacations, street use permits, revised curb cuts, certificates of
occupancy, and others they could not understand why the city did not go out
of their way to help the owner. The owner sheepishly sent their architect
and contracted owner’s representative down to city hall to apply for and
expedite permits instead of those who filed the lawsuit. Why didn’t the
owner’s attorney visit the city? The owner had six full time in-house
attorneys. What do you suppose they did all day? Are you familiar with the
term: You can’t fight city hall? Evidently this owner fought and won but
lost in the long-term.
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Case study #4.13: Value engineering
Some projects have an inherent value engineering (VE) process, especially
negotiated projects where the general contractor (GC) participates during
the preconstruction phase. Some project owners and designers welcome
contractor input with respect to cost savings, and others not so. Consider the
following two different examples:
A. The owner has reported that this GC’s guaranteed maximum price is
over their budget and has asked for VE ideas. The owner needs to
cut over 20% out of the estimate. Is this possible? Should
contractors volunteer to lead the VE process? Do architects
embrace this process? How should the owner and contractor deal
with potential revision items that the architect does not embrace? Is
the VE process ‘cheapening’ the project? How can that perspective
be changed? What liability has the GC assumed by proposing
changes? How do VE changes get incorporated into the contract?
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B. What are GCs approaches to subcontractor (sub) VE? Do you
request it from subs? If subs offer unsolicited cost savings ideas, do
you consider them? How do you assure that you are getting good
value in return? Who owns the design responsibility for a value
engineered item? Should you give the sub some incentive to
propose these ideas? Is it acceptable to allow them to skim some of
the savings off? It is said that contractors return 50 cents on the
dollar for credits but charge two dollars for every dollar of added
scope. Do you agree with that premise? Is this true for VE?
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Case study #4.14: Lean
Lean construction techniques have been adapted for construction in the last
20 years from the automobile industry. Lean basically means to build
construction projects as cost effectively as possible. Adopting a lean
approach to construction has been received well by some contractors and
resisted by others. Here are a couple of examples how different contractors
address lean.
A. This private developer has recently heard a lean presentation from a
college professor and is on the fence whether to require her open
book time and material project to be built by a lean contractor
advocate. She is interviewing two perspective general contractors
(GCs).
GC1: Argue why your company has always built in a lean fashion, even
it if was not labeled as such. Use concepts such as preconstruction
services, constructability reviews, value engineering, total quality
management, vetting best-value subcontractors, cost and schedule
controls, foreman work packages, earned value, zero punch list, zero
time-loss due to accidents, and others to pitch your company to this
client.
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GC2: Your firm has sent all your superintendents, project engineers, and
project managers to construction industry sponsored lean training
classes. Everyone is lean certified, and your business cards and
letterhead have been modified accordingly. Your company’s goal is to be
the leanest contractor in your state. Prepare an argument why your firm
is now more cost-effective than your competition and you can validate
that lean construction projects are finished less expensive than those
which are not.
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B. This large design-build mechanical subcontracting company
performs HVAC, processing piping, plumbing, mechanical controls
and fire protection all in-house. If they were a GC, they would be
the third largest in this metropolitan area. The company employs the
top mechanical engineers and has two hundred mechanics in their
fabrication shop. They sell fabricated ductwork and piping to many
of their smaller competitors. The vice president (VP) has just
attended a week-long lean construction technique seminar which
included topics such as activity-based costing, just in time planning,
pull planning, and supply chain material management. The VP is
tasked with transforming her company into the top lean mechanical
contractor in the state. She has hired you as an expert lean
consultant to help her phase in this transformation. You are to
prepare three lists of five actions each you would recommend she
implement. The first list is a group of easy to implement minor
changes which do not require buy-in or approval from any of her
other team members. The second list of five involves a pitch to the
project managers, superintendents, and project engineers. They will
have to devote some of their time and energy to incorporate these
suggestions into their project plans. The final list will have cost and
resource commitments needed from the subcontractor’s board of
directors. They will be the hardest to sell and will require the most
time to implement.
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Case study #4.15: Church donors
A private religious high school houses their students on campus in
dormitories, similar to colleges. The school decided it needed a new girl’s
dormitory. The board of directors (board) included several members from
the built environment community. Is this typical? Church boards are
sometimes considered difficult clients. Why might that be? Although there
were church members with construction experience, they elected to contract
with a third-party owner’s representative, or agency construction manager
(CM). Why didn’t one of them step up and donate their time? The board
instructed the CM that he was to have this dorm built quickly, cost
efficiently, and meeting high quality standards. Why do some project
owners forget the fourth important CM control aspect, safety? The board
also instructed the contracted CM that everyone needed to be treated fairly
and they did not want any disputes or claims. All of this seemed to be
acceptable marching orders to the CM.
The school already had chosen an architect who was an Elder and major
donor of the church. They had also chosen a general contractor (GC) whose
chief executive officer (CEO) was a member in good standing of the
church. Owners of both of these companies agreed to perform the dormitory
work at zero fee, donating their own personal time, and be reimbursed for
other actual costs only. What might go wrong with this situation? It seemed
as if everyone will get along just fine.
The CM was the only individual on the team who was not integral with the
church. Even one board member was also a major commercial drywall
subcontractor (sub) in town. The drywall sub joined in and donated a whole
barn full of ‘rock’ to the project. Evidently he had bought it ten years earlier
but had not yet been able to use it on any of his projects. Why might that
have been?
The CM attempted to meet up with the architect and get the design phase
scheduled. The architect and school did not have a contract in place but the
CM felt one was necessary. Why did he insist on a contract? The architect
dodged that move and could not really commit to a design schedule. He
used the excuse that because he was donating his fee his firm would use the
job as fill-in. The architect even expected his employees to donate their
time and prepare the design off-shift. Would you do that? The first few
drawings were sketchy at best. The architect responded to the CM’s
complaint with: “I know the GC. He will know what to do.” Any
commitments made were subsequently missed. List five things wrong with
this scenario already. Won’t a set of permit drawings be needed to share
with the city? Do you know the adage ‘you get what you pay for’? That was
how the CM was feeling at this point.
The CM’s encounter with the GC’s CEO was a very similar experience. He
preferred to work on a time and material basis and was not interested in a
guaranteed maximum price. How could the CM assure the church board
that the project would comply with their cost and schedule goals? The
pricing the GC produced was at a high summary level at best and what
detail the CM could see, appeared over-priced. The GC did not provide any
written sub quotes and the CEO indicated because he was not being paid a
fee, he was going to recommend to the church that they contract with the
subs direct. He has lined up the subs and they all agreed to donate their fees
as well. What is happening here? If the subs work direct for the church,
who will be maintaining schedule and quality controls? What happens if
someone gets hurt?
The CM complained to the board about the architect and the GC but they
appeared not to listen and sent him back out to do his job. The CM began to
have doubts and worried that if there were ever any audits or repercussions,
the responsibility may be laid on his shoulders. Were his concerns founded?
Should he hammer on the architect and GC, write them formal letters, and
copy the church board? What would be everyone’s response if he proceeded
in that manner? The CM eventually quit the project before any significant
design or estimating had been produced. Are you surprised? Did he error?
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5
Contracts
Including procurement, delivery, and pricing
methods
Introduction
The construction contract is arguably the most important document on the
project. The contract establishes relationships, rules, and vehicles of
coordination between the contracting parties. Before a contractor considers
executing a construction contract the project owner had to select the
project’s procurement options (bidding versus negotiating) and delivery
methods (traditional versus design build versus construction manager and
many others). The owner also decides on how the project is to be priced by
the contractors, either lump sum, cost plus, or a guaranteed maximum price
hybrid.
Contract documents can be generic documents copyrighted by the
American Institute of Architects, ConsensusDocs and other contractor
associations. Contracts can also be ‘home grown’ and written by project
owners and/or their attorneys. The five typical contract documents include
the prime agreement itself, supplemental or special conditions, general
conditions, drawings, and technical specifications. Additional contract
documents may include prevailing wage schedules, bid documents,
geotechnical reports, addenda, estimates, schedules, and many others. The
list is limitless and any document may be included in the contract as long as
it is referenced in the prime agreement. All contract exhibits should also be
physically attached to the agreement. Case study examples in this chapter
explore all of these documents and processes. This chapter includes the
following case studies related to contracts, procurement, project delivery,
and pricing methods:
5.1: No windfall allowed
5.2: Wet dirt
5.3: Epoxy floors
5.4: Not a GMP?
5.5: DB responsibility
5.6: Competitive general conditions
5.7: Master project agreement
5.8: Pick a GC, any GC
5.9: All-in
5.10: Unfair interview
5.11: Proposal preparation
5.12: Missing bakery ingredients
5.13: Are proposals contracts?
5.14: Man in the robe theory
studies in this Chapter #5 also connect with other chapters including:
Case studies #5.1, 5.2, and 5.9 – Chapter 6, estimating
Case study #5.3 – Chapter 10, subcontractors

connect with this chapter on contracts including: Case studies 1.6, 3.15,
13.7, and 13.8. Essentially all 275 case studies in the book involve contracts
in some aspect. Chapters 17 and 18 particularly focus on contracts and if
those cases were added to this chapter it would include over 40 contract-
related examples.
Case study #5.1: No windfall allowed

Guaranteed maximum price (GMP) projects typically include a contact
clause where the project owner and contractor share in any potential
savings. The contractor keeps 100% of the savings in a lump sum (LS)
agreement and absorbs 100% of any losses. The owner benefits 100% of a
budget under-run in a cost-plus percentage fee (CPPF) or time and materials
(T&M) project but likewise is exposed to 100% of cost over-runs. What
procurement methods are associated with LS versus CPPF/T&M projects?
A GMP project is a hybrid between the two pricing methods. The contractor
guarantees a high price limit and assumes the risk of cost over-runs. What
about document discrepancies or scope increases? Do GMP projects have
change orders as do LS projects? If GMP savings are generated, the owner
and contractor share in a predetermined arrangement, such as 75% to the
owner and 25% to the contractor. This gives the contractor an incentive to
save costs, which is not always the case with cost-plus projects. To
accomplish this, a GMP contractor will include cost allowances and
contingencies in the budget for risky or undefined scopes, which is not the
case with LS projects. Contractors may also estimate slightly higher
quantities than shown or use above market unit pricing – although astute
owner’s representatives (reps) are on the lookout for this practice.
How can project owners protect themselves from overly inflated GMP
pricing? Slightly higher is anticipated, but what if a contactor presented a
$20 mil GMP for a scope that should be $12 mil? If they bring the project
in at $12 mil, do they share the $8 mil in savings, $6 mil to the owner (75%
of $8 mil) and $2 mil to the contractor (25% of $8 mil)? The owner would
appear to be happy to receive a credit of $6 mil off the contract value such
that they had to pay only $14 mil ($20 mil – $6 mil). Should the contractor
be considered a hero?
Assume this same $20 mil project had a 5% construction fee built into the
original estimate, or $1 mil. The contractor had hoped to make a $1 mil fee
but now realized $3 mil ($1 mil + $2 mil). What percentage is that of the
final contract value? Good work if you can get it! Is this fair to the owner?
How can the owner protect against grossly inflated GMPs and potential
windfall contractor profits? One method is the use of a professional owner’s
rep or estimating consultant to thoroughly analyze the GMP before signing
the contract. Another is to place a high-end limit on the contractor’s savings
share, such as: “25% of any savings, limited to 1% of the total contract
value.” Using these limits, what would be the contractor’s fee in $ and %
and what would be the project owner’s final cost in the above example?
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Case study #5.2: Wet dirt

The geotechnical (geotech) report, also known as a soils report, is one of the
first engineering documents required on a project. It is used to gauge the
strength of the soil to facilitate design of the building’s foundation system.
Often the soils report will discover if contaminated earth requires removal,
such as oil-laden soil from an old fuel tank. Another finding from this
important document is the type of soil: Clay, sand, loam, gravel, glacial till,
etc. Contractors are also interested in the water table level and/or if the
current soil is saturated. Excavated soil which becomes wet (to a degree)
typically cannot be utilized for backfill around foundations or for site
utilities. In this case, the wet earth is excavated, exported and hauled off the
site (expense) and legally dumped (expense) and acceptable replacement
soil is purchased (expense) and imported to the site (expense) and placed
(expense). Needless to say wet earthwork is expensive to handle!
A large lump sum example project was secured by this general contractor
(GC). The site was next to a lake and the water table as stated in the geotech
report was five feet below grade. The report went on to say: “Excavated
materials must be kept dry and cannot be utilized for backfill if exposed to
the weather.” This project was in the Pacific Northwest – it rains there!
Despite this warning the staff estimator assumed all on-site excavated
materials could be kept dry and were suitable for backfill and therefore did
not budget for export or import of dirt. The project manager (PM) was in
the hole (literally) for almost $1 mil within three months of breaking
ground. It is difficult to recover from these types of losses. Can the PM
submit a change order to the project owner for wet dirt? Should the PM
confront the estimator? How should geotech reports address potential
construction problems or address suggested means and methods? Should
the owner have included an allowance for export or import that the
competing contractors were to include? Have you read a geotech report?
Was it clear?
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Case study #5.3: Epoxy floors

The aerospace client in upcoming case study #8.1 felt they had a need for a
‘perfect’ slab-on-grade (SOG). The 90,000 SF SOG was machined troweled
to a dry grind finish. It was slated to be painted with a thick glossy white
epoxy finish. The specification required NO cracks and the epoxy
subcontractor (sub) guaranteed their product would bridge all shrinkage
cracks. Concrete cracks when it cures – that is an inevitable fact. In
preparation the sub caulked all the cracks they found before applying the
epoxy – working tireless hours on their hands and knees. The subcontractor
valued the client’s work and hoped for a long-term relationship to apply this
white epoxy to hundreds of existing slabs. The epoxy work occurred over
several expensive off-shifts due to its odor. It looked perfect after
completion and no further construction was allowed on the finish product.
But two weeks after curing, tiny hair-line ‘spider’ cracks began to show.
The owner complained and the subcontractor claimed they did not
guarantee against these tiny cracks – which were previously not visible. But
there were thousands of them. The subcontractor’s supplier did not take
responsibility. An awkward debate ensued about the definition of a crack
and allowable tolerances. Contractually the GC and subcontractor could
have likely fought the issue and won. What is ‘fair and reasonable’ must
always come into play. Have you ever seen a perfect SOG with zero
cracking? Look again. This time pour a thin film of water on it and watch as
it dries. The water will high-light all of the slab’s imperfections. The two
companies pooled their resources to appease this valuable client and
countless hours were spent, again on hands and knees, filling in the cracks
with tiny artist paint brushes. Was this fair? What should each of the three
contacting parties have done? When is the supplier culpable? Where is the
architect in all this? Could a minimum crack size have been specified? How
would this be measured? Who would have won and why if it had gone to
court? How will the specification read on the next epoxy floor project?
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Case study #5.4: Not a GMP?

Some contractors prefer competitively bid lump sum (LS) projects. Others
only work on time and materials (T&M) or cost-plus fixed fee jobs. Both of
these are extremes and are industry (residential versus civil) and client
(public versus private) and project size dependent. List three project types
which fit under each of these procurement and pricing methods. Other
contractors split the difference and utilize guaranteed maximum price
(GMP) pricing and contracting methods for their negotiated commercial
projects.
A built environmental professional employed the services of an agency
owner’s representative (rep) to assist with the construction of an executive
waterfront home for her extended family. She wanted to make sure
everything was above board and open-book yet still be cost effective. The
experienced residential builder the family chose had only worked on a
T&M basis. He knew his client type – those who changed their minds – and
a LS residential project would end up in a change order blood bath. Does
this happen? Do you have any first-hand experience? The family’s point of
contact wanted neither a T&M project nor one plagued with change orders,
therefore the owner’s rep recommended the GMP approach. The family
would have high-end price protection with open-book accounting. Explain
the concept of open-book accounting. The builder was not comfortable
signing a formal GMP contract but this was a high-profile client and he
agreed with the inclusion of a 25% savings potential and a few contingency
funds. The final price was $5 mil. What AIA contract form (#) is utilized
for a GMP project? What ConsensusDocs form (#) is utilized for a GMP
project?
The project proceeded accordingly. Yes the client changed a few things. The
contractor was allowed change orders for scope changes. Did you think, as
do most owners, that a GMP contract does not have a potential for change
orders? Both LS and GMP projects experience scope changes. GMPs often
absorb small discrepancy changes but LS typically does not. The GMP for
this lodge was $5.3 mil at project completion.
The general contractor (GC) performed its final accounting and requested
an additional $200,000 after project completion. They indicated there were
numerous cost over-runs, the contingency funds had been spent, and there
were owner changes they had not previously processed. From the owner’s
rep: “We had a contract with a GMP. You cannot submit a post-project
claim and not follow the contract procedures.” From the GC’s ownership: “I
never wanted to sign that contract anyhow. No one has ever hung a contract
over my head.” Should the owner pay? Can the owner audit the GC’s
books? How does this one turn out?
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Case study #5.5: DB responsibility

One of the reasons some project owners choose the design-build (DB)
delivery method is to have ‘one stop shopping’. The owner has only one
contract and it is with the designer-builder or DB entity. Often a general
contractor (GC) will either joint venture with an architect or hire designers
as sub consultants for a one project DB arrangement. Many mechanical and
electrical subcontractors are true designer-builders but very few GCs are,
even though they market that service. What is errors and omissions
insurance and who usually is required to carry it and does that include a
typical GC?
This particular GC did an effective job of marketing its DB services to an
industrial processing client. The GC assembled the complete team, and the
owner approved the all-in $20 mil estimate. But just before the contract was
to be signed, the GC offered its client a value engineering opportunity they
couldn’t refuse. The GC would eliminate the insurance and tax markups it
had in its estimate for the designers if the owner would contract with them
direct. The GC drafted up the design agreements for the other two parties to
sign. The total design fee was $1.5 mil and the insurance on top of that fee
was 1%. In this state, sales tax of 10% would have been paid for by the
owner direct on top of the all-in construction cost. Because the designers’
fee was included in the previous $20 mil contract value, it would have been
subject to that 10% tax. But because design is considered a ‘service’ and a
soft cost, the owner would not have to pay tax on that portion. How much
did the owner save? The GC retained its fee on the design portion as they
had managed the effort up to that point. Was that fair? What is the new GC
contract value? Maybe you should draw a before and after organization
chart for this team.
What risks has the owner now assumed? If there is an error in the design in
a true DB project, who would pay for the construction impact? If there is an
error in the design of this processing plant, under this new arrangement,
who will pay for the impact? Other than change order management and
only one contract what are some other advantages of the DB delivery
method? What are some disadvantages of DB? How can they be managed?
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Figure 5A
Case study #5.6: Competitive general conditions

The example shown in Figure 5A is a five-floor addition to an existing
research building on a university campus. The 78,000 gross square foot
building includes an enlarged basement. The basic structure is cast-in-place
concrete. The project delivery method selected for this project was
construction manager-at-risk (CMAR), and the contract was awarded early
in the design process to enable the CM to perform preconstruction services
while the design firm completed the design. The contract was awarded
using a negotiated process and provides for a lump-sum amount for
preconstruction services, a lump sum for project general conditions, and a
cost-plus fixed fee with maximum allowable construction cost (MACC) for
construction. A MACC is very similar to a guaranteed maximum price.
How are estimate developments managed with a CMAR project? How are
costs managed during construction? Because contractors are (partially)
chosen on a low jobsite general conditions estimate, what keeps them from
under-staffing the project or shifting more responsibilities to the
subcontractors? What are negotiated support services and does that solve
this dilemma?
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Case study #5.7: Master project agreement

A popular contracting method with large project owners who do a lot of
negotiated work with repeat general contractors (GCs) is through the use of
a master project agreement. This contract establishes all the relationships
and rules but does not discuss project specifics, scope, costs, or schedule.
The master project agreement focuses on insurance, reimbursable versus
non-reimbursable costs, procedures related to payment, change orders,
closeout, and etc. Instead each project is incorporated into the mater
agreement via a change order. All of the typical project specifics and
requirements are then discussed and agreed to within the change order
language. This is similar to the use of AIA A201 general conditions
document and then supplementing that with ‘special conditions’ often
included as front end material in the technical specification book or project
manual.
Large publicly traded companies who have offices around the country will
use the master project agreement and their favorite GC will travel with
them and hire local subcontractors and suppliers for each project. Imagine
an arrangement like this with a large coffee company that builds hundreds
of restaurants each year. This arrangement works well for the project owner
and the GC. But how does the owner keep the GC’s prices competitive?
Since they have an agreement in place, is the GC still ‘hungry’? Does the
GC keep the same quality project manager and superintendent on each
project or do they use this national client as a way to train new people and
cycle them through the system? Have you worked on a project with a
master project agreement? Was it organized similar to this discussion? What
are the advantages and disadvantages with this arrangement? GCs will also
utilize a similar arrangement with subcontractors they do a lot of repeat
work with. Imagine a high-rise building, or shopping mall, and the GC
wants to use the same set of subcontractors but there are several different
tenants which are paying for the build-outs. How can project numbers,
costs, pay requests, and potential open-book audits accommodate master
project agreements?
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Case study #5.8: Pick a GC, any GC

In case study #9.1 we will discuss multiple superintendents on the same
project. In several others we also discuss the pros and cons of staffing
arrangements. Some of these discussions include employing a separate
general contractor (GC) for the shell work from the tenant improvement
work (reference case study #3.3). But what about a project owner who
cannot settle on one GC? This complicated project lasted six years and had
approximately 26 phases. The work consisted of a complete remodel and
expansion of one of the largest and most exclusive health and athletic clubs
in the country. The club owner started with their favorite small GC who had
accomplished their repair and remodel work thus far, all on a time and
material (T&M) basis. The GC owner was also the superintendent and
carpenter and did not have any formal estimating, scheduling, or
construction management contracting capabilities. The client had to hire all
of the subcontractors direct. The club owner also used a very small and
understaffed project architect throughout the multiple phase expansion, but
hired many of the engineers direct.
On the recommendation of a construction consultant, the owner agreed to
hire a large local GC for preconstruction (precon) on their major expansion.
They cycled through two more precon GCs due to disagreements with their
guaranteed maximum prices. Another GC received the garage package on a
lump sum (LS) basis but that phase ended up in a dispute. Three more GCs
were contracted with subsequent portions of the expansion. The club owner
also engaged a few specialty design-build subcontractors direct and the
small original GC also stuck round for the duration and picked up small
change order work. Maybe now is a good time to sketch up this
organization chart. The client felt the small GC would be more cost-
effective with his T&M pricing than a larger GC would be with LS change
orders. Is this necessarily true? Can anybody keep track of this? Who is
ultimately responsibility for project cost, schedule, quality, and safety on
this project? Do you feel the problem was with all of these different
contractors or the owner? How would you propose a better arrangement? Is
this the same as a ‘multiple prime’ delivery method?
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Case study #5.9: All-in

It appears there are two different types of general contractors (GCs), those
that include everything under the sun in their estimate and those that price
projects minimally (opinion). There are likely some in-between, and most
will tell you they are neither one extreme, nor the other. But these extremes
do exist (experience) and are reflected in these examples.
General contractor ‘A’ is a large privately owned commercial GC with a
great reputation in town for performing private negotiated projects. Even
during a slow construction market, they always seem to keep their
employees busy. GCA even turns down competitive requests for proposals
– they prefer to be the only GC negotiating with an owner – don’t we all?
They work for many real estate developers, often brought on to perform
preconstruction services which will roll into a guaranteed maximum price
(GMP) contract. Their estimates are heavy (experience) and the jobsite
general conditions and fees and other markups are also high. If challenged
by an outside estimator they respond: “We know what it will cost and we
have everything included.” They do not typically charge for small
discrepancy change orders and do not end up in post-project disputes and
claims. They typically spend most of their GMP but will find a way to
return some savings to the project owner. Owners love them and line up to
give them work. Subcontractors (subs) like them also. Why is that? This is
obviously a successful business model. But what is wrong with it? What are
some of the hidden advantages and disadvantages with this approach?
GC ‘B’ also is financially successful. They perform negotiated work as
well, but with a different approach. They estimate the documents as drawn.
They do not include allowances and contingencies for anything which is not
clearly shown. Their proposals include a long list of assumptions,
clarifications, and exclusions. But these pre-project communications are
healthy also, aren’t they? This GC works for developers who are looking
for lower front-end pricing than provided by GCA. These developers feel a
lower first price will result in a lower last price. Are they correct? GCB also
‘nickels and dimes’ their project owners. What does that phrase mean?
They are not bashful with the quantity of change orders submitted or their
inflated values. They provide a minimal pay request schedule of values and
work hard to keep their books closed. Can they do this contractually? GCB
also works their subs over on pricing, but the subs keep coming back for
more work. Why is that?
As a new project engineer, which GC do you want to work for? As a
developer which one will you hire? As a sub which one do you want to
work for? If you were an architect, which one would you like building the
projects you designed? At the end of the day, all things being equal on the
same project, which GC spends the most money? Which one makes a larger
profit? I hope you are not reading in a bias on my part, both systems work.
The answers to all of these questions is ‘it depends’.
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Case study #5.10: Unfair interview

A hospital client started with a long list of potential general contractors
(GCs), narrowed it to a short list of proposals, and was down to a choice
between two qualified local GCs. The interview panel included the hospital
administrator, hospital facility manager, project architect, and an outside
construction management consultant. Does this feel like a reasonable
interview panel for a GC? More or less it is. Who else might you add to an
interview panel? Should the presenters be scored on some rigid weighted
system? The written questions received prior were appropriate as well as
most of the in-person interview questions. But then the consultant asked
GC1 a fatal question: “It is my experience that your company always has
expensive jobsite general conditions costs and you often over-run your
estimate. Why is that?” Ouch. The GC responded defensively but the seed
had been planted with the hospital. GC2 was not asked the same question
and was subsequently selected. For the record both GCs run their projects
similar and have similar costs. Why do you suppose GC1 was questioned
like this? Was this question unfair? It turns out the consultant had a seat on
GC2’s board of directors. Now is the picture clear? Should he have recused
himself? How should GC1 respond?
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Case study #5.11: Proposal preparation

You hear all the time, ‘practice-practice-practice’ when it comes to
presentations, interviews, and speeches. But do you really need all that
practice? Can it be overdone? Is there any advantage to an impromptu
delivery? Not everyone can react quickly on their feet, but you typically
know when you are hearing a canned presentation and sometimes they can
be quite dry and boring.
This example general contractor (GC) was proposing on a large industrial
project. This was an important client and they were going in with their ‘A’
team. The president of the company was named as the officer-in-charge and
a senior project manager (SPM) was proposed as the PM. Are SPMs’ wages
typically considered a reimbursable cost on an open-nook negotiated
project? Three very qualified, and typically lead PMs were also on the
organization chart but as project engineers (PEs). This setup was definitely
a ‘bait and switch’ project team. See also case study #9.1. The GC had no
intention of locking up three of its PMs on this project. Fast forward ahead:
The GC was successful with its proposal and none of the three PMs ever
worked on this project.
The day before the interview the SPM was very uptight and was running the
entire team, including superintendents and other supporting team members,
through an endless interview rehearsal, which included practicing
anticipated questions and answers. One of the proposed PMs/PEs felt this
was overkill and avoided much of the practice. He had other pressing
business. The SPM was furious. Just chill! Most of the next day’s interview
went along without a hitch. All of the owner’s team were dressed in short
sleeve white shirts and clip-on neckties (stereotype). They were a pretty
boring bunch. The rehearsing-skipping PM/PE actually got up out of his
seat and ad-libbed a communication flowchart on the white board. The
client was impressed (bragging) but the SPM was stunned. When the client
asked the SPM a question they had not anticipated, he froze for a very long
minute. The question posed was: “If we ask you to perform additional work
outside of this project’s scope, to be reimbursed on a cost-plus basis along
with your proposed markups, what would be your response?” How would
you answer? Why did the SPM freeze? The same rehearsal-absent PM/PE
asked the SPM if he could field the question and the SPM numbly nodded.
The PM/PE’s response: “Sure, we will help you with any additional work
you want to throw our way.” Everyone smiled and the GC received the
award. Are you okay with a little impromptu speaking? Give it a try. It
doesn’t work for everyone. It may be possible you will flop, on the other
hand you may land your next big project.
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Case study #5.12: Missing bakery ingredients

The general contractor (GC) in this example is similar to GCB in case #5.9.
A bakery project owner, who had a sole source contract to provide
hamburger buns to a large national fast food-chain, was embarking on their
largest construction project. They needed a hamburger bun bakery. The
owner contracted with a repeat commercial GC but this project was really
an industrial facility with large commercial ovens, freezers, conveyors,
process piping, cable trays, and etc. The baker contracted with an agency
owner’s representative (rep) who also use to work for the same GC. Is this a
conflict of interest? How should owners with little construction experience
find reliable third-party representatives? What background do owner reps
have? The GC had negotiated a lump sum closed-book agreement. Good
work if you can get it. Why is this unusual and to who’s advantage does it
play into? Over the course of construction the GC constantly told the baker
and the owner’s rep of their exclusions. But because of the nature of the
closed-book contract and estimate, it was difficult for anyone to prove
otherwise. Also because the GC and owner’s rep had a prior relationship,
this was an uncomfortable situation. They had many important people in
common. But maybe some of the exclusions listed here were credible. What
do you think?
Site survey services,
Off-haul of contaminated soil,
Import of replacement soil,
Off-site utility connection fees,
Concrete housekeeping pads, vibration isolation, and foundations
for owner-furnished equipment,
Anchor bolts and embeds for the owner-furnished equipment,
Emergency generator service for process equipment,
Cable tray for low voltage wiring provided by the owner’s
subcontractor, and others.
Was the GC taking advantage of the owner? Maybe a little bit (first-hand
experience). How could all these missing ingredients have been clarified
earlier? How should they
have been budgeted for? The discussion of owner’s subcontractors and
suppliers is threaded throughout this book. The problem with owner-
provided subcontractors did not show up first on this project, and this will
not be the last project it occurs.
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Case study #5.13: Are proposals contracts?

Six successful high technology couples have been dabbling in real estate
developments. Most of their projects have included remodeling and flipping
retail centers and a few small apartment buildings. They have decided to go
for the home run and have purchased a downtown city block in an out-of-
state major metropolitan area. Their plans are to build a 35 story apartment
building with underground parking and a floor or two of retail. They hired
the architect they always work with and have signed the architect’s contract.
Should owners sign the architect’s contract? This was not an AIA
document. Why would an architect not use an AIA contract? Their architect
has always recommended the developer (one partner is the development
manager) hire all other engineers and sub consultants direct and outside of
the scope of the architect. This is unusual. Why would the architect make
that recommendation? Why would these very smart but very frugal
developers proceed in that fashion?
The developer has received a 70 page proposal from the recommended
mechanical and electrical engineering company. It includes fees,
deliverables, inclusions, and exclusions, as well as a lot of marketing data.
The last page of the proposal has been signed by the owner of the
engineering company and has a place for the development manager to sign.
He has now reached out to a construction consultant who has found several
risk areas within the proposal and recommends the owner not sign, but
rather work out mutually acceptable terms and execute an AIA contract.
Why would the consultant take a more conservative approach? The
developer’s response: “We always do business this way. It will be fine. We
will worry about the details when we sign a formal contact.” But tradition
has shown with this group that they never get around to signing a formal
contract. Is the proposal a contract? It may work out fine, but what are the
downsides of these types of arrangements? The AGC has defined a contract
as a three-sided triangle which includes an offer, acceptance, and
consideration or conveyance. I have added two sides to the triangle in
Figure 5B to make it a five-sided house. An official contract can only
involve a legal transaction and both parties must be authorized, often
officers of their companies, to sign it.
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Offer Acceptance
Legal Authorized Party

Transaction (CEO)
Conveyance
Figure 5B
Case study #5.14: Man in the robe theory
Fair is fair and that is important. Contractual inclusions and rules are
important. But which is MORE important? Can something be considered
‘fair’ but outside of the strict interpretation of the contract? And can
something be considered within the bounds of the contract, but might not be
fair? The answer to all of these is pretty much yes, considering other issues.
What is important for the construction professional is:
A. Cross your I’s and dot your T’s and complete the contract carefully.
Read all terms of the contract and do not sign up to anything you do
not agree with. Have your attorney and bonding company (surety)
read all prospective contract agreements before you submit a bid or
proposal. The court system considers that both parties have
thoroughly read and understood all conditions of the contract (even
the fine print) and they have mutually negotiated and agreed to all
terms. This is why the courts find it difficult to rule outside of the
contract. If the parties agreed to these terms, why would the court
overrule them?
B. But it is important that you also be ‘fair’ with respect to contract

negotiations and administration. Some courts may rule outside of
the contract if they deem that the language was not ‘fair’.
But the parties cannot rely on just A or B above. They cannot ignore
contract language and just hope that fairness in the end will rule. They also
cannot rely strictly on contract language considering it might not be fair,
because at the end of the day, the ‘man in the robe’ (or woman), or in this
case the judge, may find in favor of fairness and over-rule contract
language. Consider the following example. This general contractor project
manager (PM) was tired of issuing detailed subcontracts (subs) and
purchase orders to his vendors only for them not to read the language and
then argue about it during the course of construction. He decided to teach
his electrical sub a lesson by inserting this language: “Electrical
subcontractor to supply all concrete reinforcement steel”. The sub signed
the agreement as the PM expected, without modification. One week into the
job the PM called the electrical owner and asked him when the rebar was
going to be delivered – they had foundations to pour. Can you imagine how
that conversation turned out? If the PM had attempted to enforce this
clause, would it have been considered ‘fair’? But it was in the contract,
right, and the contract rules? If you were the man, or the ‘person’ in the
robe, how would you rule?
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Notes
6
Estimating and bidding
Including marketing, proposals, and interviews
Introduction
When is an estimate not an estimate? The answer is: When it is a bid or
budget or guaranteed maximum price or actual cost. The term ‘estimate’ is
generic. To-estimate is a process or procedure. The estimate itself can be a
document or a price. It is relevant for all members of the built environment
to be more specific regarding exactly what type of cost estimate they may
be referring to. Many disputes arise because the project owner thought they
had a ‘bid’ but the contractor proposed a ‘budget’. Bidding is one
procurement method available for project owners, the other being
negotiating. The bid itself is typically a lump sum price from a general
contractor. Heavy civil projects although often use a long list of materials
with stated quantities and the contractors apply their all-in (material, labor,
equipment, markups) unit prices to the government’s quantities. These are
known as unit price bids and unit price estimates.
Budget estimates are also known as rough-order of magnitude estimates and
are associated with preconstruction services (Chapter 4) and early design
phases such as conceptual and schematic design. Budget estimates are the
least accurate estimate type and often include substantial contingencies.
Lump sum estimates typically require complete construction documents,
including drawings and specifications. This is the most accurate type of
estimate but because contractors are assuming all pricing risks, they will
include higher fees. A guaranteed maximum price estimate is a hybrid of
budget and lump sum pricing and may occur at the completion of the design
development phase and is associated with a negotiated contract.
Estimates are prepared by many members of the built environment, not just
general contractors and subcontractors. Project owners, especially
developers, and architects also prepare estimates in-house or with the
assistance of contracted estimating consultants. Contractors prepare their
estimates in-house either with a staff estimator or estimates prepared by the
project manager who is slated to run the project if they are successful. Most
of the case studies in this book have money or estimates involved. We have
included 18 specific examples in this chapter which discuss all of these
estimating concepts and situations. This chapter includes the following case
studies related to estimating, bidding, marketing, proposals, and interviews:
6.1: Car painter
6.2: First, last, and only price
6.3: Choose a specialty
6.4: Tile shortage
6.5: Island prices
6.6: Tower crane or no tower crane?
6.7: Unverifiable
6.8: Push hard, but not too hard
6.9: Double burden
6.10: DFHW QTO
6.11: Pile cap QTO
6.12: Forklift purchase
6.13: It is for the kids!
6.14: Existing conditions
6.15: When is second the best?
6.16: Bad day for a sick day
6.17: Estimating strategies
6.18: Do what you know
Case studies #6.3, 6.7, and 6.9 – Chapter 16, leadership, careers,
and ethics
Case study #6.8 – Chapter 5, contracts
Case study #6.12 – Chapter 8, jobsite operations, means and
methods
Case study #6.14 – Chapter 14, change orders
Many case studies in this chapter also connect with Chapter 1
regarding the project owner and developers

connect with this chapter on estimating and bidding including:
Case study #2.10 regarding the design team
Three cases from Chapter 5 regarding contracts
Case study #7.11, scheduling
Case studies #8.7, 8.8, and 8.13, jobsite operations
Case study #11.12, communications, drawing reading
Case study #14.14, change orders
Case study #15.6, construction completion, as-built estimate
Case study #17.11, estimating ethics
Case study #6.1: Car painter

The finish schedule for a high-bay industrial project required all exposed
structural steel to be painted. The steel comes ‘shop primed’ so what is the
benefit of a final finish coat? This work is difficult to accomplish but it can
be managed. This particular bid requirement also stated the finish paint was
to occur after all the mechanical, electrical, and plumbing (MEP) work had
been installed. Why did they have that requirement? The 15 feet of
interstitial space created by the steel trusses was 50 feet above the slab-on-
grade. Construction of these trusses are shown later as Figure 14. The MEP
work, and associated catwalk access, was substantial in this facility – it
almost filled up the interstitial space.
On bid day a general contractor (GC) received a painting quote from an out-
of-town painting subcontractor (sub) called ‘Custom Ride Painting’ that
was $1 mil lower than the other quotes. The chief estimator had not heard
of the painter and had not confirmed the painter’s scope through the use of a
request for quotation (RFQ) before bid day. Why are the use of RFQs a
good idea? Why don’t GCs take bids only from subs they are familiar with?
How did the painter know about the project? The estimator asked around
the bid room if anybody else knew the painter. The project manager (PM)
who was assigned to the project if the GC were to be successful indicated
he knew a guy from high school (they played football together) who had a
car painting shop with that name. The bid team made a decision that the PM
was to call the sub to see if he understood the scope, especially as it related
to high-bay steel.
Should a GC call a very low-bidding sub on bid day? Why not just discard
the bid or add a bond? Why not just use the low bid and force the painter to
comply with the specifications? Can the painter pull its quote post-bid? If a
low sub pulls their quote, will the owner pay the GC to go to the second
bidder? Should the GC also call a very high-bidding sub? Would this be
considered bid shopping? Have you ever been asked to call a subcontractor
or supplier on bid day to check on the completeness of their bid?
The ex-football player turned car painter and now evidently an industrial
building painter took the PM’s call. No, he didn’t understand the scope. He
told the PM to add $1.5 mil to his bid. Now what? Does the GC modify the
painter’s bid? Will ‘Custom Ride’ call all the competing GCs with its
revised bid? Conversely, would it have been unethical for the GC PM NOT
to call his acquaintance and advise him of his obvious error?
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Case study #6.2: First, last, and only price

A small reputable builder did not believe in negotiating. He provided
prospective clients his ‘price’ which was his best price going in. He was
proud of this business model and expected the same from his subcontractors
and suppliers. When asked to ‘sharpen his pencil’ the builder refused to
budge and often walked away from a project, even if the client backed off.
Why did the builder stick to his first and final price? What would have
happened if the builder adjusted his approach and provided a slightly
inflated price as his first bid? Why do some built environment participants
insist and welcome working prices down? What happens if the price is
reduced below cost but the parties still enter into a contract?
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Case study #6.3: Choose a specialty

As shown in case #3.5 a project manager (PM) can make him or herself
valuable to their employer by adding the ability to bring new work in the
door as a tool in their construction management toolbox. Developing
accurate estimating and negotiating skills are essential to be a successful
PM. An additional way is to learn as much about your potential client’s
business and their associated industry focus.
At a marketing strategy meeting, a general construction (GC) company
president tasked each of his PMs to become an industry specialist other than
of course the construction industry. One PM said he would take on food
processing, another retail, another hospitality, and so on. This example PM
had lost his mother just after he had graduated from college due to cancer –
way too early. The biotechnology (biotech) industry was just in its infancy
and he took it on. He already had an extensive understanding of
mechanical, electrical, and plumbing (MEP) systems due to his prior
experience in utility, aerospace, medical, and electronics projects. The MEP
scopes are often 50% of the value of biotech work and this background
served him well. Many GC PMs and superintendents know their own direct
concrete work and a few are comfortable with structural steel or wood
framing, but seldom do they have an operational knowledge of MEP
scopes.
There is an adage in the construction industry that ‘you can’t get one until
you’ve done one’. The biotech PM marketed all the laboratory (lab) related
companies he could, but until he landed the first biotech project in a
competitive bid, it was slow going. After performing well on the first
project, the contractor quickly built up its resume as the number one biotech
lab builder in the region. The PM would later train many other PMs and
superintendents in this construction specialty. Later in his career he became
a consultant to all facets of members of the built environment who
participated in this growing market. Are you a specialist? What are the
advantages and disadvantages of specializing in one market sector? This
applies to both individuals and companies. Choose a market based on your
personal experiences such as this PM had. Other than bidding, how might
you land your first project? Read a journal. Attend a conference. Who
knows, you might learn something.
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Case study #6.4: Tile shortage

We all have been short-sighted at some time. We sometimes also plan for
the best, when a more conservative approach may have been more prudent.
You are aware of the adage: “Plan for the worst and hope for the best”. Do
project owners incorporate this into their procurement plans? Do designers
incorporate it into the documents? Do contractors incorporate this sage
advice into their estimates and schedules? The answer is: It depends.
A retail tenant was moving into an existing 5,000 SF space and had
improvements to make. At least five percent of the existing 2’ x 4’
acoustical ceiling tiles (ACT) were missing, others had water stains and
others had broken corners – which inevitably happens when they are
removed and reinstalled. Have you ever taken a ceiling tile out and put it
back? Were there clips holding it down and wires in the way and random
conduits running across the top of the grid? The new tenant had a tight
budget and told the contractor to figure 10% replacement of the ceiling.
Evidently someone had prepared a count and this would be sufficient,
maybe even result in a couple of extra tiles. Can un-used tiles be returned
for a credit? How many tiles are sold in a bundle? How many total tiles
were in the space and how many did the contractor originally purchase?
After the replacement tiles were all in, the owner noticed they appeared
much brighter (and cleaner) than the existing tiles. The labels were checked
and they were the same product. What happened to the existing tiles? The
owner bought two additional bundles to replace the darkest tiles. Now how
does the balance look?
The new space required some minor mechanical and electrical changes,
most of which occurred above the ceiling grid. Additional tiles were
damaged during this work and two more bundles were needed. Five
additional tiles suffered broken corners when the space was mechanically
‘balanced’. They also were replaced. This all happens without fault to the
balancer, it is just part of a normal project, especially with tenant
improvement jobs. Why not get the mechanical and electrical
subcontractors to owe up to the damage they caused and have them pay for
the replacements? The architect convinced the new tenant to purchase one
more bundle of tiles to have on hand for future work.
When should the replacement tiles have been installed? Prepare two
estimates. The first one assumes all of the ceiling tiles were replaced but
this work was done efficiently near the end of the project. Assume market
rates to purchase the tiles. The second estimate corresponds to what actually
happened on the job as described above. You need to add up all the bundles
and corresponding square footage. But because the tiles were purchased in
small lots, and not by a ceiling subcontractor, assume the purchase unit
price per tile or per square foot is twice what the new system would have
cost. Installing tiles one at a time as was also likely had at least a negative
20% labor productivity impact. Which would have been more prudent?
Look up at an existing ACT ceiling system. How many tiles need
replacement?
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Case study #6.5: Island prices

Construction estimators rely heavily on historical in-house productivity
rates for direct labor, current local wage rates, market material and
equipment pricing, and competitive subcontractor pricing. They have access
to in-house and published databases but use those more for budgeting or
change order pricing. Market driven prices are typically more accurate.
A construction consultant who wore many hats offered to assist his client
with an estimate for construction of a new investment property on a remote
but populated island. The estimator had not worked on this island prior so
utilized pricing and databases he had available from past projects. His early
budget of $7 mil was significantly less than the local general contractor’s
(GC’s) price of $10 mil. What happened? How did he miss the mark? After
diving into the contractor’s price he discovered some nuances of working
on this island. The estimator thought maybe he could help his client as the
construction manager and hire subcontractors without the GC’s markups
and bring the project price back down to where it belonged. Is this a risk?
Following are a few of his findings:
All the craftsmen on the island belong to various labor unions. He
had assumed rural wages to be merit shop.
There was only one concrete batch plant on the island and their
price per cubic yard was twice what the estimator paid on the
mainland. He looked into bringing wet concrete on the one-hour
ferry ride but that wouldn’t work. Can you think of why that was?
There was one subcontractor (sub) in every category, from
electrical to drywall to roofing. Other subs had tried to break this
monopoly but they couldn’t get enough repeat work. The residents
preferred to ‘buy local’. Therefore there was not any competitive
pricing to be had.
The estimator evaluated bringing a crew to the island but paying for
their room and board blew the labor budget.
The only earthwork sub was also the only asphalt sub, site utility
sub, and landscaper. This monopoly could not be beat as the owner
of these companies also owned the local equipment rental company
on the island.
I could continue but you get the picture. How did the estimator error? Is he
liable to his client for the budget bust? Can you think of any more creative
ways to reduce these costs? The lesson learned with this example is you
always visit the site before you prepare an estimate. Do your research!
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Case study #6.6: Tower crane or no tower crane?

A small developer/contractor hired two professional outside commercial
estimators to help him on what was to be his largest undertaking ever. The
developer needed a professional estimate to secure his construction loan.
Why might a bank require this? Can’t all developers estimate their own
work? Both estimators knew each other and worked separately but then
compared results to give the client one comprehensive estimate. Both of
them recommended the use of a small self-erecting towner crane (TC)
similar to the one shown in Figure 6 for six months. The developer
appreciated their work but felt each subcontractor could provide their own
hoisting and deleted the TC from the budget. How would you feel if you
were the estimator? The project start date was delayed for six months and
undergoes an extensive expansion and redesign. The team goes through the
process again and this time the estimators include a small TC for nine
months. Guess what? The developer removes the TC again but adds a
forklift. The project gets funded and construction commences. Would a
bank evaluate a construction loan application detailed enough to notice the
lack of a TC? It turns out the developer needed the TC, but unfortunately
did not schedule it properly and it was on the project for 12 months. The TC
operator was often observed playing with his smart phone in the crane cab.
Calculate what this might have cost.
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Figure 6
Case study #6.7: Unverifiable

A large religious organization had built and remodeled several churches in
this area. They worked primarily with one general contractor (GC) and one
architect, and they employed the outside services of an estimator to ‘verify’
the GC’s price matched the design documents. Why did they not just trust
the GC’s price? Their estimator retired and they now sought the help from
another. The new estimator was provided with the drawings, proposed
contract, the GC’s budget, and he visited the project site. The estimator’s
contact at the church referred to the GC’s price as a bid. What is the
difference between a budget and a bid? The contract format was a stipulated
sum but was set up to attach the contractor’s estimate. How does the term
‘estimate’ relate to budget or bid? If a document titled ‘budget’ is attached
to a stipulated sum contract, does that then make it a ‘bid’?
Upon review the estimator found many holes in the contractor’s estimate
along with several allowances and contingencies. If an estimate has a lot of
loose pricing such as this, is it then simply a cost-plus or time and materials
project? Conversely some of what was estimated in detail had excessive
quantities and inflated pricing. The estimator asked the GC for additional
backup, but it was not forthcoming. The GC indicated: “I have enough in
there to do the job”. The estimator pointed out several gray areas in the
drawings which would warrant additional detailing and may allow the
contractor to firm up its price, but the architect indicated: “The GC will
know what to do.” The estimator explained all this and his frustrations to
the church representative whose response was: “I just need you to verify the
estimate and provide me with that on your letterhead”. What is happening
here? The estimator responded to the church with a lengthy document
pointing out all these inconsistencies. Was there enough design completed
to build the project? Maybe. Was there enough money in the contractor’s
budget to build the project? Maybe. The church pushed back on the
estimator, but he refused to add the word ‘verified’ to his report. Why did
they need that so bad? Why was the estimator reluctant to do so? Evidently
his predecessor had been ‘verifying’ everything previously and they all
managed through it. Guess what, the church didn’t pay the estimator for his
work and the two didn’t work together again. Also guess what? The project
was completed - evidently successfully. It sounds like the estimator missed
a long-term opportunity, or did he? What would you have done? Do you
know the phrase: ‘Hear no evil, see no evil, speak no evil’? Does that apply
to these relationships?
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Case study #6.8: Push hard, but not too hard

A national hotel chain had already gone through one preconstruction
(precon) general contractor (GC) for their new 25 story mixed-use project,
and they didn’t want to lose a second. The project was very exciting and
including underground parking, a movie theatre, retail at the street level,
convention space, and a rooftop restaurant with a 360-degree view. The
hotel was an experienced builder, and they pushed all their designers and
builders hard. Evidently, they pushed the previous GC too hard as they were
unable to negotiate a guaranteed maximum price (GMP). The hotel hired a
local commercial estimator to represent them with the new precon GC.
They wanted a somewhat arms-length relationship after the last failed
negotiation. The hotel instructed the estimator to push hard, but not so hard
as the new GC might also walk away. How do you know when to push and
when to back off? Sometimes the line in the sand is not clear.
Because of the change of contractors and the need the hotel had to get the
project started (they already had booked conventions) they gave the new
GC a mini-GMP contract for excavation and shoring only, with the intent of
change ordering in the rest of the building after everything was bid out.
Who is in the driver’s seat now? The GC was actively digging the garage
while subcontractor (sub) bids were coming in for the structure and
finishes. Soon the mechanical, electrical, and plumbing subs were change-
ordered into the project as they had multiple interfaces when the excavation
reached the bottom of the hole and equipment needed to be ordered. The
concrete reinforcement steel suppler and foundation sub were not far
behind. Do you see where this is going? The mini-GMP is growing
monthly, but not quite getting completely there.
There is a term, to be a ‘little bit pregnant’. What does that mean with
respect to construction? How does it apply to this job? But of course, that is
a misconception, either you are pregnant or not. In this case the GC was
totally pregnant. They were 100% into the job and there was no way to stop
them now. As a result, the GC took a very conservative and hardline
approach to the balance of their estimate. Additional subcontract scopes
were change ordered into the contract to support construction progress.
They packed their GMP full of allowances and contingencies. They did not
necessarily use the low sub’s quote. They often ‘adjusted’ the sub’s price, as
in the GC’s opinion, the price was incomplete, and the sub did not know
how to estimate. The resultant GMP was very high. Do you blame the GC?
Were they unethical? What would you have done as the estimator? What
will the hotel’s response be to the estimator due to the very expensive
GMP? What will the hotel’s response be to the GC?
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Case study #6.9: Double burden
Labor burden is the combination of labor taxes and labor benefits. Labor
burden is a necessary cost of the work and is in addition to the craftsmen’s
wages. Some contractors combine labor burden with wage rates within their
estimates. This is known as a ‘loaded’ wage rate. For example, if a
carpenter is paid $40 per hour (HR) and has a 50% labor burden markup
rate, their loaded wage is $60/HR. Other contractors include only ‘bare’
wages (in this example $40/HR) ‘above the line’ with the direct work
estimate and carry labor burden ‘below the line’ with other markups such as
insurance and fee. Where is the ‘line’ on a typical commercial summary
estimate form? The loaded option is preferred by some as that represents
the true/total cost of an hour of work for a specific task. But is it possible
there is another reason they use loaded wage rates? Those contractors that
place the burden below the line do so to allow easy changes to the
percentage markup either during estimate preparation and bidding or after
contract award and during operations. There are advantages to both
methods. Which does your company prefer and why?
This example general contractor (GC) project manager (PM1) presented his
detailed open book negotiated guaranteed maximum price estimate to a
repeat client. The client asked an estimating consultant to review the
estimate before signing the contract. Why might a client ask for a third-
party review of an estimate, schedule, contract format, or other contractor-
prepared document? The consultant noted the use of loaded wage rates in
the estimate, which was not customary for this GC. He also noted a 50%
below the line labor burden markup. The PM1 had apparently doubled upon
the labor burden cost. When confronted with this, he defended his wage
rates as company standards, but the estimator knew that not to be true.
When are contractor estimates open versus closed book? Explain why it is
in an owner’s favor to have access to detailed construction cost estimates.
The client went over the PM1’s head to the GC’s president and presented
the consultant’s findings. When do you go over someone’s head? If you do
go over their head, have you damaged relations? The president quickly
replaced PM1 with PM2 who apologized for the ‘accidental’ labor burden
double up and removed it. Was it an accident? The balance of the project
was completed successfully. Why did PM1 do what he did? Would the GC
have made this ‘mistake’ on a competitive lump sum bid? What do you
suppose happened to PM1? He obviously shouldn’t have attempted to pack
the estimate with a repeat client. Should PM1 attempt this move with a new
client? Is it ethical?
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Case study #6.10: DFHW QTO

As a junior estimator, you have been assigned the task of the door, frame,
and hardware (DFHW) quantity take-off (QTO). You may simply go to the
door and hardware schedule and take counts, separated by type (wood doors
versus hollow metal doors and hollow metal door frames versus aluminum
frames), and develop totals for each one. However, the floor plans may have
slight variations. A thorough estimator would compare the door and
hardware schedule against floor plans. These quantities are then noted on
the QTO sheets; they will be summarized and later transferred to pricing
recap sheets. After successfully sharing your DFHW QTO with the lead
estimator or project manager (PM) you are working for, you may be asked
to go back and look at the drawings to add counts for door signage, glass re-
lites, and grouted hollow metal door frames. Do these elementary QTOs
seem too basic for you? You took two estimating classes in college, aren’t
you ready for more responsibility? Performing a QTO for whatever system
is the BEST way to learn about your project. Many experienced PMs who
are assigned to a project estimated by someone else will perform a complete
QTO of their new project just to learn it. Other than the building systems
listed in this example, what are you ready to take-off? Volunteer to do so
with your PM or lead estimator.
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Case study #6.11: Pile cap QTO

Assume you are a project engineer for a construction company which is
bidding a highway overpass project in three weeks. You have been assigned
the task of estimating the volume of concrete, square feet of formwork, and
anchor bolts (ABs) needed for the F10 pile caps. You note from the
foundation plan and pile cap schedule that there are 15 each F10 pile caps,
each of them measuring 10 feet square by 2.5 feet deep with eight
embedded 1-inch diameter by 12-inch long ABs, which will later receive 6-
inch square HSS columns. Each pile cap has #8 rebar at 8 inches on center
each way, top and bottom. Prepare a quantity take-off (QTO) for this
system. After successfully showing this QTO to your project manager, you
may now be asked to perform the same for the other types of pile caps and
perhaps the concrete grade beams as well. What is the difference between a
spot footing and a pile cap? What is the difference between grade beams
and continuous footings? Are the QTO approaches similar? Are unit prices
and productivity and assembly cost ($/CY) similar? After you successfully
completed the pile cap and grade beam QTO, what system would you take
on next?
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Case study #6.12: Forklift purchase

A general contractor (GC) was looking at bidding for a remote construction
project in the mountains, but they needed a forklift and there was not one to
rent within a 100-mile radius. The cost of importing a forklift would be cost
prohibitive, and the GC was considering passing on the bid opportunity.
The planned superintendent researched the size of forklift necessary to
accommodate all construction hoisting and found a used one for sale. He
prepared a cost analysis and presented it to the home office, which was
reluctant to purchase a forklift for a one project opportunity. The
superintendent was successful in his pitch, and the GC’s bid was as well,
maybe because of their unique hoisting approach. The superintendent
negotiated a one project maintenance agreement with the forklift seller and
also hired him as the onsite operator. The operator took meticulous care of
the equipment when it was not in use. At the completion of the project, the
GC sold the forklift back to the previous owner-operator for 90 cents on the
dollar and came out way ahead of fee projections. Who won here? Who
makes decisions regarding equipment choices on a project? What are the
advantages of renting versus purchasing equipment? It goes both ways.
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Case study #6.13: It is for the kids!

Many of us attended summer camps as kids and/or have sent our children to
summer camps. These can be enjoyable and educational experiences. This
privately-owned camp hosted eight week-long camps for middle school
aged children each summer. The camp was located in the middle of the
woods alongside of a lake – maybe you have been there! It was comprised
of 20 guest cabins which slept eight campers each, counselor and
administration facilities, and a large kitchen and dining facility.
Unfortunately the kitchen suffered a devastating electrical fire one winter –
don’t worry, no one was hurt. Their insurance company offered the camp $1
mil for ‘cleanup and repairs’. The insurance company had hired an architect
to prepare schematic drawings to show how the facility is to be cleaned up
after the fire. The architect also prepared the $1 mil estimate, which was
vague at best. Who is best qualified to estimate construction costs? Might
this architect have an incentive for a low estimate? Have you ever been in a
building which suffered a fire? How did it smell? Was it safe to occupy?
Shouldn’t the camp’s insurance company be working for the camp and
representing their best interests?
The camp hired their own estimator who had relevant recreational facility
experience. This estimator came up with a $4 mil ‘demolish, repair, and
replace’ estimate. The insurance company and the camp exchanged several
letters, had a few uncomfortable meetings, and both had enlisted the
assistance of their attorneys. They couldn’t come to an amicable agreement
so the camp unfortunately sat empty for two summers and the kids went
without. The dining facility had holes in the roof which received rain and
snow during the winter and became a temporary home to several forest
critters. The sheetrock and floorcovering had become saturated. All of the
interior wood framing had mildew. Now how does it smell? Essentially the
stalled negotiations had worsened the condition of the building.
Both parties agreed to hire a neutral third-party construction consultant to
prepare another estimate. This person had first-hand experience with three
previous fire damage projects and one earthquake project. He gladly took
the project on as both he and his children had attended camp there as kids.
His motto: “It’s for the kids!” The new estimator felt the building had been
damaged beyond repair and recommended a complete ‘demolish and
replace’ approach. His analysis included structural and accessibility code
upgrades and soft costs that the previous two estimates did not consider. His
budget was for $10 mil. Now what does the insurance company do? What
scopes and costs should the insurance policy cover?
Subsequent negotiations resulted with requesting three general contractor
(GC) estimates. The insurance company felt the last estimating consultant
had a bias and did not have current industry pricing. The GC prices were in
the $8 to $9 mil range, but excluded soft costs such as permits, design fees,
and financing. These are typical GC estimate exclusions. Who usually pays
for these soft costs? The parties eventually settled at $8.5 mil. Who won?
What lessons can all the parties learn from this experience?
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Case study #6.14: Existing conditions

Bid documents often use terms such as ‘verify’, ‘inspect’, ‘investigate’, and
even ‘test’. In these cases, the owner and design teams are not certain what
the existing conditions are and place all the pre-bid responsibility on
contractors to figure it out for themselves and estimate accordingly
(estimator’s opinion). Is this fair? Even geotechnical reports will suggest
bidders go to the site and conduct additional borings or test pits. Have you
ever seen this? Can you imagine eight contractors all out on a site at the
same time with backhoes or drill rigs? But this practice is common with
remodel projects. Owners and designers believe contractors include
contingency funds in their estimates for unknown conditions. And although
this may be included, to some extent, on a negotiated job, it rarely would be
the case for a competitively bid lump sum project. If a contractor includes a
contingency in its bid it is unlikely they would be the successful low bidder.
Analyzing existing conditions is especially difficult with selective
demolition and remodel projects. This case study example was a 20 phase
remodel and expansion for an occupied elderly care facility. The contractor
would finish one area and the residents would move into it and then they
would demolish and remodel another area. The building had also been built
in multiple phases over the span of about 50 years. There were not any as-
built drawings and the bid set included many terms such as ‘investigate’
and ‘verify’. The contractor would remove a wood frame partition to find
two adjacent rooms with one inch slab on grade elevation differences. Is
this common with older buildings which experienced many phases? Should
the contractor have conducted destructive tests in an occupied elderly care
facility to find out what is inside of the walls, below floors, above the
ceiling, or in the attic? There were bats in the attic! The contractor
submitted numerous discrepant condition change orders that the owner and
its architect rejected. Was this fair? What is the contractor’s recourse? Other
than competitively bidding lump sum, how might this project have been
procured and priced? See case study #14.15 to find out this project’s next
chapter.
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Case study #6.15: When is second the best?

Sometimes it is good to be the second bidder. Here are a variety of
examples when the second spot might be the best spot for you.
a) This is a repeat owner (or architect) you do negotiated work with but do
not want to get into a change order battle on a bid project.
b) The low bidder took the project too cheap and will lose money.
c) The low bidder will damage relations with the project owner and/or
architect and leave these firms wondering how it would have been with
you.
d) You have too much insider knowledge that the project owner and/or
architect would have used against you during construction: “You should
have known…”
e) A better project with a bigger fee potential walks in the door the day
after this one is bid.
f) Your planned project manager or superintendent leaves the company on
bid day, and you would have been short resources.
g) You share all the subcontractor (sub) bid day quotations you received
with the low two or three subs in each category. Why is this good for
you? Why is it good for the subs? Why is it bad for the low bidding GC?
Is this ethical?
h) The low bidder may pull its bid or be disqualified, and you benefit from
other competitive sub bids you did not receive in time on bid day.
See also case study #6.17.A. Your turn: When is second the best?
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Case study #6.16: Bad day for a sick day

There never is a good day to be sick, but sometimes sick days are a
necessity. A general contractor (GC) project manager (PM) who took the
lead role on this $10 mil aerospace bid unfortunately called in sick the day
of the bid. Can the GC ask for a bid extension? What message would this
then give the client about the GC? Would the client give them one? The
PM’s boss had given him plenty of rope (what does that phrase mean?) as
the lead on this estimate. What we know was: a) this was an important
repeat client, and b) the PM had been self-sufficient on the whole three-
week estimating process, until bid day.
Everyone that morning scrambled together to put together a bid day team
and submit a responsive bid. What was unusual about this particular bid day
was the way the mechanical subcontractors (subs) were submitting their
bids. They were all excluding the control system, which they usually
included. Why should mechanical systems and mechanical controls be
coupled? But because this very large client had multiple facilities at this
site, they utilized a sole-source controls vendor, there was no competition
for this scope. It would not be uncommon for this client to take a sub direct,
and the bid documents appeared that was the case with this project’s control
system. This was also consistent with the mechanical bids. The GC did
receive a direct controls quote but put it aside.
At the bid opening the GC was surprised to find themselves $350,000 low.
What percentage is that of the total bid? How much fee would a GC include
in their bid? The substitute bid captain waded through the very messy sick-
day PM’s office and found an errant addendum. The addendum read, in
part: “The GC is to include mechanical controls in its bid, separate from the
mechanical contractor.” Why would the project owner want this? Would
this have been influenced by the controls sub? The GC’s officer and
substitute bid captain met with the project owner that afternoon. They
admitted they had a bid error, but indicated the owner was complacent with
this late and unusual addendum. The owner told them: “Either take the
project for the price you submitted, or pull your bid. If you pull your bid,
don’t bid any projects at this site again.” That seems harsh.
Why can’t the GC simply be allowed to revise their bid? Why is the owner
excluding them from future work? There wasn’t a bid bond but that is not
unusual with private projects. Why is the owner willing to let the GC walk
away? What mistakes did the GC make? There were several. What would
have happened if sick day PM had decided to come to work that day? Do
you have a messy office? Clean it up. And don’t be sick on bid day.
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Case study #6.17: Estimating strategies

There are many ways a contractor can result with a successful bid or
proposal as will be discussed in mousetrap case study #17.16 and other
examples threaded throughout this book. There are also many opportunities
to fall short as reflected in the previous sick day case study. This discussion
includes a few more good and bad examples of bid day strategies. Some of
these may be considered ‘ethical’ and others ‘unethical’ and that concept is
explored further in case study #17.11.
A. Two competing general contractors (GCs) were working inside a
secured gate for a high-profile client. The client had a new project
that was to be bid by 2:00 pm one Thursday afternoon. GC1 sent
their on-site project manager (PM1) to run their bid. He got there in
time as did three of the other competitors. GC2’s PM2, who was
also working inside this large secured site, was 20 minutes late.
PM1 complained to the client, who was waiting to open bids until
PM2 showed up. The client responded: “Well I am sure he is done
with his bid, I saw him just this morning. We will wait a few more
minutes.” Do contractors (completely) prepare their bids hours
before bid time? When are subcontractor (sub) bids submitted to the
GC and why not until then? It turns out GC2 was $100,000 lower
than GC1. GC1’s PM verbally objected and immediately called his
boss who called the officer of the project owner and complained.
GC2 was subsequently disqualified. If you had been PM1 would
you have spoken up as he had to the client and made this fuss?
After GC1’s estimating team had phoned the bid to the PM bid-
runner, they received several late sub bids, saving them over
$200,000. Can they now use these bids? Is this ethical? Who won
and who lost in this situation?
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B. The soils report for this bid project indicated the existing earth was
suitable for use as structural backfill. GCX was working on the site
adjacent to the project being bid. At the pre-bid meeting the
estimator for GCX asked this question of the owner: “Can we use
the on-site material for backfill as indicated in the soils report?”
The owner’s response: “Of course you can’t. You know that. You
are working on the adjacent site and all that mud had to be hauled
off and replaced, at considerable expense to us.” Why did the
estimator ask that question? It is customary that questions and
answers from pre-bid meetings are documented in meeting notes
and issued as an addendum. When do you ask a question at a pre-
bid meeting and when not? If you were the estimator for GCY, how
would you have figured the dirt before this meeting? Would you
have received a change order for the bad dirt? If the question had
not been raised, and GCX had been the low-bidder, could they have
successfully submitted a change order for the bad dirt on the new
site?
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C. A GC’s estimator was going after this project very hard and had
figured all sorts of ways to combine sub bids on bid days and
separate other package bids out. Why might they do that? What are
some of the risks associated with splitting and packaging bids? The
estimator finished $25,000 out of low bid on a $25 mil project. That
is 1/10 of 1%, which is extremely tight bidding. Immediately after
submitting the bid the estimator realized a major error she had
made. She had included $150,000 for the fire protection system,
splitting it out from the mechanical bids, but the low bidding
mechanical price also had the fire protection included. She had
therefore doubled-up on the $150,000 and would have been the
clear low bidder without this error. She immediately called the
project owner and shared the error and asked to be able to revise
their bid. The bids had already been publicly opened. The owner
denied this request. Why would the owner not take a lower price? It
was a private company. If you had been the initial low bidder, and
the owner allowed this change, what would have been your
response? I often say we do not become first or second bidder based
on our count of anchor bolts, but it is the major mistakes such as
shown in this example, or slipping a digit, that define the low
bidder.
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D. This bid project was similar to example C above. This was a
process piping facility and the GC’s PM was adept at understanding
mechanical systems. He decided the way to become low bidder was
by taking bids for all of the mechanical and electrical major
equipment direct, and taking bids from their smaller subcontractors
direct. The industry quickly became aware of his approach to this
complicated project. At the pre-bid meeting, one of the major
mechanical contractors who was working for the client on other
projects asked the following question: “Does the owner want the
mechanical subcontractor to be responsible for all the process
systems and equipment in one large package?” And the owner’s
response: “Yes, that is how we set up the specifications and the
drawings. We think that will provide us with complete operational
systems and no gaps.” Why did the mechanical subcontractor do
this? If you were the GC’s PM, would you still pursue busting all
these packages down to smaller bids? Is the owner’s opinion
correct? Can the owner enforce this?
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E. A GC estimator/PM had worked in this pulp and paper mill several
times and knew most of the foremen in the plant. The purchasing
agent in charge of this new bid project was new to the company. He
included many construction procedural issues in the bid documents
such as parking, badging, work hours, and site access. The project
involved extensive process equipment revisions, but the equipment
was located on the opposite side of the mill from the designated
construction entrance. The estimator arrived at the pre-bid meeting
early and toured around the mill, chatting with many of the client’s
mechanics. He asked them if it would be okay on this new project if
he used the alley and back entrance to load materials and craftsmen,
rather than dragging all the construction materials across the very
active and very congested plant. Their response of course was
affirmative. They did not like the construction disruption and
keeping it out of their workspace was a benefit to all. Should the
GC estimator bring this up at the pre-bid meeting? Should he just
assume he can utilize this alternative approach? If so, it will save
considerable time and money. Should this plan be shared with all
the GC bidders? But if the estimator/PM cannot use this approach,
and has to use the designated construction entrance, he will be
short. What would you do?
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F. A GC PM was sent across two states to attend a mandatory pre-bid
meeting at an industrial complex. He arrived one day early and set
himself up in a hotel room. He visited the campus and knew how
long it would take him to make the scheduled meeting at 9:00 am
the next day. He set his alarm for 7:00 and got up, took a shower,
treated himself to a nice breakfast, and read the local newspaper. He
had plenty of time. But when he arrived at the client’s facility at
9:00 he discovered the meeting was already completed. He had
missed it altogether. What he didn’t factor was the one hour time
zone difference between his home office and this potential site.
When he explained to the client’s procurement officer what had
happened, his response was sympathetic, but the GC was now
disqualified due to their strict bidding rules. Why might
corporations establish and follow strict procedures? The GC had
worked in this mill prior, but not this particular PM. Now what does
he do? If you were his boss, would you fire him?
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There are many other examples of good and bad estimating experiences in
his book, including case #8.7 regarding the steel truss model with cranes,
case #6.15 justifying when it is good to be second bidder, and many others.
If all GCs take the same sub bids, use the same union labor, receive material
prices from all the local suppliers, how can they become low bidder? Sure
some contractors feel their craftsmen build it better and faster and safer, but
it often takes two carpenters a day to perform a task, regardless of the GC.
What are some other examples you have experienced with bidding success
and miscues?
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Case study #6.18: Do what you know

An ambitious estimator brought in a complex laboratory project to bid. The
estimator had previously been a project manager and had built these types
of projects before; she had an extensive laboratory resume. It might be
worthy to note a couple of the project’s minor nuances before we get too
deep into bid day:
The project was to be built out in the desert two hours from the
general contractor’s (GC’s) main office. What additional costs are
associated with this??
The GC had never done work in this county. Should the estimator
visit the site? What should she take note of on her visit?
The project was government-owned but the GC had only done
private work. Are the contracts the same?
The project was to be competitively bid but the GC customarily
performed negotiated work. Are the costs similar?
The project required prevailing wage rates and associated
documentation. What are prevailing wage rates and what sort of
documentation is required?
The labor supply in this desert location was predominately open
shop but this GC was union. Can a union GC employ open shop
subs and craftsmen?
The public bid process allows anyone who can post a bond to bid;
there is not a short list of prequalified contractors. But the architect,
who is a friend of the estimator’s, said he would put in a good word
with the project owner for her. Can they do this?
The project had $2,500 per day liquidated damages.
The project required set percentages of minority and women-owned
business (MBE and WBE) enterprises complying with public work
state laws. The GC had always been very progressive with
outreach, but they had never actually bid a job with these
requirements. Do you know what is involved on bid day with MBE
and WBE requirements?
Other than these few hiccups which the estimator felt she had under control,
the project seemed to be a slam dunk, right? The estimator briefly (very
briefly) discussed the project with her boss who said: “Sure, get started on
it, and we will touch base as the bid date draws near.” This all sounds
appropriate, except the boss then left for a one-month European cruise and
the bid date was three weeks away. The estimator was all in. She attended
the pre-bid meeting, visited the site, generated a lot of subcontractor and
supplier interest, and assembled her bid day team. The estimator and the
planned superintendent worked on the general conditions estimate together
and roughed out a construction schedule. It sounds as if she has followed all
the procedures to develop a competitive bid, right?
Two hours before the bid is to be submitted the only company officer
working that day (not many seem to be in the office on Fridays, why is
that?) came into the bid room. He was relatively new with the company and
had been hired as a vice president (VP) for hospitality work (hotels). The
estimator needed the VP’s input on a fee choice and his signature on the bid
form. This VP had previous public bid experience with another GC, and he
blew his top for all the bulleted reasons listed earlier, and a few more. He
might have even let a few expletives fly. He almost refused to sign the bid
form, but he did not want to offend his colleague who had given the
estimator a green light. Instead, he added $200,000 to the jobsite general
conditions estimate for subsistence associated with staffing the remote site
and finding qualified craftsmen. Is he correct to do this? He also chose a
10% fee. The estimator was devastated. The current market fees were 5%
and although this was a difficult project, she knew her three weeks of hard
work had just gone out the window. She could not possibly be competitive
at 10%. Why did the VP do this? Was he correct to do so? What is the
purpose of this increased fee? Can she just erase his modifications and go
with what she thinks will win the project? When should the estimator have
gotten the VP involved in this bid?
Guess what, no she was not low bidder, but she was a competitive second.
Evidently other GCs also felt this was a risky project. Her friendly architect
did everything he could to get her the contract. He tried to show the low
bidder had an error. He pitched to the client that our estimator’s bid was
complete, and she would not change order the job. Is a second bid always a
more complete estimate? Is there a guarantee the second bidder will not
change order a project? The low bidding GC was local to the jobsite but did
not have any laboratory experience. What would it take to disqualify a low
bidder and why might public project owners not do that? Can private
owners disqualify a bidder? The architect tried to convince the low GC it
had a bid error, and they should drop on their own, but they refused to do
so. Was the architect correct in doing all this? Was it legal? Was it ethical?
Why might the low bidder choose to proceed with the job? What wage rate
does a merit shop contractor pay on a prevailing wage project? What
recommendations do you have for this estimator for the next ‘perfect’
project she brings in the door?
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7
Scheduling and schedule control
Including liquidated damages
Introduction
Just as many members of the built environment prepare estimates,
schedules also have many different authors. This chapter is about the
scheduling process, the schedule as a document, and the schedule as an end
date. But there would not be any schedules without ‘schedulers’ and
different types of schedulers, including staff schedulers, consulting
schedulers, and construction project managers and superintendents, are
examined in many of these case studies. Not everyone can read a schedule,
let alone create one. The schedule is an important communication tool and
ideally all members of a contractor’s team understand the schedule. After
development of the schedule, the control of the schedule, particularly at the
jobsite level, is often the responsibility of the general contractor’s project
superintendent. Many scheduling related topics will be included in these
examples including liquidated damages, strategy, subcontractors, schedule
formats, contracts, claims, and leadership. The important topics of schedule,
and scheduling, is woven throughout the over 275 cases in this book, as is
estimating. This chapter includes the following case studies related to
scheduling, schedule control, and liquidated damages:
7.1: Scheduling after the fact
7.2: Trusted scheduler
7.3: Subcontractor schedule revisions
7.4: Two schedules are less than one
7.5: Horse in the barnyard
7.6: To-do list
7.7: Cheap LDs
7.8: LDs versus bonus
7.9: Schedule critic
7.10: Young boss
7.11: Faster schedule
7.12: Staff scheduler
7.13: First schedule
7.14: Skipping school schedule
7.15: 10,000 activity schedule
Case studies #7.1 and 7.3 – Chapter 10, subcontractors
Case studies #7.1 and 7.15 – Chapter 14, change orders and claims
Case study #7.11 – Chapter 6, estimating
Several case studies in this chapter also connect directly with
Chapter 9 on superintendents and Chapter 16, leadership.

connect with this chapter on scheduling including:
Case studies #11.8 through 11.11, communications
Case study #15.4, project completion, liquidated damages
Case study #16.4, leadership, schedule errors
Case study #7.1: Scheduling after the fact

On a recent project, a sizable electrical subcontractor (sub) refused to
provide any schedules of any value during the entire two years they were on
the project. Isn’t that a requirement of their subcontract agreement?
Remarkably, two months after completion, the sub submitted a $1 mil claim
for extra costs incurred due to schedule delays. Who might have caused the
delays – owner, architect, general contractor (GC), electrical engineer, or
another subcontractor? An exhibit to that claim was an incredibly detailed
schedule, in color, computer generated, with floats, deliveries, and
manpower restraints all which had not been shared while the job was in
progress. The reason this happened was because the schedule did not exist
until after the fact; it was developed by a professional claims consultant.
Have you worked with a claims consultant? Do they have construction
experience? This schedule was not a construction management tool. If it
had been available early in the project, maybe the electrical sub would have
managed their work properly and communicated early with the GC, and a
claim would not have been required. What mistakes did the GC make?
What mistakes did the sub make? Do you feel the subcontractor planned
this all along? How do you suppose it was resolved?
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Case study #7.2: Trusted scheduler
One of the area’s most highly-acclaimed superintendents retired, but he
wanted to keep himself busy and had always enjoyed drawing schedules by
hand. Another competing general contractor (GC) hired him as their
‘Scheduling Vice-President’. He would come into the office one or two
days a week and assist field superintendents with their schedules. He would
review the drawings first, then sit down with the field superintendent and a
large sheet of butcher paper and scratch the schedule out, with lots of loop
lines and plenty of erasures, but somehow it all got down on paper. The
field superintendents were happy to work with the scheduler as they all
appreciated his experience and insights. They trusted him and were not
intimidated by his resume. Why was that? He would elicit honest input
from the superintendents that a staff scheduler or project manager (PM)
may not have attained. Why can’t staff schedulers (or estimators) clearly
communicate with field supervisors? Do all PMs and superintendents know
how to ‘schedule’? The schedule drafted by the trusted superintendent
would later be put into the computer for a professional print-out by a staff
scheduler and transform it into a useful communication tool. During the
course of construction, he was on-call if a superintendent needed support,
but he generally left jobsite controls, including schedule control, to the field
supervisors. Why didn’t he leverage his expertise out on the jobsite as well?
Why do you suppose this scheduling superintendent chose to work for a GC
in his second career rather than work for a schedule consulting company?
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Case study #7.3: Subcontractor schedule revisions

The construction manager (CM) on this mega public-works project was
experienced at managing and defending against subcontractor (sub) claims
for schedule extensions. They inserted language in each sub agreement
which indicated the project schedule would undergo literally 100 revisions
in the three-year construction schedule duration and each of these revisions
was automatically incorporated into each sub agreement and purchase
order. Why didn’t the subs simply cross this language out? Was this legal?
Was this ethical? Should pre-bid request for quotations include the
subcontract format? The schedule revisions would routinely be posted to an
electronic drop box and if the subs did not respond within five days of a
posting, they had accepted the revision at no change in cost. Does this feel
fair if you were a sub? If a sub responded requesting more time, how could
they prove it? If a sub responded ‘reserving their rights to claim for
schedule extensions’ with each change order, how would the CM respond?
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Case study #7.4: Two schedules are less than one

Schedules are intended to be tools to help build a project. A developer, who
was also his own contractor, was a very capable and creative builder but did
not have the patience or interest to draw formal schedules. Don’t all
builders have all the construction management tools in their toolbox?
Which do you have and which are you working on adding? Instead of a
short interval schedule, the developer used two whiteboards in the jobsite
trailer – one for this month and one for the next month. This was an
effective communication tool for the foremen and subcontractors on his
current apartment project. What type of short interval schedules are
foremen use to working with? Why did the whiteboards work? But this type
of schedule was not sufficient for the bank or his investment partners. Why
do the bank and investors care about schedule? The developer hired a
scheduling consultant who prepared good detailed schedules to present to
the bank each month with the monthly pay request draw, but he never hung
them in the trailer nor shared them with subcontractors or the design team.
Why did the developer not use the formal schedule? This schedule was also
a tool, but not the tool that it might have been capable of. Could one or the
other of the two schedules have sufficed? What changes could be made to
either such that the project had only one schedule?
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Case study #7.5: Horse in the barnyard
Every month the mechanical scheduler on this large power plant project
prepared a detailed schedule of all the remaining work and presented it to
his boss who presented to his boss and on up. The critical mechanical work
at the time involved re-building the pipe hangers in the reactor building.
Many of these hanger retrofits would require hundreds of expensive
pipefitter hours, often on overtime. But the scheduler was also involved in
many other mechanical aspects on this multi-billion-dollar project and he
would give all the work, from replacing a drinking water fountain to the
reactor hangers, equal weight in his schedule. Upon presentation, his boss
was not happy with the very detailed schedule. The supervisor was an
accomplished artist and drew for the scheduler a ‘horse in the barnyard’
sketch. He started with a beautiful sketch of a horse in an empty barnyard
but continued adding water troughs, hay bales, riding equipment, and even
a chicken or two. Pretty soon the horse was lost in the clutter, but the lesson
learned by this scheduler would not be forgotten 40 years later. Draw a 10
line item mechanical schedule representing this project. Assume the
hangers are worth 80% of the cost and time. First draw all 10 line items as
equals. Now re-draw the schedule how this boss had intended. Take a shot
at drawing the horse in the barnyard. Are you also an artist? I’m not.
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Case study #7.6: To-do list

Lean construction advocates indicate each foreman should have a little bit
of leeway in their workload to accomplish new or changed conditions. This
electrical foreman had historically utilized to-do lists for his short-term
schedule, mostly prepared the afternoon before he went home from work.
Are to-do lists an appropriate construction planning tool? What scheduling
tool is this similar to? But this project had so many ‘fire drills’, i.e. new
important tasks that had to be done each day that the foreman found he was
struggling with his previous list of to-dos. Should the foreman have refused
the new work and stuck with his previous plan? He eventually lost interest
in the to-do list and would leave it blank, knowing that the next day would
fill up with new important tasks imposed on him by others. Unfortunately,
priority items and longer-term planning were missed, as was his enthusiasm
to start each new workday. Make a suggestion for this foreman. How can he
manage both types of tasks? Could his superintendent have help with this?
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Case study #7.7: Cheap LDs

Most contractors avoid a liquidated damages (LDs) clause in their contract,
but this particular general contractor (GC) insisted on inserting one, even on
small negotiated projects – which was their specialty. Are LDs a penalty for
finishing the project late? Some say technically no, but it seems that paying
another party money because you did not achieve your goals is a penalty.
Your thoughts? Their theory was that if the contract had a LDs clause, even
at a very small amount, such as $100/day, this was better than a ‘real’ or
consequential damages clause which they would explicitly exclude. What is
your experience with reasonable LD values? Provide an example of a
consequential damage. How much might this be if the GC was five days
late opening a large retail box store? Other than finishing on time, how can
contractors protect against paying LDs?
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Case study #7.8: LDs versus bonus

A hotel near the airport had to be complete and open by a certain date to
support a large convention so the project owner included a $20,000 per day
liquidated damages (LDs) clause into the negotiated contract. Are LDs
customary on private and/or negotiated projects? The general contractor
(GC) asked for an equal amount of bonus if they finished early, but the
hotel felt that was too steep and they settled at a bonus of 50% of the
damages, or $10,000 per day. This 50% bonus to penalty ratio is common.
Why did the owner want the LDs and agree to any potential bonus? The
contract utilized a guaranteed maximum price (GMP) pricing method. The
GC developed savings during buyout and concrete construction and used
these savings to pay the subcontractors to work selective overtime to get
ahead of schedule, including working weekends. Does a GC have a right to
spend savings dollars within its GMP on anything they choose? What if this
were a lump sum project?
The GC also developed a unique tower crane (TC) approach. The project
was a long, narrow, tall hotel and one TC could not reach from end to end.
Competing GCs figured two expensive TCs in their jobsite general
conditions estimates. But this GC put the TC on rails, similar to a railroad,
and moved it during the night, from one end of the building to the other.
The contractor finished the project one month ahead of schedule and asked
for its 30 day or $300,000 bonus. Should the owner have had some idea the
GC was going to beat its schedule? The hotel responded that they had no
intention of enforcing the LDs clause, it was just to get the contractor’s
attention, and therefore they had not intended to pay a bonus. The two
parties settled on a smaller bonus. How are construction disagreements
resolved? Do they always split 50-50? Who ‘won’ on this project?
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Case study #7.9: Schedule critic

It is important that the baseline schedule or contract schedule be looked
upon as an overall guideline but it does not typically represent the day to
day planning builders rely on. What type of schedule depicts daily activities
in more detail? A young superintendent (super) was on a high-profile
project and would be visited twice-weekly from the company’s chief
operating officer (COO). The COO would point to the schedule on the wall
and grill the super why he was one day late on an activity or two and did
not address others that might have even been a week ahead. Why was the
COO so critical? Was this fair? The super would explain, and was
defensive, but would later in his career avoid putting any detail into a
contract schedule for fear that he would later be challenged, not only by a
client, but by his own executives. Should the super have responded
defensively? Many construction managers avoid detail in a schedule (or
estimate) just for this purpose. Is this the correct approach? Propose a more
productive response.
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Case study #7.10: Young boss

The lead scheduler was only 25 years old on this $3 billion power plant
project. This is the same project as shown in Figure 11. He had 17
schedulers working for him. An older and more experienced scheduler was
also on his team and did not appreciate reporting to a younger person.
Should bosses always be older than their employees? How does a new
leader bridge the age dilemma? The experienced scheduler resisted the
younger boss’ attempts to review his schedules before presenting them to
other stakeholders – he felt he knew everything there was to know. Do any
of us know everything? So the lead scheduler decided to let him be. Did the
boss error here? During one of his presentation meetings the
superintendents criticized the older scheduler immensely. The scheduler
from then on ran drafts of his schedules past his boss and invited him to
future presentation meetings. How might you have handled this differently
had you been the scheduler and/or the boss? Make your point keeping in
mind no one wants to lose any pride here. How do leaders become leaders?
Is the job title enough?
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Case study #7.11: Faster schedule

Most estimators can measure quantities the same, receive the same material
and subcontractor pricing, utilize the same union wage rates, and
experience similar productivity in direct work as do their competitors – it
takes two people three days to do a task. Is this true? Don’t (all) contractors
brag their crews build faster with better quality and safety and more
economically than their competition? But this contractor was adept at
figuring ways to build faster. If the owner’s bid advertised the project would
take one year, but the contractor could figure a way to schedule and build it
in 11 months, they could save one month of jobsite general conditions
(GCs) and cause their firm to become the successful low bidder. Of course
project success still relied on performance in the field. Assume a $10 mil
example project for this analysis which includes an 8% jobsite GCs
estimate. How much did one month save? Would the contractor show 12 or
11 months on its schedule to the owner? If they showed 11 months, does
this mean the owner can add one month of extra work and not pay the
contractor for additional GCs?
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Case study #7.12: Staff scheduler

A civic project worth over $1 billion and scheduled to last almost three
years was being built by a national general contractor (GC) with experience
in this specific type of work. They had almost 50 people in the jobsite office
but still reached outside to hire a full-time scheduler to work on their staff.
Why didn’t the project manager or superintendent prepare the schedule?
The scheduler was very adept at the computer side of scheduling, but was
not involved in the planning or control efforts of the project. He did not
have a hard hat or orange vest or work boots and did not spend any time out
in the field. The schedule was several thousand activities long, but was
never printed. The contractor did not have the schedule on the wall but
relied on the scheduler to pull up portions, or snips of the schedule during
meetings and presentations. Other than printing a 10,000 activity schedule,
how might the GC have shared some type of printed document with project
stakeholders? Have you worked on a project without a schedule pinned to
the wall? Was it successful? Describe the perfect skill set for a scheduler
and what his or her background should be. Do the same for a staff estimator.
Are you interested in becoming a staff (or consultant) scheduler or
estimator?
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Case study #7.13: First schedule
A young superintendent (super) had just finished taking a day-long
scheduling seminar and was determined to produce his first schedule for
this project. Have you attended a scheduling seminar? Did you learn
anything? Were you then qualified to be a project scheduler? The super had
good intentions, but unfortunately was not adept with the computer. Are all
schedules produced by the computer today? He would spend the entire day
in the trailer struggling over the schedule when he was really needed out on
the jobsite. The subcontractors worked on what they chose, and their
weekly reports were so different than what his printed schedule showed,
that he was constantly playing catch-up, rather than using the schedule as a
forward-thinking planning and control tool. Who runs the job – the general
contractor or the subcontractors? The super’s struggles continued for
months yet he was reluctant to focus on ‘planning’ and delegate the
computer input to his project engineer. The project would eventually suffer
significant quality and safety issues and was prone to material theft. The
field boss needs to be in the field. Why was the super so stubborn? What
could have been done here such that everyone was successful?
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Case study #7.14: Skipping school schedule

This school district had built many elementary and middle school projects
successfully but had never built a $100 million new high school from
scratch. The project was awarded on a lump sum (LS) basis to an out-of-
state general contractor (GC) who had built several schools. Why are school
projects often competitively bid LS? As with many projects, there were
issues on both the owner, architect, and contractor sides which were
impacting the schedule. Provide an example how each party may impact
construction progress. A construction consultant was tasked with observing
the weekly owner-architect-contractor (OAC) meeting and reporting back to
the school board about the progress of the high school. Why did the school
board not just trust the GC’s reporting? Could the project architect have
provided this service? The GC’s superintendent did not have a schedule
posted to the meeting room wall and would not discuss schedule issues at
all during the weekly OAC meeting because “everything was all messed
up”. Isn’t this a contract requirement? The contractor blamed the owner for
all of the schedule impacts and by not statusing the schedule, they were also
hiding their own lack of progress. An in-progress photo is included as
Figure 7. How do you suppose this project ended up?
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Figure 7
Case study #7.15: 10,000 activity schedule
The GC on a two-year lump-sum bid public high school project prepared a
schedule which wrapped around all four walls of the jobsite conference
room and included 10,000 activities – most of which were reportedly on the
critical path. Is there a rule-of-thumb regarding the quantity of schedule
activities which are shown as critical versus those which have float? Many
of the activities in this schedule were shown as taking one day or less and
definitely outside of the 80-20 rule. Why was it so detailed? Why were so
many shown as critical? Any request for information response or change
from a submittal could be shown as impacting the project completion date.
The GC’s project manager (PM) would require extra time and money for
jobsite general conditions almost on a daily basis. Why was the PM doing
this? The contract included liquidated damages. Did that have an impact on
the contractor’s approach to schedule reporting? The school district and
architect rejected most of these change requests as frivolous. Do architects
have an incentive to reject change orders regardless of their validity or
value? Unfortunately the project resulted in a multi-million dollar claim
when completed. Isn’t the GC worried about damaging its relation with the
school district? Many public projects result in claims and lawsuits but not
liens. Why is the lien process not common with public projects?
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8
Jobsite operations
Including means and methods, jobsite
organizations and field personnel
Introduction
General construction companies are typically organized in two different
fashions. The first is a staff organization where company specialists, such as
home office estimators and schedulers help, or potentially direct, jobsite
teams. The other is a project management or sole source organization where
the jobsite team, including the project manager and superintendent, perform
all management functions. Construction organizations were discussed in
Chapter 3. The choice of means and methods of construction is always the
contractor’s responsibility, especially the project superintendent. Many of
the case study examples included in this chapter evaluate these means and
methods choices. The most important people in a construction team are the
builders. This includes carpenters, laborers, electricians, plumbers, and
many others. It is the general contractor superintendent’s responsibility to
coordinate the activities of all these people and several examples in this
chapter describe the field team’s interactions. The jobsite team reports to
the home office. Many construction management communication tools are
used by the jobsite team including estimates, schedules, and contracts. The
jobsite general conditions estimate is an important guide the project
manager and superintendent rely on. This chapter includes the following
case studies related to jobsite operations and organizations including means
and methods and field personnel:
8.1: Super scaffold
8.2: Front loader
8.3: Steel truss misfits
8.4: Super general foremen
8.5: Nepotism?
8.6: Alaska prefabrications
8.7: 300 foot-long steel trusses
8.8: Zero laydown
8.9: Modular cleanrooms
8.10: Fearsome CM
8.11: Guaranteed OT
8.12: Selective OT
8.13: Stressful PT
8.14: Irrigation union?
8.15: Labor conflicts
This chapter connects and overlaps with many other chapters in this book.
Unique case studies in this Chapter #8 connect with other chapters,
including:
Case study #8.3 – Chapter 14, change orders and claims
Case studies #8.7 and 8.8 connect with Chapter 6, estimates and
presentations, and Chapter 9, superintendents
Case study #8.10 – Chapter 16, leadership
Case study #8.13 – Chapter 6, estimates

connect with this chapter on jobsite operations including:
Case study #6.12, estimating, forklift purchase
Several case studies from Chapter 9 regarding superintendents,
including #9.11
Case study #8.1: Super scaffold

A contractor’s creative means and methods plan often results in a successful
bid and an enhanced fee. This high-bay (85 feet to the bottom chord of the
trusses) clear span (300 feet each way) needed access to the interstitial
space. There was 30 feet vertical between the bottom and top chords of the
steel trusses which would receive a substantial amount of mechanical and
electrical work, including catwalks. A photograph of these trusses is
included on the cover of the book. It might help to draw a quick sketch of
this building. Cranes and personnel lifts were expensive, produced fumes,
and would potentially damage the slab that the aerospace client placed a
great quality focus on. See also case study #5.3. Suspended decking across
the entire 90,000 SF space at the 85 foot level was considered by competing
general contractor (GC) bidders but was not ideal for cost and safety
reasons. The successful GC’s project superintendent came up with a pre-bid
plan to utilize three tall rolling scaffold assemblies. The scaffold reached
just below the bottom chord of the trusses. Light-weight scissor lifts
elevated craftsmen from the upper scaffold deck into the interstitial space.
There was plenty of room on the scaffold for material needed for each shift
and tools and equipment. Small winches were used to hoist additional
supplies. The mechanical sheet metal trade occupied one tower, pipe fitters
another, and electricians a third. The fire protection subcontractor shared
space on all three towers. The towers were moved at night and readied for
the next shift. The solution was successful, especially considering no one
was hurt. Why didn’t the structural engineer of record resolve this access
problem with their design? Why didn’t the GC superintendent just let each
subcontractor solve the access issue for themselves? Should the GC have
back charged the subcontractor usage based on square footage or hours? Is
scaffolding a direct or indirect cost? What craft assembles scaffolding? Do
you have any other creative ways the contractors could have solved this
access issue?
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Case study #8.2: Front loader

Not all construction projects are built in large cities that have ready access
to qualified craftsmen, material, and construction equipment. This sole-
proprietor builder had spent his entire career in a small town and was
always improvising; he knew no other way. There was not a concrete pump
within 50 miles of his current project which included 10 foot high concrete
retaining walls. This was a sloped site and typically he would have found a
way to get the redi-mix truck on the back side, but that was not possible for
this project. He had access to a backhoe which included a front loader
bucket. He fashioned a backstop of plywood and two-by-fours and used the
front loader to transfer concrete from the delivery truck to the form; half a
yard at a time. It was slow, but it worked. Sure he spilt some ‘mud’ and
using the top row of whalers as a scaffold for he and his son likely wouldn’t
meet with OSHA approval, but the job was completed. How would you
have resolved this ‘means and methods’ dilemma? Why did the project
architect and/or structural engineer not build in a way to convey the
concrete? Are concrete pumps cost efficient on 30-yard pours? What other
creative approaches to construction have you observed?
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Case study #8.3: Steel truss misfits

One element of lean construction is off-site prefabrication of materials.
Structural steel elements have typically been ‘fabricated’ in the supplier’s
shop for decades. This includes cutting members to length, adding gusset
plates, beam seats, baseplates, and bolt holes. Steel trusses are typically
100% assembled off-site and delivered to the project ready for erection
direct from the truck. But if the trusses are too long to haul on the road, they
may be assembled partially or entirely in the field. This industrial project
required steel trusses to span the entire building’s width of 160 feet. The
fabricator cut all the members and pre-assembled the trusses in two halves
of 80 feet each. The general contractor (GC) was then to connect the two
halves and use three cranes simultaneously to hoist each truss in the air and
rest it on two columns. The GC required the fabricator also to mate the two
halves in its yard to assure that they fit; there were camber and heat and
other complications to consider.
This all sounded good, and it worked on paper, but when the first truss was
delivered the two hales didn’t fit. The GC immediately notified the supplier
and requested they visit the jobsite – only two hours away, but they were
too busy to make the trip. The fabricator blamed the GC’s means and
methods. The fabricator also pointed their finger at the structural engineer
insinuating it was an unbuildable design. The GC had problems with all 30
truss assembly pairs. They took photographs (see Figure 14A), set up
separate cost codes, and documented every aspect of the needed repairs –
which cost over $150,000. The supplier of course refused to accept the
GC’s project manager’s (PM’s) back charge and they entered into dispute
resolution. What might have caused the misfit?
Have you ever checked steel shop drawings? This is an important aspect of
construction management and can be complicated. Have you ever visited a
material fabricator’s place of business either before contract award or
during fabrication? What did (or would) you look for? How would you
document your visit? What are the advantages and disadvantages with
employing third-party inspection firms for out-of-town suppliers? How
could the GC in this case have improved its performance? How could the
steel fabricator been a better team member? Do you suppose the project
owner or architect or structural engineer got involved with resolving the
miss-fitting steel? Why or why not? See case study #14.9 for a conclusion
of this dispute.
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Case study #8.4: Super general foremen

Contractors must choose between potential craft labor sources; basically
union versus non-union labor, also known as merit shop. Sometimes this
choice is predetermined based on the type of work (residential versus
industrial), size of project, rural versus urban jobsites, geographic location
(mid-west versus southwest), or public projects versus private projects and
other parameters. This multi-billion dollar nuclear power plant was
constructed in the northeast and was an all-union project at that time. A
photograph of the project is included as Figure 3B. There were 5,000
craftsmen on the project and all the various unions had a strong influence
on how the project was managed. Most of the different crafts had non-
working foremen, general foremen (GF), and super general foremen (SGF –
a new abbreviation). The SGF each had their own pickup truck and a union
teamster driver. Each craft with more than 30 onsite tradesmen also had a
separate non-working ‘shop steward’ whose job it was to represent the
union with the contractor.
The construction manager (CM) running the project for the national design-
build general contractor (GC) did not agree with all this layering. One day
he put his foot down (he wore cowboy boots!) and had all of the SGFs
removed from the site and each foreman level take a one-step demotion.
The foremen had to put their tool belts on and get back to work. The
pipefitter trade especially resisted this move and all 1,000 of them walked
off the job. Once the picket signs went up, all the other crafts refused to
cross the picket line and this essential project was shut down. It turns out
the strike was not ‘legal’ but that didn’t stop the pickets. This work
stoppage had ripple effects throughout the local economy. If the craftsmen
aren’t working, they are not spending money in the town. The utility
company, who was the client, contacted the Governor of the state who
directed the GC’s CM to re-hire the SGFs. Was the CM correct to do what
he did? Was the Governor correct to step in? Can he do this legally? What
could the CM have done short of firing the SGFs to have averted the
shutdown? This is of course an extreme case. There are advantages and
disadvantages of all labor sources, given a variety of factors. Which is your
preference? Make a three-point argument which labor source is best. Now
conversely make a three-point argument in favor of the alternate. Have you
or a family member been a member of a trade union? Which one?
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Case study #8.5: Nepotism?

What is nepotism? Basically, it means the employment of family members.
Does it exist in construction? Is it a good idea? Construction seems to be a
family business. My father was a carpenter and a general contractor (GC).
He employed and trained my cousin, brother, nephew, and myself, all as
carpenters. My nephew and I both own construction companies. My son is
working as a project engineer for a commercial contractor. My wife is an
interior designer/construction project manager focusing on tenant
improvement projects. Is this nepotism? Many superintendents and foremen
employ their family members. Is this legal? Is it fair? They trust these
craftsmen more than hiring an unknown ‘hand’ from the labor hall or off
the street. Their relatives are not going to do anything illegal or unsafe on
the job. They are not going to steal from their father or uncle. Some entire
crews are made up of family members. My former employer had a crew of
ironworkers who all had the same last name and another crew of cement
masons who all had another last name. These types of craftsmen and crews
are used to working together and moving from job to job and relying on the
fair treatment and opportunity for employment from their relatives. Make
an argument in favor or against this common occurrence. Does your
argument differ if the project is competitively bid lump sum or negotiated
time and materials? Are you going to have a career in construction? Do you
have family members in construction?
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Figure 8A
Case study #8.6: Alaska prefabrications

The State of Alaska has very cold winters and the typical building season is
limited to four-months, or at the most six-months, a year. One general
contractor (GC) in Juneau, Alaska invested in a large heated warehouse. He
fabricates many building components local, in a secure, well equipped, and
environmentally controlled facility. This allows him to win many more
projects than his competitors as he can limit the amount of time his crew is
working in the cold weather. He fabricates almost complete buildings
including floor and wall and roof elements and puts them on a barge and
ships them out to remote islands for quick cost-efficient assembly. He also
attracts the best labor in the area as his crew is offered year-long
employment. Explain the potential cost, schedule, quality, and safety
advantages of prefabrication. If a building is conventionally designed, such
as a stick-built apartment project, but now the GC wants to prefabricate the
wall and floor panels, who pays for the redesign? If the project architect and
structural engineer had designed the building in Figure 8A assuming this
prefabrication system, what would that have done for the competing GCs?
What are potential negative impacts of prefabrication? Explain the
connection between prefabrication and lean.
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Case study #8.7: 300 foot-long steel trusses

An industrial general contractor (GC) proposing to an aerospace
manufacturer decided to bring their ironworker specialty superintendent,
along with the project superintendent, to the proposal interview. This
ironworker had not attended many (if any) interviews prior and was not
really comfortable speaking in public. He had a system to erect sixteen 300-
foot long, 30-foot deep site-assembled steel trusses for this manufacturing
facility which would end up as a 300-foot by 300-foot clear span building.
See previous case study #8.1 and cover photograph. The bottom of the
trusses would eventually be 85 feet from the concrete slab on grade. The
GC’s project manager wanted the superintendent to wear a tie (which would
have been a mistake) and they compromised with a clean golf shirt with the
company logo. During the interview, the uncomfortable specialty
superintendent eventually pulled out a site logistics plan and model trusses
he had built and five toy cranes which would work in tandem to stand the
trusses up. The proposing GC’s team was awarded the project on the spot,
and interviews with two other contractors were cancelled. Who should
attend an interview? Should speeches be written and memorized? Should
the president of the construction company or a marketing director lead the
interview? Who does the client want to hear from? Why was this client
impressed by the superintendent and his mockup?
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Case study #8.8: Zero laydown

An underground parking garage was planned for this large health club
facility but there was zero laydown available for the contractors as the
garage would be bordered on all four sides by existing buildings, three
belonging to disgruntled neighbors. During the interview, the contracted
owner’s representative asked the project superintendent where he was going
to place his concrete pump. Was this a fair question? The two had worked
together successfully prior and the superintendent scratched his head and
answered honestly “I don’t know, but I am sure I will figure it out.” Was
their relation a conflict of interest? The interview continued for another 20
minutes before the superintendent erupted, “I got it Len!” and somewhat to
the dismay of his bosses got up out of his chair and addressed the site
logistics plan on the easel and walked the owner and design team (and his
employer) through his solution. Was the superintendent out of line at this
point? This same question had been asked of the other contractors and they
said they would get back to the owner’s team. The fact that this
superintendent was at the meeting, honest with his answers, and showed
personal interest in resolving a problem, was enough to secure the project
for the contractor. Don’t contractors consider all difficulties and prepare a
plan before they bid, propose, interview, or contract? How much can they
anticipate? Who should attend an interview with a potential client?
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Case study #8.9: Modular clean rooms

Semiconductor and biotechnology research and production facilities must
operate in a ‘clean’ environment. Clean rooms may be constructed of parts
and pieces on the jobsite, but often modular clean rooms are fabricated in
remote facilities and shipped to the jobsite as panels with minimal site
assembly. Even assembly of the modules on the jobsite is often required in
a ‘clean’ environment. Modular clean rooms are popular in class 1, 10, and
100 environments, whereas site built clean areas are often limited to class
1,000 or higher. Make a connection between modular clean rooms and lean.
What craft installs modular clean rooms? Several subcontractors and
different craftsmen are involved in site-built clean rooms. If the room is not
certified to class 1,000 when complete, whose fault is it? Once a clean room
is completed on the jobsite, either pre-fab or site-built, how do you suppose
it is kept clean? Are you familiar with the term ‘laminar air flow’? Have
you worked on a project which involved clean rooms? See Figure 16B for
an example of a completed prefabricated laminar airflow clean room
project.
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Case study #8.10: Fearsome CM

The piping superintendent had been promoted to construction manager
(CM) on this multi-billion-dollar design-build nuclear power plant. He was
definitely old school but the project was behind schedule and the cost was
out of control, and the contractor needed someone to take charge. All of the
employees feared him, he didn’t know their names and none of them spoke
to him, and when they saw his cowboy hat and heard his cowboy boots
(yes, the same CM as in case #8.4 and the project shown in Figure 3B)
coming down the hall, they quickly looked busy and headed in the opposite
direction. He would randomly (it appeared) fire people he passed in the
hall. Does this CM sound like a gifted leader? Who do some in construction
feel the need to be ‘macho’?
The CM played in the weekly golf league as did a new project engineer
(PE). The former was not a good golfer, but thought he was, and the latter
was a naturally gifted golfer. The two were matched up for a contest and all
of the PE’s colleagues and supervisors told him to throw the match. He was
pre-warned that if he didn’t the boss in the cowboy hat would likely fire
him and take his loss out on others. The PE took his chances and beat his
boss soundly. Why did the PE do this? Was he dumb or brazen? Not only
was the PE not fired, but the CM would seek him out on the jobsite, ask his
opinion, call him into the office, and forever would address him by his first
name. Should construction employees socialize outside of work? How
would this story have played out if the PE had thrown the golf match? Do
you know any ‘old school’ builders? There still are a few out there. How do
you interact with them? Leaders learn from leaders. Seek them out.
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Case study #8.11: Guaranteed OT

When construction is ‘booming’ contractors often need to guarantee
overtime (OT) to attract craftsmen. Is this true? Does a contractor have to
guarantee OT to get quality craftsmen? This was especially common in the
late 1980s when there was a large demand for pipe fitters and ironworkers,
especially welders. The crafts would travel from project to project,
depending on which ones would guarantee them the most OT, all the while
living out of travel-trailers. These pipe fitters and ironworkers were known
as ‘boomers’ because they were following the building boom. Once the OT
was cut back, they packed up and would move on to the next project. The
craftsmen were not very loyal, were they? Assume a $40 per hour wage
rate. If the craftsmen were guaranteed six-10 hour days per week in lieu of
the standard five-8s, how much extra (approximately) could they make in a
year? Was this enough to pay for the trailer’s campground fee?
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Case study #8.12: Selective OT

Overtime (OT), if worked selectively, can be very cost effective. Explain
how spending extra OT dollars might save a project money? Unfortunately,
some projects will not work specific subcontractors or craftsmen on select
OT for specific tasks, but require the entire project to work OT. Is this done
because it is simply easier? Some superintendents also feel they need to
reward all of the craftsmen the extra time and money for fear of reprisal
from those who are only working 40 hours a week. What happens if some
do not receive OT? How is OT looked upon as a reward? The electrical
trade scheduler would come in early Monday morning to review weekend
timecards from the 1,000 electricians on this example hydro-electric
project, and inspect the field work, and report to management of the non-
critical activities that were worked on Saturday and Sunday for a premium.
It was not a pleasurable task and the electrical superintendent did not
appreciate the oversight. Why was the scheduler tasked to do this? If you
were the scheduler, how might you approach your superintendent to avoid
an adversarial relationship?
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Case study #8.13: Stressful PT

The means and methods of construction is generally left up to the
contractors. Why is that? The drawings show the ‘where’ and the
specifications (specs) show the ‘what’ but the ‘how’ is left up to the
contractor. Typical means and methods for a general contractor (GC)
include laydown and logistics, concrete formwork, hoisting, temporary
utilities, and most sequencing issues.
A new tenant was to occupy floors two and three of an existing office
building. Although the building already had an elevator serving all five of
its floors, this tenant negotiated the addition of a private elevator serving the
first floor building access and just their two private floors. Evidently the
new tenant did not want to share. The building was constructed of cast-in-
place (CIP) concrete and the floors had utilized post-tension (PT) cabling.
PT is known to reduce the thickness of the CIP floor section, which
increases floor to floor height. The PT cables also lighten-up on the need
for conventional reinforcement steel. Both conventional CIP and PT floors
have their advantages and disadvantages and both are utilized extensively.
One difficulty with PT is the flexibility to penetrate the slab. Before casting,
sleeves and block-outs for mechanical and electrical systems are
coordinated with the cable layout. But after casting it becomes much more
difficult. Once the slab has cured, the cables are tensioned and secured. If a
cable fails, or is accidently cut, the strength of the entire system is
compromised, although there are a few redundant cables included in most
PT systems.
The architectural and structural drawings for this tenant improvement
project did not address how the contractor was to cut two seven-foot by
nine-foot penetrations into the existing PT slabs for the new elevator. The
specs required that the PT cables had to remain in tension and none could
be destroyed. A common practice while a new PT slab is being constructed
is to mark the form beneath the slab for locations of the cables; this would
allow future core drilling for pipes. This building did not have any markings
on the underside of the slabs. Another practice is to prepare careful and
accurate as-built drawings of the final cable locations. These drawings also
did not exist for this building. Can the GC change order or claim the project
owner for the lack of this important information? Why didn’t the structural
engineer show the exact location of the existing cables? Are they liable?
The third option is to x-ray but this is not guaranteed to be 100% accurate.
All the bidding contractors complained about the complexity of the elevator
at the pre-bid meeting but no additional structural information was made
available through addenda. All but one of the bids came in $1 mil and more
over the owner’s budget, evidently because of these concerns. If the slab
was to fail during construction, the safety and cost and schedule
ramifications were unmeasurable. Why didn’t the bidding GCs just place
this risk on the elevator subcontractor?
One GC was $500,000 less than the competition – who all felt the low
bidder had made a mistake and would either pull its bid or fail miserably.
But this GC estimator had teamed with the proposed superintendent (a PT
specialist) and they developed a plan and subsequent actions as follows:
They employed the services of a third-party structural engineer who
specialized in PT.
They x-rayed the slab to find the likely cable locations. It turns out
there were six cables running lengthwise through the proposed
penetration.
The GC had a full-time safety inspector on site all the while the
penetration work was underway.
They shored the underside of both slabs.
The rectangular outline of the penetration was saw-cut but only
within one inch of the cable depth. This was done above and below
the slab.
The slabs were then shallow cut into one-foot square
checkerboards.
The contractor carefully chiseled down to expose the cables. The
balance of the concrete was safely removed.
A PT installation subcontractor was then engaged to install jacks on
each end of each cable. The cables were slightly over-stressed;
there is a safety margin built in. This caused the exposed nine-foot
cable to slacken. The cables were cut on each end near the jacks
and removed. The ends of the cable were re-grouted and the jack
could be removed. See an actual photograph of this process in
Figure 8B.
The superintendent had actually cut each penetration ten-foot by
eight-foot, over-sized in each direction. This allowed them to install
a one-foot concrete beam around the inside of the penetration
securing the cables. Draw a sketch of this process. Do you have any
better ideas?
Figure 8B
The GC submitted its plan to the architect and structural engineer of record
for approval but they refused to comment. Why was that? That doesn’t feel
fair. The project was a success and although the GC had left $500,000 on
the table, they ended up doubling their bid fee and earned the respect from
the project owner and design team. Would the owner have spent less money
and evened the bidding playing field if they had fully-engineered the
project? Who would have been responsible then? Would you have bid on
this project? When they cut the first cable, where would you have been
standing?
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Case study #8.14: Irrigation union?

You are the general contractor’s project manager working on a union
construction project for a major industrial client who employs only union
mechanics. There are very few union landscape and irrigation contractors.
The irrigation subcontractor (sub) in this case is non-union. What ‘craft’ do
landscapers employ? The plumbing sub is union. All the irrigation work to
be performed on the project is outside of the building lines. The morning
that the irrigation pipe is delivered to the job, the building union plumbers
stop the delivery truck. The plumbers pull the driver out of the truck and
physically assault him. The entire load of plastic irrigation pipe is pulled off
the truck and busted up. Why did this happen? Who is at fault? How could
it have been prevented? What do you do today to solve the problem?
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Case study #8.15: Labor conflicts

A labor dispute on a jobsite can be catastrophic. Have you been on a project
which had a union strike? Did you ‘cross the line’, the union picket line?
What happens to project owners who are union, but the building contractors
are a mix of union and open shop? Do the owner’s employees honor a
picket line? Following are a few situations with potential labor conflicts that
owners and contractors must manage.
A. A residential developer/contractor that specialized in suburban

speculative home tracts was now moving into the multi-family
apartment and condominium market. All their projects were wood
framed. They subcontracted out 100% of the work, always to merit-
shop contractors. They purchased a steep site in a metropolitan area
which had a history of landslides. The project would ultimately
comprise six multi-story apartment buildings built over
underground cast-in-place (CIP) concrete parking garages. The
apartments would eventually have tremendous views of the water.
The developer’s typical project had a few spot and continuous
footings but this endeavor included shoring, tiebacks, rakers, 32-
foot high heavily reinforced cantilevered retaining walls, CIP
concrete columns and beams, hollow-core planks and other
structural systems they had never worked with. A photograph of
this project is included as Figure 9B. Their structural engineer
advised them to employ the services of a commercial general
contractor (GC) to get the project out of the ground and to the point
of wood framing. The GC was an all-union contractor. They were
contracted to perform all earthwork, excavation, shoring, site
utilities, and concrete. The plan was for the developer to step in
with their cadre of subcontractors when the top of the garage slabs
had been poured and begin wall layout.
All this seemed to work except when the developer began challenging
the GC on its choice to perform concrete with their own direct
craftsmen. The residential builder felt it would be more cost-effective to
subcontract that work out to concrete subcontractors who customarily
did residential work. The developer also recommended the GC use
merit-shop subcontractors for the earthwork and shoring. The GC said
they couldn’t do that for two reasons: (a) The project was too complex
and risky on this steep slope to trust these smaller inexperienced
subcontractors, and (b) they had union agreements they were going to
honor. Can the developer contractually require the use of their
subcontractors? The project proceeded along fine without any cost,
schedule, quality, or safety concerns. If the developer has their non-
union electrician onsite installing embeds in the garage slabs but the GC
does not have any electricians onsite and does not have a labor
agreement with the electricians’ union, is this a conflict? The GC will be
employing union carpenters to install the concrete formwork. Can the
developer mobilize its non-union carpenter framing crew to begin wall
layout when the first building is ready but others still under
construction? They did. See Figure 9B.
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B. Most contracts include a provision that the project owner is allowed
to hire their own subcontractors and suppliers and the GC is
expected to work with them and be cooperative. Sometimes the
language will go so far as the GC is responsible for the owner’s
vendor’s schedule, site logistics, and even safety. Is this fair to the
GC if they do not also receive a markup on these companies and are
not involved in their selection? Some of the types of contractors and
suppliers that owners may employ include:
Low voltage electricians to install systems such as paging and

security,
Landscapers,
Furniture, especially built-in work stations,
Final cleaning,
Window blinds,
Specialty equipment,
Kitchen equipment, and
Signage.
Have you experienced other owner-provided contractors and suppliers?

Since these companies work for the project owner and not the GC, are
they technically ‘sub’ contractors? How is this different than the
multiple prime delivery method discussed in case study #1.6? If these
companies are open shop, but the GC is union, how are labor issues
resolved?
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C. This example project was being constructed for the carpenters’
union as a training facility. It was understood that all craft labor on
the project was to be union, regardless of their trade. The
construction manager (CM) on this project employed all
subcontractors. Everything went along pretty well until the project
reached the finishes stage. The CM hired a subcontractor (sub) to
install the wood millwork but the sub was open shop. What trade
typically installs wood millwork? Do you suppose this upset this
client? They also hired an open shop contractor to install
miscellaneous specialties including toilet accessories, signage, fire
extinguishers, corner guards and others. What union trade also
claims this type of work? Can the owner force the CM to employ
union craftsmen? They didn’t write it in the contract. Is the CM
being short-sighted? How much do you suppose they saved? When
it came time to punch list the project, what scopes do you suppose
the owner and architect picked apart?
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D. Can a project owner use their own people, their own employees (not
contractors), for installation of some items while the GC is on the
project? This is a union consideration as well. If the project is
complete, the owner is welcome to move in with their own people
and perform ‘fit up’. But if the GC is still on the project, and the
GC employs union craftsmen, can the owner do this? Does the
contract cover it? And even if the owner could, is it a good idea?
This brewery owner had several existing facilities and had their
own crew of mechanics. On this project, although the owner hired a
local union GC to build their building, they were not happy about
the GC’s use of all union subcontractors. The owner had a bias and
felt union plumbers and electricians were paid too much. Do you
agree? Unfortunately this owner was used to working without
permits and not necessarily building to code. Now how does this
affect its GC which needs to get along with the city for inspections,
especially if it hopes to receive the final certificate of occupancy?
How would you propose a contractor protect against this a) before
construction started, and b) during construction as the owner’s
mechanics show up with wrenches in hand?
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E. Are union contractors (and craftsmen) necessarily more expensive
than non-union contractors? What happens when both union and
non-union craftsmen are working on the same jobsite? Does a two-
gate system work? Do these scenarios play out the same in a busy
versus a slow construction economy? Union craftsmen (and
contractors) will claim that because their people served an
apprenticeship, they are more qualified to do the same work and
will perform it faster, safer, and more economical. Is this
necessarily true? Doesn’t it take two people three days to do a task,
regardless of their union affiliations? Can either side prove their
point?
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9
Superintendents
Introduction
The general contractor’s (GC’s) project superintendent is arguably the most
important single individual on a construction project. My apologies to our
clients, architects, and GC project managers (PM). The PM pushes the
paper on a construction project, or today, computer keys. The
superintendent pushes the field. In fact one nickname of the field boss is the
‘push’. This chapter includes many interesting examples of superintendents,
some good and some not so. There are many connections with other case
studies and chapters in this book from the material included here. In
particular, there is a direct correlation between the role of the field
superintendent with construction leadership (Chapter 16). The old school
superintendents were often gruff and not necessarily politically correct.
Today’s generation of superintendent often has a college background, is
well versed in technology, and understands the needs of all the built
environment team members, especially the craftsmen (and women!). Most
superintendents have traditionally come up through the field ranks, from
journeyman to foreman to assistant superintendent and beyond. The case
study examples in this chapter examine the communication tools of project
superintendents, including those necessary to deal with the project owner,
designers, and the city. Communications are discussed throughout the book,
including Chapter 11. Learning is a lifelong process, and achieving the role
of construction superintendent, especially today, is validation that we all
need to continue to learn, and to share our knowledge with others. This
chapter includes the following case studies related to construction
superintendents:
9.1: Conflicting superintendents
9.2: Underqualified PM and superintendent
9.3: Hand-drafted sketches
9.4: Two-trailer management team
9.5: From PE to teacher
9.6: Trailer superintendent
9.7: Structural engineer or superintendent?
9.8: Former superintendent
9.9: Different approaches to cost control
9.10: Super bear
9.11: Brand new tool belt
9.12: All the good superintendents are taken
9.13: Big job superintendent
9.14: Specialty superintendents
9.15: Off-shift superintendent
9.16: Superintendent of what?
9.17: Too nice of superintendent
Case studies throughout this book connect with multiple other chapters.
Case studies in this Chapter #9 also connect with cases in many chapters
including:
Case studies #9.6 and 9.10 – Chapter 11, communications
Case study #9.7 – Chapter 4, preconstruction
Case study #9.9 – Chapter 13, cost control
Case study #9.11, and all cases in this chapter to some degree
connect with Chapter 8, regarding jobsite operations, jobsite
personnel, and field labor
Case study #9.12 – Chapter 1, developers
Case study #9.13 – Chapter 3, construction organizations
Many cases in this chapter also connect with leadership Chapter 16

connect with this chapter on superintendents including:
Several cases from Chapter 7, scheduling
Case studies #8.7 and 8.8, jobsite operations
Case studies #11.6 and 11.9, communications
Case study #12.6, construction controls, jobsite layout
Case study #13.4, cost accounting, safety control
Case study #9.1: Conflicting superintendents

Are two superintendents better than one? Maybe, but not always.
Superintendents are field bosses. Very large industrial or civil projects may
have multiple superintendents. Some may be known as assistant
superintendents, area superintendents, or craft or trade superintendents, but
there is always one boss of the bosses. On large projects he or she may be
known as a general superintendent.
A retail client had just completed a large tenant improvement (TI) project
and was very happy with the general contractor’s (GC’s) superintendent. He
was a good communicator and was well mannered, which is important
when working in an occupied building. What are some other requirements
for a contractor to successfully work in an occupied retail building? The
client’s next project was a 2,000-stall cast-in-place (CIP) parking garage.
Their culture did not allow them to give work away to one GC – they had to
seek competitive proposals. Why might that be? The GC which had just
completed the TI also built CIP garages. They went after the project
aggressively and proposed the TI superintendent as their field boss, even
though he personally had little garage experience. Why did they do this?
Was it ethical? Do they plan a ‘bait and switch’? What does bait and switch
mean?
Figure 9A
The GC was successful with its proposal, but the experienced client was
wise to the bait and switch game and wrote their favorite superintendent
into the contract. They also included a $10,000 per day liquidated damages
(LDs) clause. The GC managed the LD risk with a second experienced
garage superintendent who knew how to achieve productivity out of his
direct craft workforce. They gave him a slightly different title so as not to
alert the owner. The two superintendents got along okay, but not great. One
ran the field and built the CIP garage, pushing his craftsmen and the subs
hard to avoid LDs. The TI superintendent represented the GC at all owner
meetings and meetings with the design team and permitting authorities.
Occasionally (once daily) one of the superintendents would step on the
other’s toes and voices would be raised. Did this system work? See Figure
9A for the result. Who do you suppose was the ultimate boss? If you could
be one or the other of these two superintendents, which would you choose?
How might this project organization have been improved upon? If you
could manage this project with one or the other superintendent, which
would you choose?
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Case study #9.2: Underqualified PM and superintendent

A mid-sized general contractor (GC) performed a mix of bid and negotiated
work. This example $20 million project for an aerospace client was won on
a competitive bid basis, but the client had awarded negotiated work prior
and would do so again in the future, so the GC needed to put its best foot
forward, even though they had a very tight estimate. The project manager
(PM) assigned to the project had spent 10 years as a project engineer (PE)
and was previously categorized as a career PE. The superintendent also had
not worked in this high-stress, high-security environment before. The home
office had to send out a senior project manager (SPM) and general
superintendent two days a week to keep everyone calmed down and focused
and keep the client happy. It is said that a construction company is more at
risk in a busy market than a slow market. Why is that? Does that philosophy
apply to this project? Should a GC pass on a potential project if it does not
have qualified resources such as a PM and superintendent? Who pays for
the cost of the SPM and general superintendent’s wages? If this were a cost-
plus project, would the client pay extra for the senior personnel?
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Case study #9.3: Hand-drafted sketches

This superintendent was very experienced in concrete tilt-up buildings. He
had spent the last ten years working in one office building complex,
building one concrete tilt-up shell after another. Explain the construction
terms ‘tilt-up’ and ‘shell’. He did not include his foreman in any planning
issues. The foreman did not meet with the architect or owner or even the
general contractor’s (GC’s) own project manager (PM). The superintendent
would give the foreman hand-drafted sketches he had personally crafted
from the drawings, one footing or column at a time, not allowing the
foreman to have a set of drawings. Unfortunately, the superintendent
suffered a heart attack and could not return to work. The contractor’s
executives felt that since the foreman had worked for the same
superintendent for ten years that he must be ready to step in and run the
project. Unfortunately, he failed and was eventually dismissed. If the
foreman had been included as the last planner he might have been ready for
the increased responsibility. How are foremen trained to become
superintendents? Should the GC have had in-house foreman training? It is
customary for a superintendent to keep his or her foremen from job to job,
but should the foremen be rotated through different superintendents?
Should this apply to project engineers (PEs) as well? Should someone have
been supervising this superintendent? Are all foremen capable of becoming
superintendents? Are all PEs capable of becoming PMs? Are you?
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Case study #9.4: Two-trailer management team

A general contractor (GC) superintendent was building a high-technology
facility out of state. He had two trailers, one for him and the GC’s
management team including a meeting room for the project owner, and
another trailer for three assistant superintendents and foremen. These
assistants were focused on the carpentry, concrete, and structural steel work.
The general superintendent never introduced his assistants to the design or
owner teams. He asked that the project manager (PM) and project engineer
(PE) not visit the foremen’s trailer as they would disrupt his crew. Really?
The GC’s superintendent pushed the direct work portion of the project, but
the high-tech project owner’s focus was on the mechanical, electrical, and
plumbing (MEP) subcontractor scopes. Because the PM and PE did not
communicate directly with the foremen and assistant superintendents, this
portion of the work was not well coordinated and resulted in rework and
change orders. Although the concrete was finished under budget, the project
owner chose another GC for their next negotiated project. The project
owner, GC, and assistant superintendents and foremen could all have
benefited from the last planner process. Why do you suppose the
superintendent kept the team separated? Granted it is a stereotype, but GC
superintendents tend to focus on their direct work, such as concrete, more
than MEP. Why is that? Many GC superintendents came up through the
craftsmen ranks. What craft do you suppose they came from? Should a GC
also have a MEP foreman or assistant superintendent? Some do. What
crafts do you suppose were their specialty?
Post script: Years later two of these assistant superintendents (now full
superintendents) were paired up with this same PM to lead projects. Both of
them remarked: You are not as bad of guy as we were lead to believe. What
had happened on that previous project?
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Case study #9.5: From PE to teacher

A construction management student entered the industry as many graduates
do, as a project engineer (PE). He had an interest in site supervision and
after a few years requested he be assigned as an assistant superintendent.
His office agreed, as long as he continued with his PE duties as well. He
quickly grew into the superintendent role and by the age of 30 was a project
superintendent on a $50 million project. He was clearly one of the youngest
to achieve this substantial goal. He approached site supervision different
than many of his predecessors as he had not come up through the trades. He
told his foremen and subcontractors he was not an expert in their
specialized skill areas, but he would provide them the tools, materials,
resources, and timely decisions to allow each of them to succeed. They
were not threatened by his education or lack of craft experience and joined
in supporting him and therefore all realized success. Fifteen years later he
has hung up his superintendent hat and has entered a new chapter as a
construction educator. He never fit the stereotypical superintendent, but he
wore the field boss’ hat very well and now he continues to be a successful
construction leader. The construction industry has historically employed
college graduates as PEs in hopes of one day becoming project managers.
Most general contractor superintendents started out as carpenters and
evolved through the foremen ranks. Are these still the logical progressions?
Are you witnessing other routes individuals may take? Who eventually
becomes a construction company executive or owner? Who can become a
consultant? Who can become a college instructor?
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Case study #9.6: Trailer superintendent

What is a ‘trailer superintendent’? This individual sets him or herself up
nicely in the job trailer with a copy machine, coffee maker, small
refrigerator, and a microwave. These are nice amenities as long as there is
still room for a drawing table. On one example project the owner’s
representative (rep) realized he had never seen the project superintendent
out walking the job. The owner’s rep didn’t think anything of it until one
day he walked into the office trailer to deliver a box of donuts, as was his
custom, and observed the drywall foreman and project superintendent bent
over the drawing table looking for a dimension. It appeared the
superintendent’s eyes were glossed over. He quickly passed the drywall
boss off to the owner’s rep who found the answer before the project
superintendent could get the donut box opened. This superintendent did not
know how to read drawings – a skill we assume that all jobsite leaders have.
Can all foremen and superintendents read drawings? Can all project
engineers and project managers read drawings? Can all project owners read
and understand drawings, specifications, and contracts? Can an individual
survive in the built environment, let alone become a construction leader,
without the ability to read drawings? We all need to add this important
construction management tool to our toolboxes.
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Case study #9.7: Structural engineer or superintendent?

Not all superintendents start out with that career goal. A very smart
structural engineering graduate could not land the job he wanted coming out
of college so he decided he could earn a higher wage wearing a tool belt as
a carpenter than he could making photocopies. He quickly moved up the
ladder and became a general contractor (GC) foreman and ultimately a
superintendent. But he did not have a very good ‘bedside manner’. He was
very critical of architects and engineers and would often pick apart their
drawings at the weekly meeting in front of the project owner. He would
even re-calculate structural member sizes and present his findings to city
building officials. Needless to say his success out on the jobsite was short-
lived. Why was that? His last project was the one shown in Figure 9B,
which is also the same project as discussed in Case 8.15.A. But he did find
a career working in the contractor’s basement, in a room without windows,
red-lining drawings during the preconstruction process. How can
superintendents contribute during preconstruction? Now design
professionals are happy to pay the superintendent and slide drawings under
his door, literally, and flush out subcontractor change order opportunities
such that the drawings can be tightened up and the quantity of post-bid
requests for information (RFIs) is reduced. Why do project owners and
designers fear RFIs? Can’t RFIs also be helpful? What is a GC’s approach
to subcontractor RFIs? Why did this superintendent not return to a
structural engineering career? How could he have been mentored to become
a better superintendent? Why don’t architects employ individuals with
construction experience to assist with design document quality control?
Figure 9B
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Case study #9.8: Former superintendent

The construction economy was busy and this negotiated general contractor
was having a difficult time keeping up with its staffing. Younger project
managers and superintendents were being promoted daily, often into roles
they were not prepared for. How do contractors protect themselves against
risks associated with new and/or unqualified employees? The experienced
owner’s representative (rep) on this casino project climbed the scaffold to
the roof on a Friday to find out if the roofers would be working the
weekend and protecting the leading edge at the end of each day. Rain was
on its way and the complicated electrical gaming machines had been
delivered early and were stored below. Why did the owner’s rep do this?
Isn’t this means and methods and the responsibility of the contractor? See
also Chapter 8. The young superintendent responded to the owner’s rep: “I
don’t know, you should ask the roofer” and walked away. Why didn’t the
owner’s rep just go to the roofing foreman to begin with? That
superintendent was moved off the project the following Monday and 20
years later is still a good concrete laborer foreman, but not a project
superintendent. How do you suppose the superintendent came to be rotated
off the project? Aren’t all superintendents natural leaders?
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Case study #9.9: Different approaches to cost control

A. This example project superintendent did not trust any reports
generated by the home office. The project manager (PM) was
requested by the home office to have the field prepare cost control
work packages. The superintendent refused to help and would not
let the PM take the time away from his foremen to fulfill this
important task. Couldn’t the superintendent be forced to participate?
The PM made a very simple total project labor curve on a large
sheet of butcher paper and hung it in the trailer. There was a total of
over 50,000 direct labor hours on this 18-month project so it was
definitely a major cost risk. Each Friday, the PM would add up the
timecards and post the actual hours expended against the scheduled
labor curve. Why didn’t the PM just forget about cost control on
this project? Soon the foremen would wait around on Friday, rather
than head to the local pub, to see how the team did. Why did they
care? Different crafts began complaining that they knew their teams
were beating the estimate and other crafts might not be doing as
well and requested the PM prepare separate curves just for them.
Pick out three different construction crafts, performing different
work on a typical project, and explain how this might be playing
out. The PM achieved total buy-in from the last planners, even if
the superintendent did not participate.
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B. Another superintendent for the same company was also an old-
school general contractor boss but he embraced cost control work
packages. He would have his PM order lunches in on Mondays and
provide all the labor cost reports from the last week. The foremen
would sit around the conference table eating lunch and update their
cost control work packages and plan their work for the present
week. The superintendent used cost control work packages as a
vehicle to bond his team together. If you were a PM which
superintendent would you enjoy working with more, A or B? If you
were a foreman, which superintendent would you enjoy working for
more, A or B? Some companies don’t share cost and schedule
information with foremen. Why is that? What are the advantages
and disadvantages with including the foremen in work package cost
and schedule control efforts?
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Case study #9.10: Super bear

Everyone called him Bear, but no one exactly knew why or dared to ask
him. What are your theories? There was no question that Bear was in charge
on his construction projects. He was a successful superintendent but did not
care for paperwork. In fact, he took all his notes on his arm, with an ink
pen. This worked out just fine if he didn’t shower before the project was
finished, which was usually the case. Bear was obviously an ‘old school’
superintendent. What are some typical construction management
communication tools for today’s superintendents? There are still a few old
school superintendents around, but not many. If you were assigned to work
with Bear today, how would you help him with his communication tools?
He was a great superintendent. Don’t worry, he won’t bite!
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Case study #9.11: Brand new tool belt

A carpenter in his late twenties would show up at the jobsite at six in the
morning each day with has brand new tool belt and his brand new boots and
hard hat. He would ask the project superintendent if he needed an extra
‘hand’ that day. Hand is a nickname for a construction craftsman or
tradesman. For two weeks the superintendent said: “Thanks but no thanks
and put your name on the list and we will call you if we need another
carpenter”. Eventually a couple of guys called in sick and the
superintendent gave the new carpenter a chance. He appreciated the young
man’s perseverance and figured it might show up out on the jobsite, and he
was correct. That was a long-term project and the new carpenter was one of
the last remaining crew members. He was also one of the first to be called
on for that superintendent’s next project. Superintendents who are true
leaders are always on the look-out for high-performing craftsmen. Why
didn’t the carpenter simply wait his turn on a list at the local labor hall? Do
you suppose he picked this project and this company and this
superintendent for a reason? Remember when a contractor is trying you out
that you are also trying them out.
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Case study #9.12: All the good superintendents are taken

A custom high-end residential builder decided to expand his business, and
with the financial help from an outside investor purchased a large piece of
property for a speculative 95-unit luxury apartment building. This is the
same developer and project as Case #6.6. Up to this time, the builder had
also been the developer, project manager, superintendent, and lead carpenter
on his house projects. Now he needed a full-time superintendent. The
construction market was very busy, and although he had many close
business connections, all the good superintendents were working for
established larger builders. He placed an advertisement on the internet and
hired a superintendent who reportedly had apartment experience. About
half way through rough framing, the developer realized he had made a
mistake, but didn’t have any alternatives. The superintendent did not have
the necessary people skills to coordinate with the city, subcontractors, and
designers. What could the developer have done at this point? He found out
later that the superintendent was not following project safety rules, often
out on the site without a hard hat, smoking in a non-smoking wood frame
environment, and had stolen and sold several tools and pieces of equipment
from the site. He was eventually terminated. Many of us have responded to
generic help wanted advertisements, especially in a slow economy or before
we had gained considerable work experience. But who responds to
advertisements in a very busy economy? How should the developer have
found a superintendent?
Post script: Six years and four projects later this developer still doesn’t have
a good superintendent. Part of the reason for this is his hands-on approach
to every detail. Many superintendents want to be ‘in charge’, as do many
developers.
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Case study #9.13: Big job superintendent

The chief executive officer (CEO) of this established construction company
showed up at the quarterly superintendent meeting with Matt, a new
superintendent. He introduced Matt to the other superintendents, many of
which had been with the company for 20 or 30 years and had worked their
way up through the ranks. This new superintendent was introduced as
someone with lots of “big job” experience and now finally the company
would be able to go after larger more profitable work. Are larger projects
necessarily more profitable? Is this the right time and place to introduce a
new employee? Over the next three months the CEO would travel from job
to job with Matt and take job tours – the big job they were looking for had
not yet materialized. Each superintendent reluctantly had to walk Matt
through their jobs. At the next quarterly meeting, the CEO had Matt lead
the discussion and attempt to conduct a training exercise. Who should
conduct in-house construction training sessions? Needless to say that the
core of experienced superintendents, who all felt they could build the “big
job”, were not quick to follow this newly appointed leader. Leadership is
earned and not given. What do you suppose eventually happened to Matt?
Was this his fault?
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Case study #9.14: Specialty superintendents

This large general contractor (GC) had several specialty superintendents.
These were mostly senior superintendents who knew their trade well, such
as steel erection or concrete finishing, but were not necessarily equipped to
deal with other subcontractors (subs), the project owner, or city inspectors.
Do all GCs have specialty superintendents? Don’t all superintendents have
the same skill set? Assume the GC self-performs 50% of the work; that is
the way it used to be. What trade superintendents might they employ?
These specialists were respected by the GC’s project superintendents and
called on as needed on a project by project basis.
One particular specialty superintendent was very familiar with the work of
heavy civil subs. He had come up through the field as an equipment
operator and foreman and was familiar with equipment operation and
productivity. What union do equipment operators belong to? All of the
earthwork and site utility subs knew and respected him as well. He would
typically visit several projects a week and his prorated wages (a form of
activity-based costing) were well worth the understanding and
communication that he brought to each of the GC’s superintendents for this
very critical schedule aspect of most construction projects. When do
earthwork activities normally occur on a typical commercial project? What
happens to a GC if they are behind schedule and/or over budget after early
earthwork activities? List out some early civil scopes. Do you put all this
work under one sub or split it out between several?
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Case study #9.15: Off-shift superintendent

Working multiple shifts is not always a way to recover schedule time as
there are typically inefficiencies to overcome. What inefficiencies are
associated with multiple shifts? Which is more cost-effective, multiple
shifts or overtime? This example industrial project included ‘high bay’
structural steel and catwalks which required painting after all the
mechanical and electrical work was installed. Reference similar case study
#6.1. This steel was 50 feet above the slab-on-grade. The painting
subcontractor requested the general contractor (GC) allow them to work on
a second shift, without additional compensation, so that the painters had the
entire project to themselves. The GC had to staff the second shift with
another superintendent for insurance and safety reasons, but he kept himself
busy updating drawings with as-built information. Should the painter have
paid for the second superintendent? What ‘insurance and safety reasons’ is
the GC concerned about? Would a project owner care about this
arrangement? What inefficiencies would the painter encounter if they
worked the day shift with the other trades instead of the night shift? Did the
GC also benefit from this second shift work?
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Case study #9.16: Superintendent of what?

This example case study could have been placed with the development
chapter, or the chapters on contracts, communications, subcontractors, or
many others, but it has landed here. This mixed-use development project
which included 40 apartments over a podium retail floor was very messed
up and there were a variety of ‘suspect’ characters who were responsible.
Maybe they all were. The project ownership included ten individuals who
wanted to get involved in the real estate business. They chose one of the
owners as their point of contact. His experience was in the theater, but he
had always wanted to be a developer. They went through three architects
before they broke ground with a fourth firm. Interesting that each of the
three previous architecture firms takes credit for this project on their web
page but the final company makes no mention of it. After reading the whole
case you should be able to figure out why that was. The developer and one
of its previous architecture firms negotiated an open book contract with a
general contractor (GC) whose specialty was building screen sets for the
theater. The developer did make one right move and that was to employ the
services of a professional owner’s representative (rep), but that company’s
scope was limited to reviewing pay requests and change orders. Over the
course of construction the owner (and his partners) would make many
changes to the project, sometimes engaging the services of their own
subcontractors (subs) for specific scopes, but then attempting to back
charge the cost of that scope from the GC. So how many things are wrong
with this project thus far?
Two years into this one year project the roof is finally on but the building
enclosure is in disarray and the site finishes look like a bomb has exploded.
See Figure 9C. The GC has gone through two superintendents and their
current one has been out sick for three weeks. Who should now be
coordinating the subs? The professional owner’s rep realizes all these
problems and is ‘staying in his lane’ by only focusing on the financials.
Why doesn’t he put his hard hat on and play the role of superintendent? The
developer (and occasionally his partners) will wander out on the site and
arm wave but the subs do not respond to them. Why not? The GC’s PM is
only two years out of college and although she is trying, she could really
use some more experienced assistance. Unfortunately the GC ownership
and the developer are no longer communicating other than through a
mountain of nasty letters, some from their attorneys. What recommendation
would you give the owner of the GC or the development company at this
point? How do they get this project finished?
Figure 9C
The developer has a friend who is an experienced builder, actually he is a

real estate developer himself but does not have any projects currently under
construction. His experience is more from the field side (he was originally a
cement mason) and not financial or contractual. The developer asks this
friend for advice. This is the direction the project ultimately takes:
The original GC is terminated.
The new builder has put his hard hat and orange vest on and is
going to fill the role of superintendent, but as a consultant, not an
employee.
The developer and the builder have contacted all the previous subs
and suppliers and are attempting to define their remaining scopes
and issue them subcontract agreements and purchase orders.
The owner’s rep remains arm’s length and is assisting only with
reconciling the original GC’s contract amongst all the change orders
and back charges and liquidated damages in order to come to a
settlement figure that both parties can agree to.
The GC and developer will eventually sue each other for millions of
dollars.
The new builder is attempting to engage a long time industry
associate of his to assist with other construction management tools
that the developer and builder are both lacking and the owner’s rep
is staying away from. What might those be?
The original development ownership team is unhappy with the
project and is looking to blame their partner. Some of them had
plans on moving into the building and had given notice at their
previous residences. They are now forced to move to interim
homes.
So, put whatever hat you want on and analyze construction management
issues such as safety, insurance, cost, schedule, quality or claims. How can
success be achieved for each of the parties? If not success, how can they at
least come out even? Pick a party or two from this list and what
recommendations would you give them? Which would you rather be?
Ten development partners,
Lead development partner,
Original general contractor,
Financial owner’s rep, and/or
New builder/superintendent.
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Case study #9.17: Too nice of superintendent

Some superintendents are gruff. This was especially true of old school
superintendents. They were tough to get close to and were not necessarily
good communicators. Many of these superintendents are described
throughout this book. Many of them were great builders as well. The new
generation of superintendents are supposed to be sensitive to the needs of
their employees and subcontractors and have the ability to communicate
effectively with project owners, designers, and the city. But when is ‘nice’
too nice?
This experienced general contractor (GC) superintendent was an old school
builder but he also knew what was important- keep a satisfied client,
especially repeat clients. His project manager (PM) teammate observed that
the concrete flatwork cost code had been overrunning on their current
project’s budget. He took a job walk to find out what was going on. He
should have done this earlier. He (as should you) should have been walking
the project daily. Make sure you do this. This project was a large steel
manufacturing facility. It was completely surrounded by asphalt pavement
to allow easy truck access in and out. There were 20 man doors and 10 large
overhead doors in the project.
The owner’s representative (rep) had previously met with the GC
superintendent and complained how all the doors exited straight onto the
asphalt. The superintendent confirmed the installation met the design
requirements but also recognized it is standard that exterior doors exit onto
concrete pavement ‘stoops’. He asked the owner if he wanted these and of
course he agreed. No, the PM had not been consulted. There are several
construction management procedure errors which occurred that we all can
learn from here. The PM was furious with the more senior superintendent
but the superintendent indicated this would keep his company in good
graces with the owner’s rep. Is he correct? Can the PM submit a change
order now? If the owner refuses to pay should the GC remove the concrete?
Should the overly ‘nice’ superintendent pay for them? Not a chance!
Post script: The owner’s rep retired after this project.
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10
Subcontractors and material
suppliers
Introduction
Any discussion of construction management cannot forget the companies
which make up 80% to 90% of the field workforce. Many of our
discussions focus on the role of the general contractor (GC) or construction
manager, but these lead firms cannot succeed at any level if their
subcontractors (subs) do not succeed. Subcontract discussions are threaded
throughout this book. It may appear at times, that we are picking on them
and they were at ‘fault’ for some of our examples. But the fact is the lessons
learned from subcontractor actions are valuable construction management
tools for subs and GCs.
Subcontractors are different from suppliers as subs furnish field labor,
execute subcontract agreements, and are required to provide liability
insurance. Suppliers provide material only, potentially with off-site
fabrications, and enter into purchase order agreements with the prime
contractor. Subs may also be known as ‘specialty’ contractors in that their
scope is specialized in one area or another, such as glazing or electrical.
Subcontractors may also be known as ‘trade’ contractors in that they
employ a specific trade – plumbing subs employ plumbers and roofing subs
employ roofers. Some GCs refer to subs as their ‘trade partners’. They
realize the importance of subcontractor success.
It is important that general contractors choose ‘best-value’ subcontractors
and not base their selection on price alone. Best value sub selection begins
with prequalification, short-listing, and thoughtful buyout. A GC’s success
in all factors of construction (cost, schedule, quality, and safety) requires
success from the subcontractor workforce. General contractors who take
advantage of subs and ignore their relevancy and financial viability, will not
be successful in the long term. The case study examples in this chapter
explore both good and bad examples of subcontractor coordination – but we
can learn from them all. This chapter includes the following case studies
related to subcontractors and material suppliers:
10.1: Mechanical competitor

10.2: You get what you pay for
10.3: Is bigger better?
10.4: Electrical superintendent removed
10.5: DFHW vendors
10.6: The tale of two different subs
10.7: GC or glazier?
10.8: Sparking electrician
10.9: Preferential subcontractor bids
10.10: The kitchen sub is on the roof
10.11: The public pie
10.12: Favorite subs
10.13: Detailed or generic sub scopes?
10.14: Pulled bid
Case studies throughout this book connect with multiple chapters.
Examples in this Chapter #10 also connect with cases in other chapters
including:
Case study #10.6 – Chapter 14, change orders
Case study #10.8 – Chapter 12, construction controls, safety
Case studies #10.9 and 10.14 – Chapter 6, estimating
Case studies #10.11 and 10.13 – Chapter 5, contracts

connect with this chapter on subcontractors and suppliers including:
Case study #5.3, contracts
Case study #6.1, estimating
Case studies #7.1 and 7.3, scheduling
Case study #15.11, construction completion, drywall close-out
Case study #16.15.A, leadership, ethics
Case study #10.1: Mechanical competitor

Most members of the built environment consider the general contractor
(GC) or construction manager (CM) as not only the largest construction
company on the project, but the largest in any typical city or region. What
determines the size of a construction company? Is it total annual revenue,
quantity of projects under contract, quantity of employees, profit margin, or
other matrix? Many mechanical, electrical, and plumbing subcontractors
(MEP), or specialty contractors, are actually ‘larger’ than the GCs who
employ them. In fact many specialty contractors also have GC licenses and
employ subcontractors of their own. In the area this author lives some of the
most active members of the local Associated General Contractors of
America (AGC) chapter are subcontractors. For some industrial projects the
piping work might be 50% of the scope and the GC’s concrete foundations
amount to only 10%. On some sites, the larger subcontractors will flex their
muscle and assume control of logistics and schedule. These larger specialty
contractors often question – why doesn’t the GC work for us? Wouldn’t the
collective bids be lower if the MEP subcontractors marked up the GC rather
than the GC marking up the MEP subcontractors? Take an estimate you
have access to which has a large mechanical scope and run these numbers.
In some cases the mechanical subcontractor may bid a project as the
‘prime’ and take subcontractor bids for concrete, steel, and carpentry
scopes. This is often the case with industrial or utility projects. How do you
suppose the GC reacts to their subcontractors bidding against them? Would
the mechanical subcontractor still provide a bid to the GC for the
mechanical portion and would the GC provide a bid to the mechanical
subcontractor for just concrete? Shouldn’t these large subcontractors ‘stay
in their lane’? Some GCs have been known to split large MEP scopes into
smaller packages so that they are in more control. See also case study
#6.17. What risks do all of the parties assume with any of these delivery
methods?
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Case study #10.2: You get what you pay for

Competitive bidding and contracting with the low bidder has its place and
can work in the built environment. But that does not necessarily mean the
client is buying cheap; it often is just protocol as is the case with many
public projects. This example project developer/contractor chose the
negotiated over bid procurement process more times than not with his
subcontractors (subs). But unfortunately, he often ‘negotiated’ only with
cheap subs – those who did not have enough money in the contract going
into the job. The developer was always looking for a lower price. This was
not because he wanted them to lose money, but rather he had a glass is half
full perspective and thought the subs could build more economical than
they bid. He would convince them of this and sign them up on a time and
material basis. How do you suppose this story is going to end? You are
correct. The subs would routinely spend much more than their contract
value. Is the developer then obligated to pay them? He would dig into his
pocket and pay the subs 10%, 25%, even 50% more than their original bids.
Why did he do that? How would the subs react on the next project? Do you
suppose he ended up with post project claims?
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Case study #10.3: Is bigger better?

A small residential custom home builder/developer decided to go big time
and took on a speculative 150-unit apartment project. List three reasons
why this is a good idea and three reasons why he shouldn’t. His motif
operandi had always been to split the project up into 100 small sections and
hire subcontractors (subs) and install as much of the work with his own
forces as he could. But because of this being a ‘big’ project, he was swayed
by a large out-of-town sub to package all of the CSI division 07 work. They
convinced him the package deal would be more economical. Is bigger
cheaper? Not always but explain how that can be possible. Okay, how many
things are wrong with this situation already?
This sub started with the roofing (an occupied green roof) and adding siding
(three different material types), waterproofing, louvers, and thermal
insulation. Put your division 07 hat on and propose other scopes that could
be added to their contract. At the first jobsite construction coordination
meeting (hole being dug) the division 07 sub shows up with four project
managers, not one as the developer had anticipated. It turns out their large
company has separate profit divisions. They wanted four subcontract
agreements. Would you agree if you were the developer? Why would they
want this? Consider schedule and retention issues in your answer. The sub
was a much more sophisticated construction manager (CM) than the
developer and swamped him with meeting notes, RFIs, change orders,
submittals, pay requests, etc. Were they wrong to do this? What other CM
tools might they have used? The project finishes just fine, but two months
later the division 07 sub submits a well-documented $100,000 claim. They
cite several reasons primarily related to the developer’s lack of formal CM
processes. Ouch! Does he pay? What lessons learned would you share with
this developer?
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Case study #10.4: Electrical superintendent removed

On a competitively bid lump sum pharmaceutical manufacturing facility
construction project this electrical subcontractor (sub) was struggling to
make its costs. The sub’s project manager (PM) had damaged relations with
the general contractor (GC) and the project owner and they were unable to
receive all of their change orders approved, at least at full value. See also
upcoming case example #10.6.A. What might have caused this? Do GCs
treat different subs differently with respect to change orders? Does this also
apply to project owners? Towards the end of the project, when usually there
is a spike in electrician manpower on any typical project, this company
removed their PM and superintendent and cut their crew in half to save
costs. Why reduce the staff? The foreman was then stretched beyond his
limits and later quit. The sub declared bankruptcy soon after. Reducing
general conditions activities sometimes costs more money than it saves.
What could the electrical sub have done to ‘right this ship’? Make note on
your project when a reduction of craft manpower and/or supervision occurs.
Why is it happening? Can the GC contractually do anything about it?
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Case study #10.5: DFHW vendors

General contractors (GCs) may purchase door frames from one supplier,
door leafs from another supplier, door glass from a third, and door hardware
from a fourth. If the door frames and door leafs are a combination of wood
and hollow metal (HM), there may be at least two more suppliers. If all of
these materials are shipped ‘loose’ and uncoordinated, there will be
substantial assembly labor expended in the field by the GC’s carpenters.
Many contractors will package all these elements with one supplier, but that
is not always cost efficient. Another method is to have the materials shipped
from one vendor to another, including the painter, such that when the doors,
frames, and hardware (DFHW) arrive onsite they have been ‘machined’ and
are ready for installation without rework, which is one goal of lean
construction techniques. Explain the advantages and disadvantages of finish
painting or staining frames and leafs in the shop versus the field. Even at a
slight increase of cost, what are the advantages of purchasing all DFHW
materials from one vendor? Do any of these suppliers also provide the
glazing for door panels? Who provides aluminum storefront door frames?
Who grouts HM frames and why is that sometimes required? If a GC is
required by contract to subcontract 100% of the project out, who installs the
DFHW systems?
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Case study #10.6: The tale of two different subs

A. Both of these subcontractors (subs) worked on the same
biotechnology project. The electrical sub had not done a lot of work
in the high-technology arena, but they low-bid this project in hopes
of negotiating future work. The project manager (PM) was a former
superintendent and an electrician by trade. He submitted change
order proposals (COPs) for every minor issue, generating over 125
COPs, some of them for only $100. This frustrated the client who
managed the project from out of town and visited the site only once
monthly. The client fought with the electrical sub on almost every
change and the subcontractor eventually filed a post-project claim.
The electrical sub did not break into the very tight-knit
biotechnology construction market. Why did the PM take this
approach? What could he have done different? Should the general
contractor (GC) have stepped in to help the two parties come
together, or conversely take one side over another? Which side
would you support?
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Figure 10A
B. The mechanical subcontractor also bid this project lump sum but
had extensive biotechnology experience. The PM took a big picture
approach. He did not charge for minor discrepancies. The client
eventually generated a very major change in scope, adding and
revising several pieces of mechanical equipment both on this
project and in an adjacent facility. Some of these can be seen in
Figure 10A. These changes amounted to over $600,000 worth of
mechanical work. Many of the equipment changes were performed
off-shift to minimize the impact to the client’s employees and
laboratory experiments. The client was very thankful. The
mechanical sub is still in the building doing time and material
(T&M) work, years later. If the client had not come through with
the big change order, how might this have worked out for the
mechanical sub? Should the GC be allowed to mark up this large
change order? What if the owner wanted to contract with the sub
outside of the GC for the change order? Should the GC be upset
they are not also involved in the long-term T&M work?
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Case study #10.7: GC or glazier?

A general contractor (GC) project manager (PM) with a soft heart awarded
a large glazing project to a new company. The three glazing principals were
all experienced and well-known to the PM when they worked for a
competing subcontractor (sub). As many new contractors do, without a
stable of experienced in-house craftsmen, they sub everything out. They
bought the glass from one supplier, the aluminum from another supplier,
they hired a third-party individual to prepare shop drawings, a fabricator
was contracted to assemble the storefront system, and another small glazier
was to perform the installation. Does splitting a scope out such as this save
or cost a contractor money? The house of cards fell apart when the new
principals didn’t pay their subs and suppliers promptly enough and the GC
had to step in and contract with all of the independent parties direct, and
still warrant to the project owner the windows wouldn’t leak. How did the
PM error to begin with? Is the PM making the right decision now?
Wouldn’t a bond on the sub have protected the GC from this? Could this
sub have bonded the project? Guess what, windows leak! Who will pay for
and repair leaking windows on this project two years down the road?
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Case study #10.8: Sparking electrician

Contractors, especially subcontractors to subcontractors (subs), do not
always follow the rules. Why is that? This example general contractor (GC)
required its electrical sub to perform their own trenching and backfill work
for site lighting. The electrical sub normally excludes this work but missed
the contract inclusion in its bid. Why didn’t the GC perform this
excavation? The sub hired another owner-operator backhoe subcontractor to
perform the work. The owner’s representative was surprised one morning
when the power was suddenly shut off from his trailer. Upon leaving the
trailer, he witnessed the backhoe holding up several live sparking electrical
wires and broken conduits. The operator was lucky he was not electrocuted.
GC superintendents must make sure that all employees follow the rules,
especially subs to subs. What should have been done to have prevented this
from happening? If the operator had been hurt, who would have paid the
medical bills? Who now pays for the damaged electrical services?
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Case study #10.9: Preferential subcontractor bids

An industrial contractor superintendent had a reputation for getting the
project accomplished quickly, sometimes while ruffling a few of the
subcontractors’ (subs’) feathers. Most general contractors (GCs) promote
carpenters to be superintendents. Why are more carpenters GC
superintendents than other crafts? This GC hired a sheet metal
superintendent away from one of its major subs. This gentleman fit the old-
school superintendent stereotype, large tall Scandinavian male who spoke
loudly, used expletives, and often hammered his fist on the table. But sub
ownerships knew he finished the job on time, if not quicker, and would give
the GC a preferential bid if they knew that this superintendent was assigned
to manage the project. Do subs provide different bids to different GCs? Is
this ethical? Is it a good business practice? How would GC1 react if they
found out an electrical sub gave a lower price to GC2? How did this
superintendent accomplish his projects faster – other than by hollering a
lot?
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Case study #10.10: The kitchen sub is on the roof

A restaurant chain was used to working in different cities with different
general contractors (GCs), but they always brought their own kitchen
equipment subcontractor (sub) with them from project to project. I guess a
commercial kitchen is an important element in a restaurant project. But
what sort of complications arise when project owners hire their own subs
and suppliers outside of the contractual responsibility of the GC? Case
studies #1.6 and 8.15 and others also cover this topic.
Kitchen equipment interfaces with many other subs including cabinetry,
floor covering, electrical, plumbing, ductwork, and others. But this GC
found out the kitchen also interfaces with the roof. The kitchen’s grease
hood exhaust fan is mounted on the roof, on sleepers provided by the GC.
This project also had a dozen conduits and vents from the kitchen
equipment that penetrated the flat roof membrane. Who cuts these
penetrations? Who flashes them? Who builds curbs and crickets around
them? Where are we going with this? The roof leaked! The GC tried to get
the kitchen sub up on the roof to address the problems but he waved
goodbye on his way to the next town and the next restaurant. Will the roofer
stand behind his warranty? Is rain dripping on restaurant customers a
problem? What recommendations do you have for a GC pre-construction
and post construction when owner-employed subs are involved? How does
the GC get its retention released?
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Case study #10.11: The public pie

The open public bid system is set up to a) keep prices competitive to reflect
the best interest of the taxpayers and b) give all contractors the opportunity
to gain projects who might not be able to land private negotiated work.
Expand on the advantages and justifications for both of these points. Are
there other reasons? The public system is also designed to allow
opportunities for underserved groups such as minority-owned business
enterprises, women-owned, disabled, veterans, small business, and many
others. Sometimes a general contractor (GC) has to employ minimum
percentages (of total contract value) of these groups and other times it is
encouraged to set goals known as set-asides. Explain the advantages and
disadvantages of public set-asides. There are also methods a GC might use
to discourage or eliminate some subcontractors (subs) and suppliers from
getting a piece of the public construction pie. We will focus on the
construction manager/general contractor (CM/GC) scenario for this
discussion as it represents a hybrid of negotiating and bidding and is
gaining popularity on public projects, especially large complicated projects.
A. One of the methods a CM/GC uses to unofficially minimize the
quantity of sub bids received is to require all subs over a certain
value, say $50,000, to post a bond. Subs which are too small or not
strong enough financially will not be able to bid those projects.
B. On larger projects the CM/GC can assemble larger bid packages to

keep all bidding subs above the minimum bond threshold. This is
accomplished by packaging similar or related scopes into one larger
bid package. Examples would include packaging thermal and
acoustical insulation, metal roofing with hot mopped roofing, all
floor covering materials, doors/frames/hardware, and others. Name
some other scopes which can be legitimately packaged. Combining
finish paint with mass excavation is not an option. Is this practice
unfair? Does it necessary increase the total cost of the project? How
might it also decrease the total cost? In that case, isn’t this practice
actually in the public’s benefit?
C. Another approach is to require project specific related experience as

part of a prequalification process, if permitted. Is it in the public’s
best interest for a CM/GC to contract with subs that have relevant
experience? Will you typically (but not always) end up with a
smoother process and a better product? Isn’t that in the public’s best
interest?
D. Conversely a CM/GC can assemble bid packages in such a manner

that not any subs are either qualified or interested in the work. This
is often the case with normally self-performed scopes such as
structural concrete and finish carpentry activities. In these cases the
CM/GC will end up subcontracting that work to themselves. These
scenarios are also discussed in other cases.
E. What is your opinion about procurement and pricing rules on public

projects? Discuss the advantages and disadvantages of: Bidding
versus negotiating; lump sum versus guaranteed maximum price (or
MACC) versus cost-plus; and traditional GC delivery versus
CM/GC versus design-build. Also address these issues to the
companies which will perform 80% to 100% of the work, the
subcontractors.
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Case study #10.12: Favorite subs

What are the advantages and disadvantages for a general contractor (GC) to
use a) the same subcontractor (sub) and/or supplier in each category on
each project (sole-sourced), b) a short list of subs, or c) whoever is low
bidder with no allegiance for any reason? There are pros and cons for each.
This example case study GC fits category ‘a’. They work with many repeat
developers and have a niche with shelled concrete tilt-up office and
warehouse buildings and car dealerships. They work with ONLY ONE sub
in each category on each project. When owners, or owner’s agents, try to
bust this up and add competition, the GC refuses under the guise it would
be the owner’s risk if the sub does not perform. Can the GC do this
contractually? Why are they so insistent? Would the owner absorb some
risk with alternate subs and if so, what types of risks?
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Case study #10.13: Detailed or generic sub scopes?

You will likely error if you go one way or another, but splitting the
difference may not work either. When a general contractor (GC) estimator
prepares requests for proposal or requests for quotation (RFQs) for
subcontractors (subs) and suppliers they need to make a decision:
Do I attempt to list out every nut and bolt for this vendor’s work? or
Should I just reference the complete drawings and specifications
with a generic catch-all phrase such as: Supply and install all
floorcovering?
The GC’s project manager (PM) needs to make the same choice when it
comes time to draft subcontract agreements and purchase orders (POs). If
you choose the detailed approach, but you missed one item, is that item then
excluded? Some would say so. If you choose the generic approach but some
scope may be needed that is not clearly specified or shown on the drawings,
is that then excluded? GC estimators and PMs are always plugging holes in
sub and supplier scopes from lessons-learned on their past projects. It is
similar to plugging a hole in a dike that protects a city from a body of water.
Once you have that hole sufficiently plugged, another shows up. This does
not stop us from continuing with our mission as GCs - to make sub and
supplier scopes as tight as possible.
Scopes such as flashing, miscellaneous steel, rebar, blocking and backing,
and waterproofing are difficult to detail 100% in the RFQ or PO. One
common practice is for the GC to list every possible item they can find in
the documents (ask your superintendent for help here also) and add a phrase
such as: ‘Includes any and all additional work to make this a complete
system whether shown or called out for or not.’ Is that fair to the vendor? Is
it enforceable? This is often the preferred choice. What has been your
experience with successful and unsuccessful sub and supplier scopes? Other
than the material categories listed here, what systems require: a) a detailed
list, or conversely, b) a generic approach?
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Case study #10.14: Pulled bid

In the public market, most general contractors (GCs) are required to post a
bid bond and many GCs require the same from their subcontractors (subs),
especially the larger ones. But in the private market, bid bonds are not as
common. Some GCs will still ask for them from subs, not with the intent of
calling on the bond in case of a bid default, but more because the posting of
a bond ensures some financial stability of the sub.
This example GC had secured a large industrial facility project on a
competitively bid basis. Everything was proceeding fine with the project.
The project owner requested the GC to perform a substantial addition to
their contracted scope located a couple of blocks off-site from their existing
project. See case studies #5.12 and 14.3, and several others in the book, for
change order opportunity examples. The owner expected this scope to cost
approximately $750,000 and the GC would receive its standard markups for
the work and any additional jobsite general conditions necessary to manage
it. The work involved installing approximately 100 linear feet of a 36 inch
diameter storm drain. But the difficult part was this pipe had to be installed
under an active railroad track. The railroad in question is shown in Figure
10B. The owner had obtained approvals and easements from the railroad.
This is difficult to do! The design documents were all complete and the GC
solicited bids from three qualified short-listed utility subcontractors. Why
did the GC not open the bids to any interested subs?
The subs were not required to post a bid bond. The bids received were for
$600,000, $675,000, and $695,000. Does this seem like a reasonable
spread? The GC informed the owner of the results but would not process
the change order until they met with the apparent low bidder and verified
the scope. This is a good practice. The GC also had other work associated
with this change so all the owner’s $750,000 budget would be needed. The
GC’s project manager (PM) and superintendent met with the low bidder
who was very well known in town. The owner of the utility sub attended the
interview, which was unusual for him. The sub quickly informed the GC
they had not included the $100,000 drilling operation for the portion under
the tracks, even though this was not a specific exclusion on their bid form.
This was a specialty sub and they assumed the GC took this on separate –
which they hadn’t. The sub was presented with the option to absorb the
drilling within their $600,000 bid or pull their bid. Which would you do?
See also case study #6.16. They pulled. Why did the GC allow them to do
that?
Figure 10B
The GC PM informed the project owner of this situation and the need to go
to the second bidder at $675,000. Will the owner allow this? The change
order for the added scope had not been submitted. If a five percent bid bond
had been involved, how might this have ended up? Who would do the work
then, the low bidder, second bidder, or surety company?
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Notes
11
Communications
Includes drawing reading
Introduction
An attorney friend’s opening line in a dispute resolution conference given to
contractors was: “If contractors would learn to communicate, attorneys
would be out of a job.” Communication is unquestionably considered
among the top, if not THE top, construction leadership characteristic.
Communication skills include written, verbal, and maybe the most
important, listening skills. The ability to read and understand drawings and
specifications is a ‘given’ in the built environment, isn’t it? This chapter
includes a variety of case study examples where communications were used
positively and negatively on construction projects. All construction
management tools are essentially communication tools including:
Contracts, meeting notes, RFIs, submittals, schedules, estimates, inspection
reports, change orders and many others evaluated throughout this book.
Essentially each of the 275 case studies could have been included in this
chapter on communication to some degree. This chapter discusses the
following case studies related to all facets of construction communication
tools, including drawing reading:
11.1: Money can’t buy everything
11.2: Fear of the drawings
11.3: PM or PE?
11.4: Attorneys not allowed
11.5: No one is home
11.6: Follow the rules!
11.7: Shower curb detail
11.8: Ugly schedule
11.9: No schedule proof
11.10: Garage model
11.11: Dome hangers
11.12: Darryl’s footing
11.13: Broken water pipe
11.14: Thrown under the bus
11.15: Look the other way
Case studies throughout this book connect with multiple chapters. Many, if
not all, case studies in this Chapter #11 also connect with other chapters
including:
Case studies #11.1, 11.2, 11.3 and 11.14 – Chapter 16, leadership,
careers
Case study #11.5 – Chapter 1, project owners
Case studies #11.6 and 11.9 – Chapter 9, superintendents
Case studies #11.7 through 11.11, Chapter 7, scheduling

connect with this chapter on communications including:
Case studies #1.5 and 1.7, project owners
Case study #3.13, construction organizations
Case study #4.7, preconstruction
Case studies #9.6 and 9.10, superintendents
Essentially all case studies in this book involve construction
communications
Case study #11.1: Money can’t buy everything

How will the success of your career be measured? A cost and schedule
engineer spent his first four years out of college working for a national
industrial contractor. He was rotated through several projects, geographical
locations, and different positions. This frustrated him as he was wanting
more stability. Just as soon as he had a project or responsibility figured out,
they moved him; this went on for four years. The engineer was unaware
that he had impressed the corporate office very early and that he was on a
fast-track to become an executive. After working seven-12 hour days for
close to a year, which included overtime pay, per diem pay, and bonuses, he
gave his two-week notice that he was unhappy and was going to quit. He
received a call at home late that evening from an executive in the home
office trying to talk him out of this decision. He was offered a raise, a
transfer (again), and time off. The engineer had met this executive once or
twice but he always seemed to be drinking from a bottle of Pepto Bismo
from his desk drawer; he didn’t appear very healthy. The executive told the
young engineer: “We had plans of you one day taking my job! Why didn’t
you tell us you were unhappy?” The engineer’s response: “You should have
known I was unhappy and I don’t want your job.” Did the employee miss a
career opportunity? Shouldn’t employees sacrifice everything, including
health and family, for a desk in the front office? How could this situation
have been averted utilizing better communication skills from both the
employee and corporate?
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Case study #11.2: Fear of the drawings

Can you ‘read’ drawings? I hope so. If not, learn this new and different
language as soon as you can. Construction drawings, specifications, and
contracts are essential construction communication tools. The best way to
do so is to open the drawings and hunt for items, similar to the children’s
game ‘Where’s Waldo’. How many toilets are there? What is the size of the
largest footing or heaviest beam? What floor covering is in room 101? How
many square feet of glass is in the job? What warranty is required for the
roof? Can all construction management (CM) professionals read drawings?
We would hope so, but that is not always the case as evidenced in trailer
superintendent case study #9.6.
This young woman was a professional project manager (PM) and was
taking an adult-education class titled construction contract documents, or
drawing reading. She had been born in a country other than the U.S. but had
earned a college degree here. She worked for a very large public agency
that had hundreds of construction projects on its schedule for each year and
employed 1,000 construction personnel, from electricians and welders to
design engineers and PMs.
She did just fine in the class. Not the best, but not the worst. Isn’t that the
case with most of us? Her final exam was delivered in a large sloping
theatre style classroom. She brought her final exam down to her professor
and she was crying. He felt terrible. He consoled her: “I am sure you did
just fine.” She responded: “No it is not that. I did okay. But I am so happy. I
no longer have a fear of the drawings.” She confided in her professor that
she had been faking it at work and nodding a lot when others were gathered
around a set of drawings. Her employees had been doing the drawing
reading for her. She had now gained confidence in this one CM area. She
had a very successful career and eventually became the vice president of
capital projects for this public agency, in charge of a 1,000 person
workforce. Congratulations Alina.
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Case study #11.3: PM or PE?

What is the difference between a project engineer (PE) and a project
manager (PM)? Many contractors use different titles for similar positions.
The rule-of-thumb is a PE right out of college will need to put in
approximately seven years before having an opportunity to run their own
job and assume the PM role. Larger companies have half-steps such as
senior project engineer or assistant project manager. Other companies rotate
PEs through the home office as estimators, schedulers, and cost engineers.
An individual may find themselves running five $1 mil projects one day
and be a PE on a $100 mil project another day.
This example PM had risen through the ranks quickly and had just
completed a complicated out-of-town high-technology project. The
contractor had a large cost-plus fee project underway and needed someone
with his expertise, so he was assigned as the mechanical, electrical, and
plumbing (MEP) PE. His business cards already read ‘PM’ and he was not
pleased with the new box which labeled him as a MEP PE. The PM on the
job knew of his new teammate’s experience but they had never worked
together prior. They were only one year apart in age, but the PM treated him
the same as the other five younger PEs. The PM used excessive oversight,
at least in the MEP PE’s opinion. He reworked his estimates and schedules
and would contact the MEP subcontractors direct without the PE’s
knowledge. They bantered, and one day had it out over the PM’s
micromanagement leadership style. Somehow the PM got the message,
changed his approach, and backed off. They worked successfully for the
balance of the project and became good personal friends. Should there be
clear lines of distinction between job titles? Should the MEP PE have just
kept his head down and not raised the issue? How might the PM have
handled his communication skills differently? Have you had a bad boss?
What were the circumstances? Have you had a good boss? What were his or
her leadership traits?
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Case study #11.4: Attorneys not allowed

What do you suppose happens when the project owner, general contractor
(GC), and/or architect begin bringing their attorneys to owner-architect-
contractor (OAC) weekly construction coordination meetings? Are we then
still coordinating? There is an unwritten rule that if one party brings their
attorney, so does the other party. The presence of attorneys at construction
meetings tends to either stifle conversation or causes the meeting to become
contentious (opinion). The group may be told the attorney is just there to
listen, but it doesn’t take long and they take over the conversation (another
opinion). One large example client had six attorneys full-time on staff. One,
who was not versed in design or construction matters, would attend every
weekly OAC meeting. The architect and GC were directed by the project
owner that they could not also bring their attorneys along. Is this fair? Can
they enforce that? Can an attorney attend but under a different guise, such
as a consultant? What happens to verbal and written communications when
an attorney is present at an OAC meeting?
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Case study #11.5: No one is home

Imagine building a construction project without any local representation. It
is difficult. This case study is more about a town than one particular project.
This is a resort town which is both a winter ski destination and has
extensive summer activities. The ‘trophy’ houses that are built there often
cost in excess of $10 mil, if not $20 mil. Have you ever worked on or been
in a trophy house? Note the use of the word house here in lieu of home as
most of these are second dwellings. Side note: Is their primary home worth
more money? But because the four seasons in this resort town are well
defined, and often extreme (below zero in the winter and above 100 degrees
in the summer), many construction companies have a difficult time keeping
a good backlog and a solid workforce. Explain why these two are important
to construction company operations.
A California move star wants a new $18 mil second home. She won’t live
there full-time and over the course of construction will only visit the project
a hand full of times. The movie star hires an award-winning architect from
Boston. He will visit the ski town twice for this house; groundbreaking and
ribbon cutting. He contracts with several consultants and engineers who live
in the state the house is being built, but none of them are closer than two
hours away. The owner has a wealthy California neighbor who built a
similar 10,000 SF ski chalet in another state and that contractor is
contracted to build this house. How big is your home? Does a ski chalet
need to be 10,000 SF? How much per square foot would this new house
cost given that it is much smaller than her friend’s home; this one is only
8,000 SF. The builder does not have a license in this state, but they will get
one. They only work on a time and material basis. No construction timeline
is set. How many things are wrong with this scenario thus far? How are all
these people and companies going to effectively communicate?
The builder hires a superintendent on a contract basis and all the scopes are
subcontracted. What are the advantages and disadvantages of direct hire
employees versus contract employees? Who gets paid more and why? Even
the subcontractors are typically travelers, some spending the summer
construction months living in tents and trailers. Expensive finish materials
are specified to come from all parts of the globe. What do you suppose
happens to our owner’s $18 mil budget? How could these trophy houses be
organized more productively and built more economically and timely? Can
you guess what happens to quality and safety and schedule on these
projects?
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Case study #11.6: Follow the rules!

This sixty-year old superintendent was very well respected in this large
metropolitan area. He had many family members involved in construction
throughout town. He seemed to know most of the police and fire
department members and had close connections in the building department.
Owner and design teams routinely requested his participation on their
projects. Construction is a tight community. What advantages are there
when ‘people know people’?
On this hospital project, it appeared that the structural engineer forgot to
detail one spot footing under a tube steel column. The superintendent
ordered rebar and anchor bolts from similar column and footing details and
formed and cast what he felt would be an adequate footing. What process
should he have followed and what construction management
communication tools should he have used? The project architect and owner
were very upset that, although the superintendent’s assumptions were
correct, he should not have taken it upon himself to build the footing
without asking for a formal design. Why did they care? Even with a
plethora of experience and trust, contractors must still follow the rules as
outlined in the contract. Do you suppose the superintendent removed and
replaced the footing? Do you think he changed his ways after this
experience? This author/construction manager doesn’t subscribe to the
phrase: ‘It is easier to ask for forgiveness rather than permission’. How does
that apply to this situation? Have you observed others who use that
philosophy? Does it work?
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Case study #11.7: Shower curb detail

A downtown historic hotel renovation project, which was basically a gut
and re-build, requires an incredible amount of communication and
documentation between the construction and design teams. The new hotel
suite showers were to be oversized without a door or curtain and relied on a
short curb to retain the water. This is a popular shower design today, but
does it meet American with Disabilities Act (ADA) requirements? The
design documents were lacking any detail on how this curb was to be built
and the architect was reticent to put anything on paper. A young assistant
superintendent who was trying to keep the crews moving developed a
proposed curb detail using and sent it via email to the design and owner
teams prior to the weekly owner-architect-contractor meeting. The detail
was discussed at the meeting and none of the parties took any exception to
the superintendent’s proposal. The project manager (PM) documented the
discussion in the meeting notes and bypassed the typical request for
information (RFI) process as the project already had over 400 RFIs. Should
the construction team have just waited on the architect here and not stick
their neck out? What if the curb doesn’t meet code? What if it doesn’t retain
water? Who is at fault? Who checks for ADA compliance? Why did the PM
skip using an RFI? What other construction management communication
tool might the contractor have used?
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Case study #11.8: Ugly schedule

A small sole-proprietor general contractor (GC) in Juneau, Alaska was
awarded a large commercial office building on a negotiated basis due to his
wonderful reputation in the community and personal connections with the
owner and architect. Is this typically how negotiated private projects are
secured? He was both the project manager (PM) and superintendent on all
of his projects and also managed a very busy panelized prefabrication
facility. See also case #8.6 and associated Figure 8A. Have you met
construction professionals who wear both PM and superintendent hats?
The contracted owner’s representative was from Seattle, Washington and
expected project controls sophistication comparable with his Seattle GCs.
The Juneau contractor had never produced a three-week schedule and
resisted the ‘big-city’ oversight he anticipated receiving. How could the
contractor have succeeded without the use of short interval schedulers on
prior projects? The owner’s representative helped him through this and
eventually received buy-in to use this valuable tool. The project was a huge
success on many fronts. The GC’s schedule was not pretty. It was in hand,
often with phone numbers and coffee spills, but still it was his. What is
more important, the schedule format or the scheduler? On a subsequent
project proposal, he included a sample of his three-week schedule as one of
‘his’ standard PM communication tools; and he landed that project as well!
Do you suppose this bothered the owner’s representative?
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Case study #11.9: No schedule proof

The schedule is an important communication tool, and its presentation, in
whatever format (summary, contract, three-week), needs to be understood
by all the stakeholders. This particular superintendent would spend the
entire Monday morning preparing for the foremen’s meeting by updating
his schedule, but he always seemed to have trouble formatting and printing
the schedule. Have you experienced this? I think we all have to some
degree. For this particular meeting he printed out and copied for the whole
team his 12 page 11 x 17 schedule (this already is not a good
communication tool – what would be?); but he had not proofed it. Half the
pages were blank, others had only vertical restraint lines with no horizontal
activity lines or activity descriptions, and the schedule was plagued with
reverse logic loops and incorrect dates. The superintendent loses credibility
with his or her team if they cannot communicate the importance of
achieving the project schedule. List three suggestions you would make for
this superintendent such that he could communicate project schedule needs
with the team.
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Case study #11.10: Garage model

A local general contractor (GC) experienced at cast-in-place concrete (CIP)
work and parking garages negotiated a seven-story 3,000-stall garage for
this casino project. Even though the project was negotiated, the owner still
required a $100,000 per day liquidated damages clause in the contract if the
garage was finished late; they needed their parking stalls to support a grand
opening! Doesn’t $100,000 per day seem excessive? How much do you
suppose a casino makes in a day? The CIP garage had two distinct halves
with ramps up and down through the center. The contractor utilized two
tower cranes and two concrete placing booms. The owner was not
experienced with construction projects and did not really understand the
schedule. Why don’t all clients employ an outside agency owner’s
representative if they lack this experience in-house? Why doesn’t the
project architect provide this service? The superintendent was a good
communicator and built a physical scaled model of the CIP garage. He
would explain with the model in the weekly owner-architect-contractor
meeting what half and what floor was being poured that week and which
was being shored and re-shored. These activities all corresponded to the
contract schedule. This was the best three-week schedule the GC could
have used and was accepted by the owner. The project finished on time and
was a big success for all of the parties. Architects sometimes build models
during the design process. What are some other examples a contractor could
benefit from the use of physical scaled models during preconstruction?
Explain how building information modeling could also have resolved this
situation.
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Case study #11.11: Dome hangers

The top of this nuclear power plant containment dome was 300 feet above
the false floor which served as the ceiling for the reactor. Have you ever
been inside a nuclear power plant? Very few of you will. Why is that? See
Figure 11. A large 80 foot tall gantry crane ran on a circular track inside of
the dome designed to eventually service the power generation equipment.
There were five circular pipes for emergency containment cooling spaced at
even intervals high up inside of the dome. Why might the containment
dome need to be emergency cooled? The hangers on these pipes required
redesign and rebuilding after code changes. The contractor’s means and
methods included a very tall scaffold on top of the gantry crane which
would be moved every five days to access a few additional pipe hangers on
either side of the dome. This work was on the critical path and lasted for
nearly three months.
The mechanical scheduler built a mockup of the crane and pipe loops and
hangers for the project’s construction manager (CM) – a licensed nuclear
engineer who oversaw this project’s 5,000-person workforce. Once weekly
the scheduler would update the mockup in the CM’s office with work
accomplished, including rotating the crane and scaffold to its next position.
The CM didn’t know many of his 5,000 employees personally, but he knew
this scheduler (one of 40 on the project) on a first name basis. Draw this
containment dome and its five piping loops. What is the diameter of the
dome? Locate hangers at approximately 20 feet on center. How many total
hangers did you come up with? If the contractor could finish 10 hangers per
week, how long did this project last,
Figure 11
including two weeks each to erect and dismantle the scaffold? Add the
gantry crane and scaffold on top and cantilevering out to reach the sides of
the dome in your sketch. Now build a model of that. That is a lot of work,
but that is how to be recognized by construction project leaders.
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Case study #11.12: Darryl’s footing

This example case study is connected with the project described in case
#1.6. The only concrete contractor on this remote island was Darryl. Darryl
shows up with his Datsun pickup truck (old name for Nissan) which was
full of rust holes and held together with duct tape (sarcasm, but not far off).
The project had a complicated structural system to tie the timber frame
building down to solid rock with ‘rock anchors’. There were four large
interior type F10.5 (10’ – 6” square) by 2.5’ deep spot footings. The rock
anchors were drilled into the bedrock and were to be embedded into these
footings. This would be a good time to draw a sketch.
Design drawings typically include many abbreviations and acronyms and
this structural set was no exception. There was an arrow pointing to one of
the four footings with the following note:
#4 rebar at 4” OC T&B EW with min 3” clear A4S, typ.
The question for you: At a purchase price of $1,400/ton and an installation
rate of 1 ton per hour at a wage of $44/HR plus 54% labor burden, how
much would it cost to supply and install all the rebar in Darryl’s F10.5
footings? I hope you do a better job of reading these drawings than Darryl
did. When I showed up for an inspection, concrete was coming down the
chute and there were only four #4 bars in the bottom of one footing, the one
shown at the end of the arrow and note, laying east to west.
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Case study #11.13: Broken water pipe

A. Interior building water pipes today are typically copper and
sometimes plastic for residential projects in some jurisdictions.
Exterior water systems are cast iron or ductile iron. What other
materials have you seen? But way back when, large city water
supply systems used wood pipes with exterior metal strapping
reinforcement. Have you seen these? A new hillside apartment
complex was under construction adjacent to a city easement which
still had an active 36” diameter wood water pipe. If wood remains
buried, and is not exposed to oxygen, does it rot? There was a
blockage in the pipe due to tree roots and the city hired a utility
contractor to investigate and repair. The contractor valved-off the
water above and sent a small laborer into the pipe with hand tools to
remedy the blockage. Does this sound like a project for you? The
water pressure had held the outside earth back, but when valved-off,
the pipe weekend, the earth caved in, and the laborer was crushed.
Who is at fault? How does the deceased employee’s family collect
for damages?
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B. The young general contractor (GC) project manager (PM) working
on the adjacent apartment project witnessed and documented all
that happened with respect to the broken water pipe and subsequent
accident. His project had been complete for three years before he
received a phone call from an attorney. The attorney was very polite
and indicated he was looking into the laborer’s case and understood
the PM may have relevant documentation. Does it matter here
which party the attorney represented? The PM was so excited he
could contribute that he took the attorney to his company’s
basement and opened his file cabinet. Uh oh! When the PM’s boss
heard about this sharing he hit the roof. Why the concern? The GC
had not done anything wrong. How long are you are you required to
keep records? What would you do if an attorney asked to see your
files? What would legally be required for someone else to access
your documentation? Does your company have a policy about
speaking with or meeting with attorneys?
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Case study #11.14: Thrown under the bus

The construction manager (individual CM in this case) for this large
example design-build general contractor had an assistant. The assistant was
not really an assistant CM, but rather an assistant to the CM. What is the
difference? He had a business school degree and a knowledge of
construction terminology (sometimes it seems we speak a different
language) but was not a builder per se. The CM boss was well-liked by
everyone around him. He socialized with the city, clients, his employees
and especially his home office superiors. He seemed to enjoy positive
relationships. He wanted to be ‘popular’ and avoided confrontation. Is this
possible on a construction project? How did he accomplish this? The CM
sent his assistant out to deliver messages, gather information, and often
perform the dirty work. The CM boss personally handed out promotions,
raises, and bonuses. The assistant, on the other hand, laid people off and
authored negative paperwork and reviews to be placed in employee files.
When unfortunate incidents would happen on the jobsite, as they
occasionally do, the CM would claim no knowledge and place
responsibility on others. This included cost and schedule overruns and
quality and safety infractions. This was not a pleasant situation for the
front-line last planners, those doing the work, but it kept a smile on the
CM’s face. How would you react if you were a field supervisor or the CM’s
assistant if you were ‘thrown under the bus?’ How would you propose this
situation be rectified?
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Case study #11.15: Look the other way

I can’t. This author was a very successful general contractor (GC) project
manager (PM) and later owner’s representative, but my biggest fault (one of
many) was the inability to let things go. Some of what upsets me, and I
make an issue of, include:
Unfair and potentially unenforceable contract language,
Pre-project deals between the parties which are not documented in
the contracts,
Inflated estimates,
Inefficient jobsite management,
Lack of attention to safety,
Poor quality work,
Over billings,
Inflated change orders,
Slow and inadequate closeout,
And a bunch of others.
But other GC PMs look the other way, as do some project owners,
architects, and many agency owner’s representatives. Why do they let
things go? Is this ethical of them? Does this represent good project
leadership? Their projects get built and everyone seems to be happy in the
process at the end. Is the entire built environment industry messed up or is it
just me?
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Notes
12
Construction controls
Including quality and safety controls, and
construction management tools such as submittals
Introduction
The term ‘construction control’ is common in both academia and in the
profession, but it is slightly misleading. We cannot actually ‘control’
someone or some event. What we can do is plan and manage to the best of
our ability. Some of the tools we use include adequate drawings and
specifications, clear contracts, sufficient time and budget, proper tools, and
a qualified workforce. There are typically five areas of construction controls
including schedule, documentation, cost, quality, and safety. The first three
of these have been assigned their own chapters in this book; 7, 11, and 13
respectively. This chapter is devoted to quality and safety controls. The
example case studies in this chapter include discussions of submittals,
inspections, and site security to reinforce these two important control areas.
But all five control areas interact. A project cannot be successful if the
contractor meets the expectations in four but falls short in one. For
example, a project which meets schedule and budget goals, is safe, has good
communications, but the quality of the installation is so poor that the project
owner will never use the contractor again, and the architect will not
recommend them to future clients, is a failure. This chapter includes the
following case studies related to construction controls, quality control,
safety control, and submittals:
12.1: Scaffold mishap
12.2: Dirty sanikans
12.3: Missing vapor barrier
12.4: Plywood footballs
12.5: Icemakers
12.6: Banned food truck
12.7: Aquarium trout
12.8: Utility inspector
12.9: No jerry-rigging here
12.10: No carpet submittal
12.11: Five-foot elevation snafu
12.12: Fix it, fix it quick
12.13: Lunch box contraband
12.14: Three-story fall
12.15: Who dropped the coupling?
studies in this Chapter #12 also connect with many other chapters,
including:
Case study #12.3 – Chapter 4, preconstruction
Case study #12.6 – Chapter 9, superintendents

connect with this chapter on construction controls including:
Case study #1.10, project owners
Case studies #2.7, 2.9, and 2.11, design team
Case studies #3.13 and 3.15, construction organizations
Case study #13.4, cost accounting, safety miss-code
Many cases from Chapter 15, construction completion, connect
with controls
Case study #12.1: Scaffold mishap

A foreman came up with a creative method to reach a high-bay industrial
facility’s underside roof structure to implement repairs. He assembled
several levels of scaffold to reach the structure and included wheels under
the four scaffold legs so the temporary structure could be moved. The
foreman was situated 30 feet in the air with framing materials and his skill
saw while his apprentice would move the structure to the next location. This
invention worked very well for the first three days of the project. The floor
was concrete and sloped to an open internal catch basin for drainage. The
grate for the catch basin was missing. On the fourth day during one of the
moves, one wheel landed in the drain and the entire scaffold came tumbling
down. The foreman hit the concrete slab first and his planks and saw and
lumber and scaffold assembly piled on top. He didn’t die that day, but was
seriously injured. We all know what should have been done, but why were
short-cuts taken? What is jerry-rigging? Have you witnessed similar safety
violations? Who pays for the foreman’s medical bills: The client, the
scaffold supplier, the apprentice, the foreman’s employer, the state?
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Case study #12.2: Dirty sanikans
It is often said that a clean jobsite is a safer jobsite and has better quality
than a messy one. It is important to keep the craftsmen happy. Most of them
are not just on the job for a paycheck on Friday. They deserve to be
respected and a clean jobsite is one way to show that respect – not only to
the craftsmen but also the client, designer, and the city. Another way to
show respect to the true builders is to provide them sufficient access to
clean and plentiful sanitation facilities. These toilet facilities have many
names including sanikans, blue rooms, honey buckets and other colorful
descriptors. Some estimators skimp on providing adequate budgets for
safety and quality control efforts, including cleanup and sanitation. A rule
of thumb is a minimum of one facility per 10 craftsmen, including separate
toilets for women, accessible units, and access to hot water. They should all
be serviced at least twice weekly, but granted, these considerations all have
costs associated with them. Have you ever had to use a dirty sanikan on
your jobsite? It wasn’t a pleasant experience was it? On this large example
public project the quantity of toilets was inadequate and they were only
(reportedly) cleaned once weekly. Some of the electricians took matters into
their only hands and dropped M80 explosives into the dirty toilets. Can you
imagine the mess? This of course turned out to be counter-productive; there
were now fewer toilets to share. How can each of the parties (GC,
estimator, subcontractor, and craftsmen) implement positive changes to
improve safety, quality, and sanitation needs for any project? Address each
one separately. Do all parties have a say?
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Case study #12.3: Missing vapor barrier

Many design professionals look at value engineering (VE) as ‘project
cheapening’. Do VE alternates always reduce quality? Can’t some actually
improve quality and/or offer life-cycle cost benefits? Some project owners
encourage all methods of VE in order to reduce costs. This is often the case
with real estate developers who are focusing on their short-term pro forma
and plan to build-lease-sell and not hold for the long term. This example
speculative office building was being built in a former farm field. The
ground was inherently moist and soft. The developer instructed his general
contractor (GC) to propose VE alternatives to bring the project within (his)
budget. He stated: “Nothing is sacred, everything is on the table.” The
architect objected to these cost cutting methods and was terminated shortly
after receipt of the building permit. What sort of risks do all of the parties
assume if the architect does not continue to support the project through
construction completion?
One of the accepted VE reductions was for $500 to eliminate the vapor
barrier under the slab-on-grade (SOG). Are VE reductions given back at
100% of the original budget? The shelled project (no finishes or mechanical
or electrical) was completed and leased and the new tenant began their
tenant improvement (TI) work with another GC and another architect. The
lease agreement required the tenant to pay for all their TI improvements.
Sometimes this is the case and other times the developer pays for the TI and
the tenant’s lease rate is adjusted to cover TIs. This was a laboratory tenant
and the floorcovering was a mixture of vinyl composition tile (VCT) in the
laboratories and halls and carpet in the offices and conference rooms. One
month after move-in the tenant complained to their new GC that the VCT
floor tiles were popping up. Upon inspection, the building’s heating system
appeared to be sucking the moisture from the fertile soil underneath the
structure through the SOG and popping the tiles up. Everyone knows
concrete is porous but the tenant had no idea that there was not a vapor
barrier under the slab. The building shell drawings indicated there was a
barrier. The tiles were dripping wet when removed. Was this worth the $500
savings? How do you stop the moisture now from the inside of the
building? Can the tenant claim their new architect or GC? Can they claim
the previous architect or GC? Can they claim their landlord, the developer?
What has been your experience with VE?
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Case study #12.4: Plywood footballs

How ‘clear’ is clear wood? Are trees perfect in nature without knots and
splits and pitch pockets? Just because a detail can be drawn or a product
specified does not mean the construction team can (always) meet the
designer’s and project owner’s intent. The two-story atrium in this law
office case study project was specified to have a plywood finish. The
plywood was to be Douglas fir veneer and ‘A’ grade. What is ‘A’ grade? To
the architect this meant perfect clear fir with no splits, blemishes, or knots.
How might specifications and drawings be used to emphasize this? To the
plywood supplier this meant the best he could supply. The plywood when
delivered to the site looked perfect. Should the architect have inspected the
sheets at that time? It was finish-stained on site with a transparent oil while
staged on sawhorses in a controlled environment. The general contractor’s
superintendent inspected the sheets and gave the process a thumb’s up.
Should the architect also have taken a look at that time? The wood panels
were then installed 20 feet in the air with scissor lifts. What had been
overlooked pre-stain, but showed up when hung in the atrium, was three-
inch long plywood veneer football-shaped patches or plugs. The plugs were
also made of Douglas fir. These were added at the lumber mill and replaced
knots and other blemishes. The footballs were carefully placed such that the
wood grain lined up. But they were not an exact match. See Figure 12A.
Should the designer have visited the mill before the material shipped?
The architect rejected the installation. This was not ‘clear’ or ‘A’ grade as
she understood it. This ceiling was to be perfect. What does ‘perfect’ mean
to you? The GC argued that no one would look up and study the ceiling as
she was now doing; laying on her back on the carpeted lobby floor. A
compromise was reached replacing any sheet with more than one football.
How might the architect, GC, and supplier have guarded against this before
it happened?
Post script: The ceiling has not been replaced or re-finished 25 years later.
But the plywood patches show up more now than ever. Can you see them?
Evidently the different veneers age differently. I wonder if anybody notices.
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Figure 12A
Case study #12.5: Icemakers
A general contractor (GC) does not want to be in the situation of receiving
100 kitchen refrigerators that lack icemakers when the contractual
documents required refrigerators equipped with this feature. The supplier
on this example project has offered to solve this issue by retrofitting the
refrigerators in the field, but this results in a two-week schedule delay
which will also affect the schedule of the plumber who has completed the
rough-in for the icemakers and is expected to connect them. Why doesn’t
the GC just reject the refrigerators and ship them back? The project
engineer (PE) in charge of coordinating this work apparently forgot to
review for this scope with the submittals. Does this relieve the supplier
from responsibility? What does a GC’s submittal stamp say? Who pays for
the plumber’s delay? Does the PE get fired because of this mistake?
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Case study #12.6: Banned food truck

Every construction site element needs to be considered when developing
the site logistics plan. Every construction project is visited by a vendor
truck, also known as a food truck or taco truck and some other fun
nicknames. Some jobsites have multiple trucks showing up before work,
again at the 10:00 am coffee break, and at noon for lunch. How long is a
coffee break? The vendor trucks need to have the superintendent’s approval
with respect to location and timing and cleanup. This general contractor
superintendent did not approve of vendor trucks; he felt they resulted in
wasted time for his craftsmen and generated garbage. His crew and all the
subcontractors would therefore break for coffee and lunch and walk two
blocks to a corner convenience store. This distance extended their breaks
away from work. On the way back to the site occasionally some garbage
would accidently end up on the ground and the superintendent would send a
laborer out for four hours a week at the end of shift on Friday to clean up.
Keeping the truck off the site to save labor may actually cost more labor.
Are craftsmen paid during coffee breaks or smoke breaks or phone breaks?
Are they paid for 30 minute lunch breaks? Make whatever assumptions for
this example that you need and compare the costs for this superintendent.
Assume a 50 person crew.
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Case study #12.7: Aquarium trout

This city was very environmentally conscious and this one particular
building inspector took it upon himself to restore defunct salmon spawning
streams. He required this general contractor to install a 1,000 gallon
aquarium with live trout on the jobsite. The site storm drainage was
partially routed through this aquarium. If there was any silt in the runoff it
would be apparent in the aquarium. If any trout died, the inspector would
shut the project down – ouch! Is this fair to the contractor? Would this
system have been described in the bid documents? Are you familiar with
the term ‘storm water pollution protection plan’ (SWPPP)? How is that plan
prepared, permitted, and inspected? Where are the costs for temporary
erosion and storm control (TESC) included in a contractor’s estimate? Are
these the same things? Shouldn’t the earthwork subcontractor be
responsible for these scopes? What do you suppose happened to the trout at
the end of the project? Any idea what the city inspector had for dinner?
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Case study #12.8: Utility inspector

This was a large high-technology project being constructed in California.
The project superintendent and his three assistant superintendents would
routinely take Friday off and head to a Nevada casino, often leaving only
the new project engineer (PE) as the contractor’s on-site representative. On
this particular Friday, the site utility subcontractor (sub) was installing the
underground eight-inch diameter fire loop. The owner’s representative (rep)
stormed into the jobsite trailer office complaining that the utility trench had
been backfilled and he was not offered an opportunity to inspect the pipe. Is
it the owner’s responsibility to inspect underground utility pipes? The
young PE reviewed the specifications with the owner’s rep and required the
sub to dig up one joint and discovered it had not been properly braced. Is
the PE making a mistake here? Shouldn’t he stand up for his sub? It turns
out that is what the general contractor’s superintendent would have done,
had he been there, or so he claimed. Shouldn’t the PE ‘stay in his lane’?
The PE required the subcontractor to subsequently dig up the entire loop.
The young engineer documented this in the daily job diary – much to the
chagrin of the project superintendent. Trust must be developed and
maintained with the owner, permitting jurisdictions and third-party
inspectors. The superintendent returned to work on Monday and wrote a
letter to the company owner demanding the PE be terminated. Why was he
upset? What do you suppose happened next?
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Case study #12.9: No jerry-rigging here

A commercial general contractor superintendent was building single-family
residences on a speculative sale basis on weekends and vacations. Is a side
business such as this ethical? Does it happen a lot in construction? Are you
familiar with the term ‘moonlighting’? The builder often had to request
county inspections during the week when he was at his regular job, 60 miles
away from the residential site. This rural county building inspector was at
first reluctant to perform an inspection when no one was on site. The county
inspector had been burned by several small builders who did not always
build to code. Can you imagine ‘builders’ actually removing materials
which had been ‘approved for cover’ and re-use them in another location?
This unfortunate practice is referred to as ‘jerry-rigging’. But this
moonlighting superintendent did not cut any corners. The two developed
mutual trust and respect for each other that lasted for 10 years and 10
quality houses. The inspector would even carefully store and protect an
errant tool that he discovered misplaced, turn off the utilities, and lock up
the site for the builder. How does an individual become a building
inspector? What experiences might inspectors have had in their prior
careers?
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Case study #12.10: No carpet submittal

This is a small office tenant improvement project with a contract value of
approximately $500,000. The owner is very experienced and routinely has
one to two projects under construction. The architect is a repeat firm. The
owner usually negotiates projects but has recently had two bad experiences
with general contractors (GCs) and decides to bid this project out in hopes
of finding a new GC they can develop a relationship with. Is that how you
would recommend an owner find a new GC? The contractor which is low
bidder is also looking for just this sort of arrangement. They are a very
small firm. Even this project is at their limit. They operate very informally
with little documentation. The project is on schedule and all parties are
operating in a partnered fashion. Samples of the carpet are not submitted, as
the specifications did not require this process. Why not require submittals?
Why not submit anyhow? The carpet arrives two weeks before it is
scheduled for installation. It is left rolled-up and wrapped. The
superintendent does not inspect it. Should he have? The carpet was installed
by the subcontractor over a weekend. The GC’s superintendent was not
present during this work. Isn’t it an insurance requirement that the
superintendent be there if anyone is working? On Monday morning the
owner arrives and is surprised to see that the new carpet is a different color
and a different cut than the carpet it adjoins with and was to match. Didn’t
the subcontractor know there was a problem? Why did they proceed
anyhow? It turns out that the carpet is “as specified” but the architect erred
with their specifications. Did anyone ‘win’ in this scenario? Should the
architect pay for the replacement? Should the owner just live with? Did the
owner find their new GC to team with?
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Figure 12B
Case study #12.11: Five-foot elevation snafu

A project owner that builds a lot of construction projects engages their
favorite surveyor to locate property corners and one benchmark elevation
for this new retail building. The general contractor (GC) takes over control
of the elevations and lays out grid lines from these initial points. After the
building pad had been built and foundations were starting the owner’s
representative (rep) confronted the GC’s project superintendent about the
pad elevation. It appeared to him to be way too high but the superintendent
said it was fine. After the slab-on-grade was poured the owner’s rep brought
the issue up again, but the superintendent responded: “I can fix it with a
wheelbarrow and a hand shovel.” The building shell was finished and
everyone now knew there was a problem and the building was five feet too
high. The asphalt parking and sidewalks all had problems with access. Part
of the resolution was to build a short retaining wall. See Figure 12B. The
only good thing was the site would drain well during a storm (sarcasm). At
the next owner-architect-contractor meeting the owner’s rep showed up
with an actual wheelbarrow and a shovel for the GC superintendent. Whose
fault is this? Why is the owner’s rep harping on the superintendent? Why is
the superintendent so defensive? Is there a claim potential against the GC or
the surveyor? What else do you need to be able to make a conclusion on
this case?
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Case study #12.12: Fix it, fix it quick

Mistakes happen. We try to minimize all facets of potential mistakes in
construction, but the fact is, they happen. Our goal is to anticipate them,
react appropriately, hope that they are not deal breakers, and learn from
them.
Constructing concrete tilt-up buildings provides an economic benefit to the
project compared to many other building methods, but also introduces
additional safety concerns. Forming only the edge of tilt-up panels is
considerably less expensive than forming vertical sides of cast-in-place
(CIP) concrete walls. But the effort and expense in equipment and craft
labor to tilt and lift the panels in place is intense. See Figure 12C. Have you
ever worked on a concrete tilt-up building? Prepare a list of advantages and
disadvantages. Prepare a cost comparison to a CIP building, structural steel,
or concrete masonry block building.
This example project manager (PM) received a call one morning that a tilt-
up panel on their project had failed during erection. He rushed out to the
jobsite to inspect the damage. No one had luckily been hurt that day. Upon
arrival the PM was surprised to find the failed panel had 100% been broken
up and was in the dumpster and the carpenters had already begun the edge
form for a replacement panel and new rebar was on its way. Why had the
project superintendent moved so quickly to remove the broken panel and
begin work on its replacement? There are several reasons.
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Figure 12C
Case study #12.13: Lunch box contraband

Many different types of craftsmen were performing welding on this billion-
dollar example refinery project, including ironworkers, pipe fitters,
electricians, and others. The craftsmen were individually checking out
welding rods for installation, and apparently some would take home more
welding rods than they installed. Small tools were also disappearing. The
general contractor’s security force had been checking lunch boxes entering
the jobsite to make sure that contraband was not being smuggled in. What
type of contraband were they concerned about? They now had to add
checking lunch boxes at the end of the shift to make sure the welding rods
were welded into the work and the tools were returned to the company
toolbox. There are a couple of explanations regarding the stolen tools. But
why steal welding rods? Do you know what ‘piece work’ is? Is that legal?
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Case study #12.14: Three-story fall

Unfortunately, everyone on this project began their day hearing screams and
witnessing one of their fellow ironworkers on the concrete in a pool of
blood after suffering a three-story fall. The crew started early that morning,
as is common with builders who like to beat rush hour traffic and enjoy a
few extra hours in the afternoon at home with their families. This particular
morning had a heavy dew in the air and there was still frost on the metal
decking that had been placed the previous day. Should they work if ice is on
the steel? The pair of ironworkers placing deck on the ‘leading-edge’ were
not tied off, and one of them slipped on the frost. What does the term
‘leading edge’ mean with respect to structural steel erection and wood
framing? Is this an OSHA violation? His hard hat fell off during the fall and
did not protect his head from the concrete slab below. As a result of this
terrible accident, the contractor revised its corporate safety plan to not allow
ironworkers to work when there is frost on the steel and require all to be
tied-off, even those working the leading-edge. This change in plan was
constructive, but it did not help the permanently injured craftsman who
would never work in construction again. Who is at fault here? Would it
make a difference if the steel erector was a subcontractor or worked direct
for the GC? Who pays for the craftsman’s medical bills? Can he sue
someone for long-term impacts?
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Case study #12.15: Who dropped the coupling?

How much does a commercial airplane cost? Well that should be the last
line of this story. This case begins with a general contractor’s (GC’s)
successful bid of a major renovation to an airplane fuselage assembly
building. An important element of this project was the safety of the ongoing
assembly process which took place 50 feet below the construction zone.
The GC’s scope involved substantial mechanical and electrical (M&E)
changes, along with structural seismic upgrades. Most of this work occurred
in the 12 foot deep steel roof truss space, also known as interstitial space.
The cover photograph and Figure 14 are from similar facilities. The
contractor was required to build a solid scaffold platform suspended at the
bottom chord of the trusses. This is the same area normally occupied by
maintenance catwalks to access the M&E systems. Below the scaffold was
draped a safety net over the entire assembly plant. The goal was that no
tools or materials or craftsmen were to fall from that height.
Part of the scope also occurred above the roof structure where new large
mechanical penthouse air handling unit (AHU) equipment was to be
installed. Now for the middle of the story. You likely need a sketch for this
example as well. All had been proceeding as planned until the following
sequence of activities occurred on a normal Wednesday afternoon.
AHU 1 was set previously and most of the work had been
completed.
Apparently an electrician had left an errant two inch long conduit
coupling on the floor.
The plumber was making final connections internal to the AHU and
seemed to have accidently kicked the coupling.
The AHU supplier was responsible to provide the equipment with a
solid floor.
The mechanical subcontractor (sub) had plugged all penetrations in
the AHU floor but someone had left open a small gap to allow
condensate drainage during testing.
The conduit coupling rolled to the corner and found the only gap in
the AHU floor and fell to the roof.
The roofing sub was to flash and caulk around all equipment and
penetrations and make the complete system water tight, but they
had not yet finished.
The conduit then followed the roof slope for a few feet and fell
again through an un-flashed M&E opening.
The coupling now dropped through the truss interstitial space and
hit the solid scaffold deck, 12 feet below.
The conduit rolled again on what was supposed to be a flat surface
but found a slight slope and a small gap in the scaffold.
The coupling hit the safety net but the holes in the netting were too
large to retain it.
The two inch long conduit coupling fell an additional 50 feet and
hit an airplane fuselage which was on the assembly line near
completion.
None of the construction crew or airplane representatives witnessed any of

this happening. An assembly line mechanic found the coupling the next day
on the floor and observed it was not an element used to fabricate airplanes
(shucks). After a report and upon further inspection the mechanics observed
a small dent in the fuselage above where the conduit was discovered. The
parties met and documented more or less how this conduit might have
gotten to where it ended up. The GC’s project manager offered to have the
small dent popped out similar to a car dent. The airline which had pre-
purchased this plane was notified, inspected it, and rejected all methods of
dent repair. I guess my recommendation of bondo was not even considered.
Gee whiz! The airline indicated this would forever be a weak spot in this
plane, regardless of the quality of repair. They cancelled the plane order.
Now what happens? Which contractor or supplier is the proud owner of a
commercial jet? The owner’s contract is with the GC. What does standard
insurance policies cover?
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Notes
13
Cost accounting and cost control
Including pay requests, activity-based costing, and
lean construction techniques
Introduction
There is much more to construction controls than just cost control, as
discussed in other chapters in this book, but cost is very important and often
receives most of the focus. Cost accounting includes assignment of the
original and modified estimate to cost codes, which allow effective cost
control tracking. Actual costs are recorded and input back into the
accounting system and form the basis for the contractor’s estimate database.
The accuracy of cost reporting is therefore crucial for future estimates. One
of the most important things a contractor does, if not the most important, is
receiving payment for work performed. Case study examples in this chapter
discuss both good and bad pay request and timely payment experiences.
Contractors must accurately report cost and monthly fee forecasts so the
company knows, at any given point of time, how each project and the
overall organization is doing financially. That accuracy depends on cost
control input from cost engineers, jobsite cost accountants, and project
managers. Understanding value-added activities and personnel is the
premise behind activity-based costing. Lean construction techniques
involve minimizing waste and building more cost efficiently. All these cost
control concepts are crucial to the long term financial viability of a
construction company and are discussed here. This chapter includes the
following case studies related to construction cost accounting and cost
control.
13.1: Pay request processing
13.2: T&M procedures
13.3: 10% cost forecast
13.4: Safety miss-code
13.5: Below cost home builder
13.6: Timesheets and cost codes
13.7: On-site accounting
13.8: Out-of-town accounting
13.9: Pipe hanger cobwebs
13.10: Medical fire
13.11: Equipment company controller
13.12: Activity-based costing
13.13: Warehouse staff
13.14: Surviving the recession
13.15: Timber-frame construction
13.16: Conservative cost forecast
studies in this Chapter #13 also connect with several other chapters
including:
Case study #13.4 – Chapters 9 and 12, superintendents and
controls, safety
Case study #13.5 – Chapter 1, developers
Case studies #13.7 and 13.8 – Chapter 5, contracts
Case studies #13.11 through 13.14 – Chapter 3, construction
organizations

connect with this chapter on cost control including:
Case study #2.6, architect’s role in pay requests
Several case studies from Chapter 3 involving construction
organizations
Case study #9.9, superintendents’ approach to cost control
Case studies #16.2 and 16.13, leadership and ethics
Case study #13.1: Pay request processing

Most project engineers (PEs) want to become project managers (PMs). One
way to do this is to seek more responsibility and add more construction
management (CM) tools to their respective toolboxes. The PM on this high
technology project prepared his monthly pay request and handed it to his
PE as he left the project for a one week vacation. The PE was instructed to
add a transmittal cover page and mail it to the project owner who had an
office on the other side of the country. This is the same owner as discussed
in case studies #1.5.A (teams) and 15.14 (close-out). This owner always
insisted on a certified hard copy of the pay request, as he did with change
orders. Why was that? The PE happily accomplished this important task.
For many contractors getting paid is the most important CM task. Why is
that? Is that wrong? What are some other important CM tasks?
A month later the PM’s chief financial officer contacted him and inquired
about the last month’s pay request. They still hadn’t been paid which was
unusual for this client. Although he took the complete 30 days he was
allowed, he didn’t stray beyond that. The PM called the owner’s
representative and inquired if there was a problem. The owner’s
representative responded: “No, no problem. Yes I received the pay request.
The transmittal only said ‘see the attached’ and did not request further
action. I assumed it was just a draft copy and I filed it.” Was he playing a
game here? Was this ethical? Was it in conformance with the contract
requirements? The PM had to send another copy, with a clearer transmittal
instructing ‘please pay’. The contract required the owner to pay within 30
days of receipt of a certified copy, and as stated, he typically took this entire
30 day period. Why did the owner not pay faster? We obviously know what
the PE’s first error was. Were there other procedural processes he should
have followed? How did the PM error?
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Case study #13.2: T&M procedures

Open book projects typically have clear contract language regarding what
costs are reimbursable and what costs are outside of the scope of the
project, such as home office overhead, and are therefore non-reimbursable.
Anything the owner pays for is job cost, whereas non-reimbursable material
or labor comes out of the contractor’s fee. Time and materials (T&M)
projects often have strict job cost approval procedures and monthly third-
party audits. This example client was so worried the contractor would slip
something in (maybe it had happened prior) that they required the owner’s
representative to be on-site 100% of the time. Most of his day was spent
counter-initialing every timesheet and material invoice, even for pencils! Is
this necessary? Do contractors actually try to slip costs into the books that
are not justified? Shouldn’t there be some reasonable cost limit for expense
approvals? What happens to a contractor when an auditor discovers an
expense in the books, such as new sedan tires, but there were only pickup
trucks on the job? List five construction costs which are typically
reimbursable and another five that are non-reimbursable.
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Case study #13.3: 10% Cost forecast

This very large international contractor was constructing power plants in the
1980’s that cost billions of dollars. A photograph of this project near
completion was included as Figure 3B. There were 1,000 engineers in the
home office producing design for the 5,000 craftsmen in the field. Design
changes and building code changes were occurring so often that it was easy
to lose track of the original or current budget. Only two years out of
college, this 24-year-old cost engineer was promoted to chief estimator on a
$5 billion construction project, and although completely unqualified for the
position, he gladly accepted it. Why did he accept a position he was not
qualified to fill? Shouldn’t we all ‘stay in our lane’? At that time, the
method the contractor used to forecast next year’s expenditures was to take
last year’s expenditures, regardless of where they were spent, and simply
add ten percent to it. It is no-wonder these projects cost so much money!
How should cost forecasts be accurately developed? What does a contractor
do with the result of a cost and fee forecast? What does a project owner do
with a cost and fee forecast, assuming an open-book project?
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Case study #13.4: Safety miss-code
This superintendent wanted to teach the home office staff estimator a lesson
on this out-of-town electronics facility construction project. He felt the
estimator never included enough money for safety, so he charged $50,000
of concrete formwork to the safety cost code to make his point and
completely blew the safety cost code out of the water. Is this the proper way
to create historical databases? When should a superintendent become
involved with estimate development? If a superintendent felt that an
estimate item was short, what should he do about it? What if the estimator
felt he was correct and regardless of field input, he would not adjust his
estimates? Should the estimator be terminated? Should the superintendent
be addressed about these miss-codes?
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Case study #13.5: Below cost home builder

This small speculative home builder did not have any means of construction
cost control and did not even track the cost of any individual home. He
often had three houses under construction at any point in time; one at the
site-clearing stage, one in rough framing, and the third in trimming-out
interior finishes. The economy was slow, but he was still able to sell a
couple of houses each year and pay his bills. There were two things he did
not understand: First, he was using the revenue from the current house sale
to pay for the bills on the last house, and second, he was selling them below
cost. When the economy slowed even further, and he was stuck with two
completed but unsold houses, he went through bankruptcy and lost the
houses to the bank. List five recommendations you would make to this
builder to establish a cost control system. Address estimate development,
accounts payable and receivable, construction loans, cost control, as-built
estimates, sales price, and others. If the builder increased his volume to 10
houses per year, would his problem be resolved? If he decreased his volume
to one house per year, would his problem be resolved?
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Case study #13.6: Timesheets and cost codes

An experienced cost engineer was responsible for tracking and reporting
labor costs on a large hydroelectric project. Her focus area was for the
electrician and plumber trades, which amounted to 600 and 300 employees
respectively. At the end of every shift, foremen would write, in hand, often
with poor hand writing, the work each individual craftsman performed that
day, along with their hours on a timesheet. A separate timekeeper working
for the payroll clerk would translate these timesheets into cost codes which
would be entered into the accounts payable system each evening. Every
labor craft has over 100 cost codes assigned for them to choose from. The
next morning the cost engineer would be presented with an Exceptions
Report which would kick out all the cost coding errors. She would spend
the first half of each day tracking down the foreman and timekeeper and
inspecting the work on the site to rectify these miss-codes and then journal
entry them into correct codes. And the next day’s activities would be a
repeat of this one. How do journal entries impact negotiated projects and
audits? How could the system be improved? Should the cost engineer step
into the timekeeper’s role? Should the timekeeper be responsible for the
miss-code corrections? Should the cost engineer work with foremen direct?
Why aren’t the different cost codes abolished and all labor costs assigned to
one code?
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Case study #13.7: On-site accounting

This example project is a $100 million downtown office building that has a
negotiated guaranteed maximum price (GMP) contract that allows for all
on-site accounting to be reimbursed. What contract type is utilized on GMP
projects? What article in that contract addresses reimbursable versus non-
reimbursable costs? The project is only four blocks from the general
contractor’s home office and it may be more cost effective to perform
accounting out of the home office with the assistance of an accounting
department, but according to the terms of the contract, the client will not
pay for activities conducted off the project site, therefore the accountant is
in the jobsite trailer. Why do contracts typically exclude off-site costs?
Other than accounting or cost engineering, list five costs that are off-site
and typically non-reimbursable.
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Case study #13.8: Out-of-town accounting

This is a $50 million competitively bid lump sum school project located ten
miles out of town. Since this project is closed-book, any costs not expended
on the project site result in an increased fee for the construction project.
Therefore any accounting activity that can be accomplished more
effectively in the home office is done so there. But if operations could be
performed more efficient at the jobsite, shouldn’t they be done so there?
What are some examples you can think of? In a negotiated project, costs
moved from the home office to the jobsite can improve corporate profits.
Explain how. But with lump sum projects, does moving costs from the
jobsite to the home office or vice versa change corporate profits? Explain
that. Isn’t this just a ‘shell game’?
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Case study #13.9: Pipe hanger cobwebs

An ambitious cost engineer was required to review timesheets daily for
1,000 pipe fitters on a very large power plant project. One particular pipe
hanger seemed to have 300 or so man-hours charged to it daily. That is over
30 craftsmen on one hanger! On further inspection by the cost engineer, that
hanger was discovered right above the door exiting the turbine building.
The pipe and hanger had been there for years and had cobwebs on them.
But what was very clear for all the foremen looking for an easy cost code as
they finished their work day and exited the building was this one pipe
hanger number. Why does it matter where actual costs are charged?
Shouldn’t the cost engineer have just stayed at her computer and trusted the
foremen’s reporting? Should she now address the foremen, or better yet,
their superintendent? Should she have the pipe hanger number removed?
What sort of sign might you install in its place?
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Case study #13.10: Medical fire

This $14 mil example medical facility suffered a devastating fire when it
was nearly 70% complete. Interior paint and floor finishes were just getting
underway. Creation of the cost estimate for recovery was very complicated.
The estimator had insurance agents and the client and his bosses and all
their attorneys looking over his shoulder during estimate preparation. Why
all the interest? Does he have to share his estimate? All parties were
concerned about mixing the hard-cost, which had not been expended for the
original contract, with the costs for remediation. What difference is it?
Costs are costs, aren’t they? The remediation totaled $6 mil. A separate
jobsite cost accountant was brought in once the estimate was finished to
cost code only those associated costs for repair. The accountant’s wages
were added to the insurance claim, which increased that price, but all
parties felt more comfortable that the accounting books would be kept
separate. Provide three examples of costs which should be accounted for
against the base project and another three examples which should be
accounted to the fire remediation. Have you ever been involved in a
construction insurance claim? Was it a simple process?
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Case study #13.11: Equipment company controller

Many construction company executives form separate equipment company
Limited Liability Companies and rent equipment to their own construction
companies. Why do they do this? This general contractor assistant
controller spent 100% of his time managing these equipment companies
and other real estate investments for the construction company officers, but
charged his time to the construction company home office accounting
department. Does your company have a similar employee in the warehouse
or accounting department? A study of activity-based costing would identify
him as a no-value contributor to the construction operations and would
recommend moving his wages out of company costs. But then where should
the equipment manager charge his time? Do you recommend he be
terminated? This author at one time had an ownership share in several
internal equipment companies and partnerships. It is a profitable side
business for construction executives. If you get the opportunity, join in.
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Case study #13.12: Activity-based costing

Each of the six major construction company departments for this builder
with $500 mil of annual revenue was headed by a senior project manager
(SPM). The SPMs provided guidance to project managers and project
engineers, but spent over half of their time marketing their respective
market sectors, which included real estate development, biotechnology
(biotech), medical, aerospace, hotels, and tenant improvements (TIs). They
were paid an approximately equal wage of $150,000 per year but the
medical market was over 60% of the total company volume, biotech was
15%, TI was hit and miss at 5%, and the other departments contributed to
the annual revenue equally. All the SPM wages were cost coded to the same
generic home office labor cost code. How much revenue did each industry
contribute? Now deduct each SPM’s wage from their respective market,
what is their percentage market share? A study of activity-based costing
(ABC) would have first isolated each of the SPM’s wages to their
departments, and then shifted more of the SPM’s marketing time towards
the larger markets and away from the smaller market sectors. Take a shot
using ABC to reallocate the SPM costs and analyze total revenue and
market share. Draw an organizational chart with your new allocations.
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Case study #13.13: Warehouse staff
This very large locally owned example general construction (GC) firm did a
mix of lump sum and negotiated work. Why not just focus on one
approach? Historically they were more cost competitive than other GCs
because they employed more crafts direct, such as ironworkers, cement
finishers, operating engineers, teamsters, millwrights, and others. Explain
the cost advantages of utilizing direct craft labor versus all subcontractors.
How can employing direct crafts be an advantage and how can it be a
disadvantage? The GC had a substantial warehouse staffed with a full time
warehouse superintendent, two equipment mechanics, and a laborer for
cleanup. Where are warehouse costs customarily charged? As the economy
changed and they began to employ more subcontractors than direct crafts,
there was not much for the warehouse operation to do so it was eliminated.
Ouch, if you were one of these four employees. Could they be moved to
jobsites? Without understanding activity-based costing or lean, this
contractor employed both of those methodologies successfully. Does your
company employ direct crafts? Which ones? Does your company have a
warehouse? How much do you suppose that costs (or benefits) the bottom
line? Can warehousing costs be invoiced as job costs?
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Case study #13.14: Surviving the recession

During a recent economic recession, construction slowed to a near halt,
especially for private negotiated projects. Why might public construction
work continue, regardless of economic conditions? Many contractors
suffered bankruptcy and others incurred significant lay-offs. This
construction company survived by eliminating its preconstruction division
and vice president of marketing, hired another lump sum (LS) estimator,
and focused on LS competitively bid projects. Isn’t estimating for
negotiated work the same as for LS work? This was a similar experience to
the contractor which moved its office operations all out to one construction
project as discussed in case study #3.8. What happens to this contractor
when the market turns around? If you were an employee, such as a project
engineer or a carpenter foreman, and were able to keep your job, this move
was successful, wasn’t it? Out in the field do we approach negotiated work
different than bid work?
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Case study #13.15: Timber-frame construction
Timber-frame construction is an old system with a new life. It is very
similar to post and beam construction. This Pacific Northwest (PNW)
specialty contractor chooses only the best Douglass fir and spruce trees and
fabricates every beam and column and rafter for pre-assembly in their yard.
They pre-drill for oak peg connections and ship the materials ready for
assembly to remote sites including islands. The construction system is not
the least expensive, but it is local and efficient with excellent quality and
has life-cycle benefits. Construction of an executive home is shown in
Figures 13A and 13B. Is timber-frame construction utilizing large old-
growth trees a sustainable approach? Explain the connection between
timber-frame and lean construction techniques. How does timber-frame
accommodate other building systems such as mechanical, electrical,
insulation, and glazing? If a project were in a critical seismic zone, such as
the PNW or California, does timber-frame make sense? How can metal
connection hardware be incorporated?
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Figure 13A
Figure 13B
Case study #13.16: Conservative cost forecast

This project manager (PM) had been a project engineer (PE) for about
seven years, had managed a couple of small projects as a PM, and was now
managing a high-risk lump sum bid $15 million aerospace project with an
estimated 3% or $500,000 fee. How long does it take for a PE to become a
PM? He was ‘chicken-little’ with a ‘sky-is-falling’ attitude throughout the
whole project. His fee forecasts varied each month from $0 to $200,000 in
the black, to $200,000 in the red. What do the terms ‘in the black’ and ‘in
the red’ mean? The result was the home office had a senior PM, and an
additional staff superintendent, visit the site once weekly for the final three
months. The project PM had been overly pessimistic with his forecasts and
thought himself quite the hero when the project settled on a $1 million fee;
twice the bid fee. Should he now receive a bonus? Why were his monthly
forecasts so conservative? Was he hiding something? He was terminated
shortly after final close-out. Why did the contractor do that? Isn’t ‘winning’
all we care about in construction? What is the purpose of a monthly cost
and fee forecast? Who is it distributed to and what do they do with this
information?
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Notes
14
Change orders and claims
Including negotiations
Introduction
Most projects have them. The key is to anticipate that change orders will
come, mitigate them, and manage the process once they occur. Good
communication skills and open book estimates and cost accounting help
facilitate expeditious resolutions. These tools were the topics of Chapters
11, 6, and 13 respectively. Many people use the terms change order
proposal, change order, and claim as the same thing, but they are different
as outlined here and explained in the case study examples in this chapter.
Change order proposal: An offer, a softer presentation of a cost for
a project change, whether requested by the project owner or
architect or the result of changed conditions.
Change order: Formal change to the contract incorporating one or
more approved change order proposals. The formal contract change
order should be a simple document and an accounting function,
assuming the change order proposals were mutually and amicably
negotiated.
Claim: The result of change order proposals or change orders which
are not accepted by both contracting parties. Claims often occur
after the fact or near project completion, as one or more parties
realize they did not achieve the financial outcome they had
anticipated.
Dispute resolution techniques are explained in the contract, or at least they

should be. Jobsite negotiations are the least expensive and litigation is the
most expensive means of resolving a claim and/or dispute. This chapter
includes the following case studies related to change orders, claims, and
negotiations:
14.1: In-box overload
14.2: Hold the line
14.3: Change order opportunities
14.4: Impartial DRB
14.5: No help from the agent
14.6: Don’t touch my GCs
14.7: Bigger is easier
14.8: Negotiating tactics
14.9: Steel dispute
14.10: Un-timely notice
14.11: Chamfers
14.12: Who are you working for?
14.13: She was set up
14.14: Zero change orders?
14.15: A pickup truck full of change orders
14.16: Fire claim
studies in this Chapter #14 also connect with other chapters in this book
including:
Case study #14.13 and many other cases connect with Chapter 16,
leadership, careers, and ethics
Case study #14.14 – Chapters 4 (preconstruction) and 6
(estimating)
Many cases in this chapter also connect with Chapter 1 which
discusses project owners and developers

connect with this chapter on change orders and claims including:
Case study #6.14, existing conditions
Case studies #7.3 and 7.15, scheduling
Case study #8.3, steel truss misfits
Most of the advanced case studies in Chapter 17 have a change
order, claim, and/or negotiation element and connect with this
chapter
Case study #14.1: In-box overload
The general contractor’s (GC’s) project manager (PM) on this large lump
sum example project felt the client’s full-time on-site representative (rep)
spent too much time out on the jobsite inspecting and disrupting the work.
Isn’t that the job of an owner’s rep? The project had a lot of design
discrepancies and resulting requests for information (RFIs) and change
orders. The PM had recently lost his only project engineer (PE) and was
under water to keep up with documentation, meetings, and supporting his
superintendent and subcontractors. His solution was to work all day on
Saturday, writing RFIs, processing submittals, and drafting change orders.
He particularly enjoyed the change order part. Why should the PM sacrifice
his personal time when his office would not support him with another PE?
Should management personnel be paid for overtime the same as craftsmen
are? When the owner’s rep showed up for work on Monday morning his in-
box was overloaded. He moaned and complained but this kept him out of
the field. It appeared the PM took perverse pleasure in drowning the owner
in paperwork – especially the change orders! Was this unethical? What
would you have done if you were:
The GC’s PM?
The GC’s main office?
The owner’s rep?
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Case study #14.2: Hold the line

It would be much easier to hold other parties accountable if the general
contractor (GC) was simply allowed to build the project it bid, and
contracted to, if the project owner would let them be (opinion). Some
members of the built environment feel contractors live for change order
opportunities, and some likely do. But most contractors would be happy to
build the project reflected in the original documents and earn the fee they
estimated. Sure, fee percentages on change order work are often hirer than
bid fees, but it should be that way (another opinion). Change orders
typically disrupt the original flow of work and even though their values
may feel inflated, it is difficult for a contractor to build the change for the
value negotiated (experience). Provide examples of how this first list of
participants may impact the work flow of the second list.
Impactors: Project owner, architects and engineers, the city, the GC’s front
office
Impacted: The GC’s superintendent/foremen/craftsmen, subcontractors and
suppliers, design team, the city
Can you provide additional ‘impactors’ and ‘impacted’ to these lists? Can
you provide examples of how actions of the first list impact that of the
second?
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Case study #14.3: Change order opportunities

Some construction project managers (PMs) feel they need to ‘win’ every
change order battle, regardless of the dollar value or justification. Some see
this as a game. Many general contractor (GC) PMs do not appreciate that
approach from subcontractor PMs and owners do not appreciate it from the
GCs. This large example client was no exception. Their culture required
them to bid projects and they expected their fair share of change orders due
to this procurement choice. But they did not appreciate being nickeled and
dimed nor being cheated. Reputable contractors (GCs and subcontractors)
knew the buying power of this client and treated them fairly.
This industrial complex had very high security demands. It was an arduous
process to get craftsmen approved at the plant and once badged, it behooved
the contractors to keep them employed. It also benefited the client. The
entire industrial complex would be completely shut down for two weeks
over the Christmas and New Year holidays. At that time the project owner
would commence with many ‘shutdown’ construction projects that
otherwise were not possible during full operations. If a contractor were
lucky enough to be physically on site during the holidays, and they had not
‘burnt their bridge’ with small change orders, the owner’s representative
would award them numerous substantial negotiated change orders, often
performed with overtime and on an open-book time and material basis. This
was a win-win for all parties. These contractors (GCs and subcontractors)
and their craftsmen already had security clearance. The additional fee a
contractor could achieve during this time-period was enough to cover minor
change orders and estimate shortcomings realized during the bid stage. Was
awarding these lucrative work order opportunities to lump sum contractors
by the owner ethical? Could a public owner do this? Have you ever lost a
change order negotiation that you deserved to win? Have you ever won a
change order negotiation that you should not have ethically pursued? Some
contractors (and PMs) thrive on the lump sum bid and change order culture.
Other contractors (and PMs) prefer to partner with the clients, designers,
and subcontractors. Which type of firm do you work for? Which type of
PM are you?
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Case study #14.4: Impartial DRB

There are several methods to resolve claims and disputes in construction.
The best method is to prevent one from happening in the first place. This is
accomplished by utilizing good construction management practices,
including communication tools. The second best is to negotiate the
disagreement between the parties before it escalates into a formal dispute,
preferably at the jobsite level. But claims are a fact of life in construction
and the contract should establish clear rules regarding procedures. The
typical methods used and prescribed in the contract include:
Dispute resolution boards (DRB),
Mediation,
Arbitration, and ultimately
Litigation.
The parties cannot bring a case to court (or litigation) without first
attempting an alternative dispute resolution process such as one or more of
these first three options. The DRB alternate has recently been added to
many copyrighted contracts as a viable choice. It involves the parties
selecting three neutral board members who participate in the project from
start to finish, rather than only showing up after a dispute has arisen. That
way they stay informed and often help deter the filing of a formal claim.
The DRB members are required to be impartial and not have worked with
either of the parties in the past 30 years. This requirement raises a series of
questions:
In a typical city, an experienced construction expert will have been
in a contract or associated with many built environment
participants. How do you find someone who is totally unknown to
all of the parties, including the design team? If they are totally
unknown, are they then an expert?
If you have to look outside of the area for an impartial expert, will
they have enough local knowledge to be a good judge on your
project?
If you hire from outside, are the contracting parties then responsible
for travel expenses and additional billable hours incurred for the
board member to travel, making this option uneconomical?
What has been your experience with claim preparation or defense? Have
you participated in negotiations, mediation, arbitration, litigation, or a
DRB? Was it satisfactory to you?
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Case study #14.5: No help from the agent

A 5.0 earthquake hit this area and did significant damage to the ‘old town’
neighborhood which had many historic masonry buildings. Insurance
coverage in these situations is precarious at best (experience). Is insurance
different for a historic structure? What constitutes a ‘historic’ structure?
Typically many insurance policies require a building owner to follow a set
of specific steps such as the following when they need to file a claim and
implement repairs.
Notify your insurance carrier.
The insurance company will make an inspection and authorize the
owner to proceed with next steps.
All of the repairs and design (if necessary) must be pre-approved by
the insurance agent or adjuster.
Obtain three competitive bids from contractors, possibly at least
one from the insurer’s choosing.
The building owner has to employ the lowest bid.
The insurance adjuster will be on-site to inspect repairs and approve
any additional work. Repairs such as this often have unknown
conditions.
All work must be documented with proof of actual expenditures.
The value of the claim will be settled after the work is completed.
Does all this seem reasonable? It is a similar process that you may need to
follow if you have an automobile accident. But if the construction repairs
are deemed to be an emergency then the rules are slightly different. What
constitutes an emergency? Certainly repairs necessary to protect public
safety are an emergency. But are immediate repairs necessary to get a
business, such as retail, back up and running to minimize loss of sales?
Does insurance cover loss of business?
This sample client had its office and coffee manufacturing and distribution
in one of these historic brick buildings. They notified their insurance carrier
of the damage and the need to implement emergency repairs. The owner
employed their favorite architect and general contractor (GC) which both
mobilized immediately. These firms were told by their client that that they
were to proceed on a time and materials (T&M) basis. The insurance
adjuster also mobilized up and set up a jobsite trailer. But when the owner,
architect, and GC tried to engage the adjuster in the five-month repair
process he remained relatively silent. He was in an ‘observe and document’
mode. He was invited to all the meetings and copied with correspondence.
Did the owner’s team need to reach out like this? Why were they so
inclusive although they did not receive any help from the insurance agent in
return? When the adjuster was asked his opinion whether they should
pursue path A or path B with the repairs, he remained hands off.
Explain the strategy of the insurance company. What will they do in the end
and will they be successful? Explain the strategy of the property owner.
Will they be successful in the end? If the insurance company does not pay
100% of the cost of the repairs, is the project owner obligated to pay the GC
and architect? How would you proceed if you were the GC’s project
manager?
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Case study #14.6: Don’t touch my GCs

This general contractor’s project manager (PM) worked hard to look out for
his client’s and their insurance carrier’s best interest when preparing an
estimate for fire repairs. This is the same project as discussed in case study
13.10. Some of the subcontractors (subs) and suppliers were a bit greedy
with their estimates for repair costs. The PM had access to their original
contract estimates as this was an open-book negotiated project. Some
parties attempted to use inflated wage rates, equipment rates, and material
prices. Labor productivity would be expected to increase slightly for repair
work, but the PM only passed along estimates that he felt he could justify.
The client’s insurance adjuster approved each repair price as the PM had
them assembled. The insurer was impressed by the PM’s aggressive attitude
towards his subcontractors and his open-book estimate presentations. The
last piece of the puzzle was the contractors’ jobsite general conditions
(GCs). The adjuster attempted to dive into each line item but the PM
resisted and negotiated a tough lump sum settlement. His argument was he
had been the insurance company and project owner’s advocate through this
difficult process with his own subs and suppliers and his extended jobsite
GCs were justified for his efforts. Eventually they agreed. Did the PM
negotiate too hard with his subs and suppliers? Why not let them make a
little extra money from the insurance carrier? He will work with the subs
and suppliers again but hopefully not the insurer. Did the PM negotiate too
hard with the insurance company for his jobsite GCs? Where is the project
owner in all of this?
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Case study #14.7: Bigger is easier

For some reason, it seems general contractors (GCs) will fight
subcontractors (subs) tougher with small change orders than big ones.
Project owners will do the same with GCs. Why is that? It might be because
the owner’s representative (rep) can associate with a smaller change easier.
They may have more ability to zone in on the details. Smaller changes are
often due to discrepancies more than scope changes. Does the owner (and
its architect) take discrepancy changes personally? Large changes in scope
often are accompanied with additional sources of funding. Case study
#10.14 was a tough job for the GC, until the large sewer scope was added.
See also case #10.6 involving two different subcontractor approaches to
changes. Resolution of larger changes may also be escalated to other parties
up the line who might not be as detail-oriented as an owner’s rep or the
GC’s project manager (PM). Have you experienced difficulty with a small
change but had a larger one easily approved?
When this author was a young GC PM he felt the need to win on every
change order with owners or back charges with subs. He felt he was right
(which he was, opinion) and did not see the need to compromise. But his
learned boss told him one day: “Don’t make your fortune on this project,
make it on the next one.” What does that mean and how can it be related to
change order pricing? Bookmark that quote and use it in your career.
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Case study #14.8: Negotiating tactics

Some people say they always win at negotiating; but likely they exaggerate.
We had a recent president in this country who indicated he always won, but
that did not turn out to be so. Conversely, some feel they are often on the
short end of the stick when it comes to construction negotiations. They may
not always lose, because if they did their business would not survive for
very long. Where do you see yourself among these categories?
1. Always win,
2. Usually win,
3. Win my share,
4. About 50-50,
5. Lose more than I win,
6. Usually lose, or
7. Always lose.
Likely most of us fall in the category 3-5 range. Where do you fit in?
Contractors negotiate every day, but most of those issues are not deal
breakers. Without thinking of them as negotiations, we attempt to get our
way with RFI responses, submittal approvals, acceptance of alternate
materials or methods, permit issuances, inspection approvals, pay request
approvals, timely receipt of payments, and many others. The two significant
negotiation topics for contractors are contract language and change order
approvals. Claim resolution is at another level. There are hundreds of
business school books and seminars on ‘how-to’ successfully negotiate.
There are few, if any, solely dedicated to construction. Several case studies
in this book have discussed negotiations including others in this chapter. In
addition to tactics discussed there, we include a few others to add to your
negotiation skills toolbox.
Do your research, be prepared, have backup.
No one wants to negotiate with another party that refuses to budge
or compromise on some point. This often results in walking away
and ultimately escalation.
Be willing to accept something other than what you are asking.
Ask for more than you want and be willing to settle for what you
need.
Find out what is the most important point for you. Don’t let the
other party know your position. Stand strong on that point and be
willing to give on other points.
Make it feel you suffered greatly by giving something up.
Conversely, find out what the other party truly needs.
Emotions can help or hurt. It is best to keep true emotions to
yourself – don’t let the other side read you. But playing a false or
exaggerated emotion may force a reaction from the other side.
Shake hands after. Don’t burn a bridge.
Can a negotiation result in a win-win scenario? Academics in this area

indicate that is the only truly successful negotiation outcome. But often
through the action of negotiations one party, or both, has to give up
something significant. Consider this example: A general contractor is
asking for a $200,000 change order due to a schedule extension beyond
their control. The project owner doesn’t have this budgeted and wants to
pay $0. The two parties eventually settle at $100,000. The owner lost
$100,000 in the deal and the contractor accepted $100,000 less than what
they asked. In this case, both parties feel they lost. Splitting a negotiation
deal like this results in a lose-lose scenario.
The third scenario we didn’t present was a win-lose one. Are you a believer
in that approach? As a contractor if you win and the other party loses, does
that make you a winner? If you win all the time negotiating with your
project owner, and they lose, how will your success be measured? How
about if you win in all negotiations with your subcontractors (or one
particular subcontractor), and they lose, how will your reputation fare in the
long run? There is no one-size-fits-all solution in this discussion on
negotiations. The answer likely varies with each individual, each company,
and each situation. Your thoughts?
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Case study 14.9: Steel dispute

We had a major dispute with our out-of-town structural steel fabricator. This
case study builds upon case study #8.3. The two-part prefabricated trusses
shown in Figure 14A didn’t fit. We blamed the fabricator. The fabricator
blamed us in part due to our means and methods and also blamed the
owner’s design. As repairs were underway on the jobsite we discussed the
issue with the project owner and the structural engineer. They emphatically
denied any culpability. We agreed to some extent and because this was a
large repeat client with more work in the books, we agreed the fault fell
100% on the fabricator. The amount of our well-documented back charge
was $150,000. This was not an inflated figure. The supplier of course
denied any responsibility. They threatened filing a lien against the project
owner’s property and this would not have been acceptable to us or the
owner. I was the project manager and the issue quickly escalated to my
executive vice president (VP). My boss was a former religious minister
which seemed an interesting fit for construction. He was a great mentor for
me.
Figure 14A
We decided to visit the fabricator to make our case and flew to their
location. My boss advised me that a strategy the other side would use
against us was time. They would ask when our return flight was and use
that as a negotiating tactic, putting our back against the wall to force a
compromise. The owner of the fabrication facility was known simply as
Red. He was a very large man with a ruddy complexion. He was known to
have a wild temper, at which time his complexion would turn crimson. True
to form he used a loud voice throughout our meeting, pounded on the desk,
and let every expletive known to man fly, and even some new ones. My
boss remained very cool. When Red asked (as predicted) about our return
flight schedule, my boss replied “We haven’t booked a return flight and
plan on staying the night”, both of which were not true. Red had only an
internal design engineer with him during the meeting. No one from
production or estimating was in the room. After we calmly explained our
case, and the engineer confirmed our findings, Red turned pale and we split
the claim, 75% to us and 25% to them. We returned home exactly on the
flight we always had reserved. Did we win? Should I have resolved this
myself without my boss’ help? Did the fabricator lose? What negotiating
tactics would you recommend either party could have used to improve their
outcome? Why didn’t either party have their attorney present? Why did we
spend the money to meet in their shop since they were obviously the ones at
fault? Could all this have been avoided?
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Case study #14.10: Un-timely notice

Contracts include ‘notice’ clauses for good reasons. It is not fair to a project
owner to find out much later that an action, or inaction, caused a
construction delay and/or increased costs. Project owners should be given
an opportunity to take action, reverse a decision, or make a correction so as
to avoid large cost impacts. Imagine a project which has been closed out for
a year, but then the contractor approaches the owner with a multi-million
dollar claim. This is an extreme example, but it happens. How long is a fair
notice period? Contracts differ but often include language similar to the
following.
The contractor is required to notify the owner (in writing) within 14 (or
21 or 28)
days of a potential impact…and submit costs for owner review within
14 (or 21 or 28) days of providing notice.
These types of owner-general contractor (GC) contract clauses are also
typically passed down from the GC to its subcontractors (subs). Subs
cannot submit late claims for extra time and/or money to the GC.
The GC on this example negotiated project did not have its best project
manager (PM) in place (opinion). He struggled on the entire project with
change order processing. The change order backup was unsubstantiated, if
any was included at all, and the pricing was often inflated. The owner of the
mechanical sub knew the agency owner’s representative (rep) and
complained about change order processing and payments. Should the owner
be talking with a sub direct? The owner’s rep found out:
1. Many changes had been approved between the owner and the GC
but the sub’s contract had not yet been modified. Without
modification, contactors cannot invoice for changes even if they
have been approved. Why would the GC’s PM not modify the
subcontract agreement as soon as the change is approved?
2. Many changes have been paid for by the owner but the GC had not
yet paid the subcontractor. These changes had been incorporated
into the sub agreement and they invoiced for them. Why would a
GC hold a sub’s money?
3. 20 changes had been submitted by the mechanical sub in a timely
manner, but had not yet been submitted to the owner from the GC.
They were over the 28 day limit agreed to in the contract. Some
were three months old. Why would the GC PM not process change
orders in a timely manner?
The owner’s rep put pressure on the GC and resolved items 1 and 2. Why
did he do that? Is that his responsibility? Is there anything the mechanical
sub should have been doing all along to avoid this uncomfortable situation?
Problem #3 was more difficult. When the GC PM finally submitted these to
the owner, they were all contractually too late. The agency owner’s rep felt
they had to stick to the contract terms and he rejected them all – even
though many were legitimate scope increases. Why did he do that? If he
had just agreed and processed the changes, and later payment, could he
have been found liable? If you bend the rules on one item, have you agreed
to bend the rules on others? The GC’s PM rejected group 3 change orders
back to the mechanical sub and blamed the owner. Since the sub processed
their requests for change timely, can the owner or the contractor then reject
them? How do you suppose this played out? What do you suppose this
incident did to the relationship between the mechanical sub and the owner’s
rep? They had worked on 15 projects together successfully up to this point.
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Case study #14.11: Chamfers

There are plenty of reasons we have contracts. Contracts establish the rules
that owners, architects, contractors, and subcontractors (subs) must follow –
for everyone’s benefit. This was the first construction project for this
biotechnology client. The owner of the company was very excited about the
process and visited the jobsite weekly. On one visit he observed the
laboratory casework installation. The countertops were an expensive poured
resin black product. He commented to the casework foreman that he didn’t
like 90 degree countertop corners – they were hip pointers. The foreman’s
response: “I can chamfer those for you at a 45 degree angle, we do that all
the time.” The project owner’s response: “That would be great, thanks.”
Should owners talk with subs direct? Should the subs engage with owners?
What is the correct process? Who should document what and how and
when? Where do you think this discussion is going?
Three months later during project closeout the casework sub project
manager (PM) presented the general contractor (GC) PM with a change
order for $30,000 for the chamfered countertop corners. This is a real cost
and for the sake of this discussion, let’s assume it is priced fairly. The GC
was surprised, admonished the sub for lack of proper procedures, but
forwarded the change order to the owner anyhow. Should the GC just deny
the change at this point? The owner was also surprised and indicated yes, he
recalled the conversation, but no he did not ask for the change nor did he
agree to pay an extra cost. Essentially the change order was rejected for
process. Is this fair? Is it contractual? Is it ethical?
The GC PM also rejected the change order back to the casework sub who
was offended. This is a lot of money and essentially means their job is a
loser. The two PMs have worked together prior and socialize, but now they
have a problem. Should the sub eat the cost? Should the GC eat the cost?
What are your recommendations?
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Case study #14.12: Who are you working for?

Attorneys: You can’t live with them and you can’t live without them, or so
it seems. Have you had a good or bad experience working with an attorney?
Both are possible. But what is complicated and often frustrating is when
you work for an attorney versus them working for you. When you do so, as
this author has on numerous occasions as an expert witness, it is really
difficult to tell who you are actually working for. The process goes along
just fine until you are either waiting to be paid or are in a deposition. I like
to be paid within 10 to 30 days of submitting an invoice as do most
contractors. When 60 days goes by and still no payment and the attorney
responds: “I will have to check with the insurance company (or the
defendant) and get back with you.” I thought I was working for you! And if
you are working for a team that ‘loses’ its court battle, the payment may
never come.
The other frustrating situation is when you are having your testimony taken
and/or during deposition and the opposing attorney asks (or at least you
thought they were on the other team): “Didn’t your council tell you either X
or Y happened in this case? Why would your attorney keep secrets from
you?” I thought we were a team. Okay, I am ranting now, but a couple more
frustrating examples are worth noting. When your attorney-client asks you
to provide a list of questions they should ask you when you are on the
‘stand’ is when you know more about the law than they know about
construction. Or when they hire you to be an independent expert but they
tell you what you are to write in your expert witness report and what your
conclusions should be.
Today’s generation of new construction managers talk of paperless
construction projects. Imagine being hired by an attorney as an expert and
led into a conference room with 20 file boxes full of paper and told to tag
what you want copies of. The pay is good, don’t get me wrong. But it seems
the system could be a bit more efficient. Ok, I am off the soap box, or in
this case, the ‘stand’. Your turn. How should the legal system work with
respect to expert construction witnesses?
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Case study #14.13: She was set up

And I did it! A very smart and up-and-coming general contractor project
engineer (PE) was working with a large team on this example casino
remodel and addition project. Her project manager had assigned her the job
of coordinating the back of house improvements. This included two large
staff restrooms. The architect had minimally scoped the documents, which
is common with remodel projects – you never know what you are going to
find. The PE was being ‘worked’ (unbeknownst to her) by the owner’s
maintenance manager to get as much improvement into the project as
possible, he wasn’t paying for it. The design drawings really did not include
much more than clean and paint for these two restrooms. The PE
approached the contracted owner’s representative (rep), whose job it was to
keep the project within budget, that for only an additional $1,400 she could
have all the toilet partitions replaced with new and that would be a
significant improvement. The owner’s rep agreed the partitions were in bad
shape. He also knew she had way underestimated this scope and was being
manipulated by the maintenance manager. The owner’s rep knew this young
PE was a rising star and rather than just put her down here, he decided to
use this as a teaching opportunity. He also had access to unspent
contingency funds. He challenged the PE on the scope and her estimate but
on her word this was a not-to-exceed price, he would let her have some
rope, just this one time. Have you ever set anybody else up? Has anyone set
you up? Was the owner’s rep being mean? What do you suppose happens
next? Remodel projects are difficult. One thing leads to another as
evidenced by this string of events.
Removal of the floor-mounted toilet partitions left gaping holes and
damaged many ceramic floor tiles.
The floor tile was 20 years old and could not be matched. There
were several broken tiles throughout the restrooms. Removal of the
entire floor was now needed.
Removal of the tile also required removal of the toilets as they sat
atop of the tile. No one wants to reinstall an old toilet so they all
required replacement with new and associated supply piping.
Removal of the tile base along the wall damaged the gypsum
wallboard (GWB) and required repair.
Evidently blocking was not installed in the walls originally for
either the toilet partitions or the tile base. This required additional
GWB repair.
When the old tile floor was removed it was apparent the concrete
slab on grade had not been properly leveled and the new tile
supplier would not warrant the tile without a 100% floated
underlayment.
In the middle of each restroom there was a floor drain. This drain
also required replacement. It had not been properly equipped with a
trap-primer which was now a code requirement so one was
required, along with associated supply piping.
Should I go on? How does the $1,400 look now? How about $30,000? Do
you suppose the owner’s rep taught the PE a lesson? But the casino
received two wonderful nearly new restrooms. Did the maintenance
manager get what he wanted? Be careful working with representatives of
the project owner on your jobs who are not necessarily empowered to
authorize, or pay for, extra work.
Post script: This PE eventually went back to school and became a
construction attorney. I wonder if she ever sets up a construction
professional in her law practice. Do attorneys do that?
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Case study #14.14: Zero change orders?
Many in the built environment will say change orders are inevitable, and
that is likely true to some extent. All parties should plan for an efficient
change order process. But do they occur on all projects? And a project
which touts they did not have any changes, was something else at play?
Projects with overly inflated contract values, or those performed on a time
and material basis, may not see their overall budgets increased. But did
changes occur that cost the project money? Were these changes absorbed
within savings pockets such that other potential cost under-runs did not
materialize?
The internal owner’s representative for a pharmaceutical company was
required to bid a complicated project by his board of directors. He had bad
experiences with changes on bid work with a previous employer. He
attempted to convince his board to negotiate this clean room project but did
not prevail. The successful general contractor (GC) was not a typical lump
sum (LS) bidder but saw this project as a potential opportunity to enter a
new market and gain a new client. Is diving on a bid for this cause risky?
The GC estimator was made aware by his friend the architect that the owner
had set their budget expectations too low. The project would likely be
exposed to a lengthy value engineering (VE) process post bid with the low-
bidding GC. Is this insider knowledge unethical? It all played out as the
estimator had anticipated. The owner’s representative notified him he had
the successful bid but they (client and GC) needed to partner with the
architect and VE the project so it met budget. The two-month VE process
was successful and the parties entered into a LS contract. Was this prudent
of the owner? Should they have chosen another contract format? Should
they have re-bid the project after VE? This sometimes happens. Would that
be fair to the original low-bidder?
The owner was still concerned about change orders and allowed the GC a
1% increase in its fee if they would not process small discrepancy changes.
This was also in appreciation for the GC’s effort with VE. The GC agreed
as through the VE process they had plugged most of the estimate holes,
bought out all of the subcontractor scopes, and now had earned an
additional 1% in fee. Was this unethical? What the owner was unaware of
was the GC estimator (and subcontractors) had not been returning 100% for
VE credits. Is this a common practice? How can owners and architects
protect against contractors skimming off of VE preconstruction or credit
change orders during construction? This project actually finished at exactly
the same contract value as was agreed. There were zero change orders!
How was this possible? All parties, owner/architect/GC, saw this as a
successful project. Both the owner and architect suggested this GC to other
pharmaceutical companies. The estimator had accomplished his initial goal.
Did everybody win?
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Case study #14.15: A pickup truck full of change orders

This example is based on the same project as case study #6.14. The client’s
president of this multi-phase expansion did not understand construction,
other than he didn’t trust contractors, and was convinced everyone was
cheating him. He was not from this area and was busy running a large
company, but insisted on acting as the owner’s representative. When should
project owners seek outside help? The general contractor (GC) was a very
reputable firm and their project manager (PM) was open book and very
honest (first-hand knowledge). The PM had processed dozens of
discrepancy related change orders but the relatively new president had
stalled on processing. Under the recommendation of a competing GC who
served on the client’s board of directors, they hired a construction
consultant to help with change order processing. Is it a coincidence that a
contractor would make this recommendation? The consultant told the
owner’s representative that he would be objective and honest in his review
but could not guarantee finding 100% in the owner’s favor. The president
had hoped that they would all be rejected. Two days before the consultant
was scheduled for his first site visit and introduction to the GC he received
a phone call late one evening. The GC’s PM introduced himself (the two
were aware of each other but had not formally met – the construction
industry is a close one) and asked if the consultant wanted to review the
changes before the coming meeting. The consultant’s response: “Sure Jack,
that would be great, but how are you going to get them all to me? I live
quite a ways out of town.” The PM’s response: “I am sitting in your
driveway in my pickup truck and I have them all boxed up for you in the
back, including all the historical detail.” What was the PM’s motive for
providing all these copies? How did he know the consultant would want to
review them ahead of time? How do you suppose this process ended up? It
lasted several months and the consultant stayed on until punch list, more to
be a mediator than anything else.
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Case study #14.16: Fire claim

One reason public projects are subjected to competitive bidding is to allow
open access to all contractors which may not have opportunities to negotiate
private work. What are some other reasons public projects are bid in lieu of
negotiated? A small general contractor (GC) with a list of smaller
subcontractors (subs) and suppliers was the successful bidder on a state-
funded bridge project. The completed project is shown in Figure 14B.
Unfortunately this contractor was not equipped for this type of work, at
least not this particular project at this time. Is an opinion of a construction
expert considered a ‘fact’ in a court of law? A fire caused by construction
activity resulted in a 10,000 acre forest fire and the loss of 20 executive
ranch homes and many crops and livestock. An insurance company
representing one of the parties enlisted the assistance of an attorney who
hired a construction consultant as their expert. Imagine all of the parties on
this project (state, GC, subs, suppliers, home owners, designers, and etc.)
each teaming up with their separate insurance carriers, attorneys, and
construction consultants. What a mess! All-in there was about $500 mil of
lawsuits at stake. Everyone was suing everyone. Following is some of what
our consultant ‘discovered’ during the ‘document discovery’ process. Have
you ever been involved in a legal discovery process? There is still a lot of
paper produced on construction projects.
Figure 14B
Reasons the contractor has stated they are not at fault:
The contract did not specifically state the contractor was not to
cause a forest fire.
Nothing in the documents declared this area as a ‘forest’.
There had been two prior fires on this construction site but the full-
time owner’s representative (rep) did not shut the project down.
The owner’s rep was parked in his pickup truck the day of the
incident. It was 90 degrees out and he had air conditioning.
The owner’s rep had a long list of previous employment positions
and companies and his formal education was in question.
The owner’s rep knew what the weather conditions were that day
and he did not shut the project down.
The contract did not require a full-time fire watch during welding
activities – the suspected cause of the fire.
The contract did not require an on-site water truck.
The owner’s rep called in the fire but gave the fire department the
wrong address.
Reasons the state has said the contractor is at fault:

Other projects administered by this state included contract clauses
addressing fires, fire watches, water trucks, and forests.
This GC had worked on other projects for the state which included
these clauses.
There had been two prior fires and the owner’s rep warned the GC
to be more careful.
It had not rained for 30 days in this area. They had a solid week of
90 plus degree weather. The wind was blowing a consistent 20 to
30 miles per hour.
The only access road to the site had a Smokey the Bear sign with
“Extreme” noted for that day’s fire danger.
There is no question the fire started at this jobsite.
The sub which reportedly caused the fire declared bankruptcy and forfeited
their $25,000 insurance deductible. The GC also filed for bankruptcy and
forfeited their $50,000 deductible. Is bankruptcy a ‘get out of jail (almost)
free card’? So now you can see how clear cut this case is. You are on the
jury. Fill in whatever missing information you feel is relevant to your case –
it seems the parties did that. Who pays who?
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Notes
15
Construction completion
Including punch list, close-out, testing, and
inspections
Introduction
An expeditious construction completion and project close-out are in
everyone’s best interest. There is much more to completion than just
cleaning up of the punch list – although that is critical and a few examples
in this chapter discuss that. But close-out has both a physical (construction
work) and paper component. The general contractor’s (GC’s) project
superintendent is typically in charge of the physical completion of the
project. This includes attending to the punch list and obtaining all necessary
inspections and approvals. The GC’s project manager and his or her project
engineer, handle the bulk of the financial and managerial close-out
responsibilities. This includes final change orders, final pay requests, lien
releases, as-built drawings, operation and maintenance manuals, startup,
and a host of others. Quality control (Chapter 12), or lack of, throughout the
course of construction shows up at project completion. Many good and bad
case study examples are discussed in this chapter highlighting these
processes.
The project close-out requirements should be established in the special
conditions of the specifications as well as the contract. Close-out should
start at the inception of the project, including defining close-out in
subcontract agreements. The project owner has been holding 5% to 10% of
the construction team’s money throughout the course of construction. This
is known as retention. The amount of retention held approximately equals a
contractor’s fee. Receipt of the retention is therefore ultimately receipt of
fee, which is a very important milestone for construction companies. This
chapter includes the following case studies related to construction
completion, punch list, close-out, testing, and inspections:
15.1: Paint shop
15.2: Double-door elevator
15.3: Framing liability
15.4: Stop light penalty
15.5: Pressurization test
15.6: As-built estimate
15.7: Punch list and a rolling table
15.8: Punch list and a shopping cart
15.9: Storm before the calm
15.10: Punch list: Love it or hate it
15.11: Drywall close-out
15.12: Inspectors
15.13: Stepped retention
15.14: Slow close
15.15: Ideal close
Case studies #15.2, 15.3, and 15.9 – Chapter 1, project owners and
owner representatives
Case study #15.4 – Chapter 7, scheduling
Many case studies in this chapter also connect with Chapter 12 on
construction controls, particularly quality control

connect with this chapter on construction completion. Many of these case
study and chapter connections are discussed within the body of the
examples included in this chapter.
Case study #15.1: Paint shop

Imagine the amount of air needed to move through an airplane
manufacturing facility’s paint shop! The ductwork and fans on this example
project were the size of some houses. Connected to both the fresh air intake
ducts and exhaust ducts were also very large louvers that were operated by
a complicated control system. If ‘A’ is operating, ‘B’ must be open, and ‘C’
must be shut. The owner provided the computerized control system but the
general contractor (GC) and its subcontractors (subs) installed the
mechanical and electrical systems. When is it a good decision for a project
owner to supply and/or install elements of a construction project? How do
contractors ‘coordinate’ with these scopes and how do they manage their
risk exposure?
The airplane manufacturer had orders to fill for commercial airlines and
associated stiff penalties if the planes were late. A photograph of the
building’s interior is included as Figure 15A. This project was on schedule,
but just barely. One week before the scheduled turnover during mechanical
start-up and testing, all heck broke loose. The exhaust opened up but the
intake did not correspond and the result was the fresh air louver was sucked
into the supply fan. Meetings were held. Inspections were conducted.
Letters and emails and phone calls were all over the air waves. The project
owner blamed the GC. The mechanical sub blamed the louvers (purchased
by the GC) and the owner’s control system. The louver supplier blamed the
mechanical sub. No one wanted to budge on a fix and assume responsibility
for the damage. Voices were raised and the owner directed the GC to “Just
fix it!” Do we resolve the ‘why’ before we repair? Will this be a change
order to the owner? Put your louver supplier hat on: Will you provide a new
louver without guarantee of payment? Put your mechanical subcontractor
hat on: Will you fix the fan without guarantee of payment? Do you know
what consequential damages are? This is why contractors (attempt to)
eliminate that clause from their contract. How much is a commercial
airplane worth?
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Figure 15A
Case study #15.2: Double-door elevator

The purpose of the mechanical, electrical, and plumbing (MEP) system
startup process during close-out is to verify that all the MEP systems and
equipment are operating as they should before the contractors demobilize.
These processes are also referred to as test, inspection, balancing, and/or
commissioning. But the purpose of these tests is not to break equipment or
wear it out. It seems that some owners, or their testing agents, want to press
a bit too far. Who should perform testing: Project owner, third party
companies, the general contractor (GC), or the subcontractors who installed
the work?
This project had a complicated five-story (plus roof) freight elevator. How
many ‘stops’ is that then? It had both a front and a back door. The front
door opened at floors 1, 2, 3, and 5. The back door opened at floors 1, 4, 5,
and the roof. The complicated elevator control system was designed to
assure that on floors 4 and the roof, the front door would never open. On
floors 2, and 3 the back door would never open. Both doors serviced the
first and fifth floors but only one door was to open at a time.
During startup this owner’s representative, who was suspicious of the
elevator company’s claim that operation controls would be met, made it his
goal to push the limit. But what he pushed, manually, was as many buttons
as he could riding the freight elevator up and down all day. Yes it finally
broke down, and yes he said “I told you so”. Is ‘startup’ (or other term)
intended to flush out any problems which may come out (A) during the first
year of operations, or (B) over the life of the equipment? Who should
perform (and witness) testing? Should protocols be set for system startup
and test and where and when are they established?
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Case study #15.3: Framing liability

If you miss a detail, obviously you made a mistake, but can you be held
liable for it? A complicated heavy timber family lodge was not completely
engineered. An in-process photograph is included as Figure 15B. Many
wood framed projects, such as a single family house, are not completely
designed, but details are left up to the contractor’s means and methods. The
contractor is tasked to meet code and satisfy the local inspector. But when
wood framing escalates from 2 x 4s to 6 x 10s, there is a difference.
A third-party owner’s representative (rep) visited this lodge project once
weekly, took many photographs, and prepared a report to her client. On this
visit, the foreman bragged to her how he was able to make all these
different roof pitches and complicated rafter framing work. This project did
not use prefabricated wood trusses but rather old-fashioned rafters, hips,
joist, valleys, and ridge members that required cutting in the field – maybe a
lost art today. A week later the client received a nasty call from the general
contractor (GC). The city inspector rejected the roof framing and red-tagged
the project, shutting it down. Evidently the foreman had cut a severe ‘bird’s
mouth’ out of a critical hip, removing four inches from the 6 x 10 timber.
But removing four inches from 10 essentially reduced this hip to a 6 x 6
which was not structurally adequate. The inspector demanded the structural
engineer visit the site and inspect the installation. Draw this bird’s mouth.
The GC blamed the designer and wanted $5,000 to fix the problem. How
did the contractor error up to this point? There are several miss-cues.
Figure 15B
The client received the owner’s rep report and saw a photograph of this
exact hip. Evidently the owner’s rep took the photograph but did not realize
the field error at that time. She typically took 20 random photographs per
visit. Should she have noticed? If she had, should she have shut the project
down at that time? Is that within the realm of responsibility of an owner’s
rep? The client asked her to cover the cost of repairs. Is she liable? This is
the same GC that struggled with the guaranteed maximum price contract
discussed in case #5.4. They also used this framing error, and cost to repair,
as a basis for their end-of-project cost over-runs. Should the owner pay
them for these repairs? Can you see the error in the photograph?
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Case study #15.4: Stop light penalty
Should contractors be penalized for trying to do a good job but falling
slightly short, possibly at no fault of their own? Project owners – both
public and private – use liquidated damages (LDs) as a method to force
timely completion. Contractual language indicates LDs are not meant to
penalize, but charging daily or hourly fees for a late completion feels like a
penalty (opinion). Some owners will say: “We just wanted to get your
attention with the LDs”. Do owners believe contractors would like to finish
a project late? Aren’t they aware that the costs of jobsite general conditions
are largely time-dependent and the longer a project lasts the more it costs
the contractor? Isn’t that enough of a penalty?
A contactor had negotiated a five-story partially underground parking
garage with a general contractor (GC). This was a difficult project. See also
case study #2.3. The city required the addition of a traffic signal to be paid
for by the project developer. Requirements such as this are known to
developers as mitigation or extraction fees. The developer asked the GC to
add this $500,000 traffic light scope to the garage contract. The GC’s
project manager (PM) was polite and indicated this work was not their
specialty and provided the developer with a list of three other contractors
who could help. The owner did not want to engage another GC and insisted
the PM accept the work. Can the GC be forced contractually to do extra
work? Why would an owner prefer to stay with one contractor? The change
order came with strings attached in the form of $5,000 per day LDs. The
developer indicated the city required this, but that was never substantiated.
The contractor hired one of the specialists as a subcontractor and they did
their best, but the work was finished five days late. The developer withheld
$25,000 from the GC’s final retention check. Can he do this? When and
how are LDs (or bonus if applicable) settled up? Was it ethical? Was it fair
to the GC?
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Case study #15.5: Pressurization test

For a lot of good energy conservation reasons, many jurisdictions have been
imposing building codes which require tighter building envelopes and
minimize heating and cooling leakage. But is this now going to change?
First a brief background.
During the 1970s the United States had a major energy crisis and buildings
were subsequently required to be built tighter. This was done with a variety
of methods including more insulation, additional layers of waterproofing
and weather protection, insulated glass, and re-use of heated and/or cooled
building air. But then in the 1990s it was discovered that buildings had then
been built too tight and we experienced ‘sick building syndrome’. Spent air
was being recycled which increased carbon monoxide levels – we were
breathing each other’s spent air. As a result, new residential and commercial
buildings were built to revised codes which increased the use of fresh air.
Windows were manufactured with ventilation holes in them, and houses
were equipped with automatic supply and exhaust fans.
But now jurisdictions are requiring completed buildings to be pumped full
of air (like a balloon) for a pressurization test. If the building leaks air it
cannot achieve an occupancy permit. Is this a LEED requirement? Have
you observed these tests? What do you think is involved with creating the
air pressure, making sure it doesn’t leak, and measuring the leakage? These
tests can be very problematic for older building remodels and projects
which have indoor-outdoor occupied spaces. This book is being writing
during the 2020-2022 Covid pandemic crisis. As a result of what is
happening now, will we go back to buildings with mandatory holes in them
again?
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Case study #15.6: As-built estimate

The as-built estimate should be maintained throughout construction or
prepared near the completion of the project but not after close-out.
Considerable work went into tracking actual costs. This is valuable input to
the construction firm’s ongoing ability to improve its estimating accuracy.
Input of the as-built estimate into the estimating database is necessary if the
database is to be kept current. Many construction managers will simply
input actual costs, alongside the original quantities, to the company’s
database. This is better than no input at all, but the most accurate historical
cost data is created by combining actual direct labor hours and actual
material costs with actual installed quantities. How would a corporate
estimating department handle as-built labor productivity and material costs
submitted from multiple projects of different types? For example assume
your company did a mix of retail, concrete tilt-up warehouses, and food
processing projects. Can the as-built data be blended? What affect do very
small versus very large projects have on unit costs? How about very
successful versus unsuccessful projects? National databases provide
thousands of unit prices to contractors and students. Where do these values
come from? Is there ever an ‘average’ project?
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Case study #15.7: Punch list and a rolling table

The general contractor (GC), owner and architect started the punch list on
this example four-story speculative office building over four stories of
underground parking garage on the lowest floor and worked their way to the
top. The punch list walkthrough included the usual participants: Owner’s
representative, project architect, and the GC’s superintendent and project
engineer (PE). The PE was equipped with a rolling table and his laptop. As
the team listed items to include on the punch list, he was typing them into
the computer. When they finished with the rooftop and penthouses, he sent
everyone an electronic copy of the punch list as well as distributed it to all
the subcontractors who began working on corrections the following
morning. Punch lists and the punch list process can take on a variety of
formats, including blue tape, clipboards, and a sheet of paper taped in each
room. What are some technology advances you have experienced with
punch lists? Have you participated in punch list development and punch list
completion? You should look at is as a ‘get-to’ and not a ‘have-to’.
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Case study #15.8: Punch list and a shopping cart

Another mid-sized general contractor (GC) took a unique approach to
punch list with a carpenter foreman and a shopping cart full of tools and
materials. The punch list team on this school included the owner, architect,
and GC. When they discovered a minor gash, paint touch-up, or burnt-out
light bulb the foreman performed the fix right then and there in the field.
Even though some of the repairs were technically the responsibility of
subcontractors (subs), this foreman eliminated the need to put half the items
on the list. Wasn’t some of this work technically a violation of union rules?
Shouldn’t the subs have been forced to correct their own work? This
proactive approach facilitated receipt of the certificate of substantial
completion from the architect the next day which was accompanied by a
manageable list of outstanding deficiencies. What happens if punch lists are
too long, say 1,000 items long? Can this example GC now back charge the
subs for repairs? This author uses the terms ‘active’ versus ‘passive’ to
describe quality and safety controls. Using this and other examples,
describe active and passive punch lists.
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Case study #15.9: Storm before the calm

No one likes to receive a nasty phone call or letter. Even if the sender is in
the wrong, which this one was. This $1 mil biotechnology laboratory tenant
improvement project was only one week from turnover. Everything was
going well and the end date was achievable. The project owner visited the
site and blew a gasket when he saw about 10% of the ceiling tiles out of the
gird and the office area carpet had ceiling dust and other light debris
scattered. Would you have been upset as well? He called the general
contractor’s (GC’s) project manager (PM) and read him the riot act that the
project was no-where near finishing on time. Was there a better way this
could have been handled? The PM let the owner finish with his rant and
then politely assured him all was fine. What was currently happening on the
site was mechanical balancing, which requires a few tiles to be removed to
access control valves. Ceiling tiles give off white dust when handled and
occasionally a corner will break off and require replacement. Have you ever
removed and reinstalled ceiling tiles? Did you break any? The GC had
anticipated this and had a couple of extra boxes of tile handy. The other
activity at that time in the building was the owner’s low voltage electrician
pulling wires above the ceiling grid. Does it seem they are always late, run
the wires diagonal, and damage tiles (three opinions here)? The GC was
planning to clean up after this vendor as well, even though they didn’t
receive a markup on the cost. Should they cleanup after the owner’s
electrician? Should GCs receive markups on owner employed
subcontractors?
Within two days the tiles were replaced and the carpet was vacuumed and
the project was ready for turnover. The GC PM met with the project owner
onsite for a final walkthrough. The owner could not believe the change and
was embarrassed by his previous outrage. Do people in leadership positions
apologize? Should they admit fault? Does that show weakness? Should the
PM rub it in the owner’s face? The project was completed successfully and
the PM received one of the best unsolicited letters of recommendation ever.
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Case study #15.10: Punch list: Love it or hate it

Development and management of punch lists are an inevitable part of any
construction project. The punch list should be looked upon as a ‘get-to’ and
not a ‘have-to’. Proper punch list management leads to a quality project
finished faster and with improved opportunities to achieve the budget. A
satisfied client (and designer) may quickly become dissatisfied if punch list
repairs are not completed expeditiously. On this large example public
project the general contractor superintendent would repeatedly have the
same rooms cleaned and punched as various trades would re-visit spaces for
additional work and ultimately cause some damage. She subsequently
implemented a lock-out system. Where possible each space was physically
locked-up with a padlock when the punch list had been resolved. Anyone
wanting back into the space had to obtain keys from her and the responsible
subcontractor or foreman had to sign accepting full responsibility for
further cleaning or repairs. When the foreman returned the key, the
superintendent would verify the space was as before. Would this system
work on every project? How about a hospital? How about an apartment
building? How could it have been improved?
Have you participated in punch list drafting and/or physical repairs? Have
you ever experienced a lock-out process such as described here? Did it
work? Remember that the final ‘prize’ for most contractors is receipt of the
retention check, which is also approximately their fee. Retention is not
released until a project is 100% closed-out, which includes all
documentation and cleanup of the punch list. Efficient punch list
management is an opportunity to contribute to the bottom line for new
construction project engineers and assistant superintendents and foremen.
What other efficient punch processes have you observed or conducted?
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Case study #15.11: Drywall close-out

In April, six months after this large aerospace manufacturing facility was
successfully completed, the owner of the drywall subcontractor (sub) called
the general contractor’s (GC’s) project manager (PM) and indicated that he
was owed an extra one million dollars, even though his contract had been
closed out with proper lien releases. The sub could not show why he was
owed money other than it was tax time and he was preparing his books and
realized the company lost money last year and this had been their largest
project. He had not been using independent project numbers, let alone cost
codes. Contract close-out and lien management are important financial
responsibilities of the project team. Should the GC’s PM pay the sub?
Should the PM change order the client? Assume the PM and sub have
worked together successfully for years. List a few basic cost control
recommendations you would make to this drywall sub.
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Case study #15.12: Inspectors
Construction quality control (QC) is a get-to, but it is also a have-to.
Whether inspectors are internal contractor employees or external
companies, they play an important role in achieving active QC in a
construction project. What are some other methods to achieve active QC?
Some construction managers resist because they feel achieving high levels
of QC costs a project money and maybe takes longer to build. But actually
QC saves time and money. Explain how that might be. One method project
owners impress upon their builders the need to achieve QC is by providing
warrantees. It is difficult to warrant that your work is good and will last if
you did a shoddy job. Describe what the term ‘jerry rigging’ means.
A standard building warrantee is only one year. All materials and
workmanship are understood to be warranted for one year unless extended
warrantees are provided for specific systems. One assembly which is
typically accompanied with an extended warrantee is roofing, which can be
for 20 or 30 years. Name some other materials or systems which have
extended warrantees. But what many project owners do not understand is
that a subcontractor (sub) typically only warrants its labor for one year and
it is the sub’s supplier, in this case the roofing material supplier, that
provides the 20 year warrantee. The roofing sub may go out of business in
the short term and the project owner needs to look to the supplier to step up
to the line. Essentially a roofing sub’s warrantee ‘won’t hold any water’
(pun). The next time you receive a warrantee on any material or piece of
equipment from a subcontractor, check to see who is actually warranting the
product. Inspections play an important part in the warrantee as well.
Following are a few different examples of how contractors dealt with
inspectors.
A. Roofing and other waterproofing systems may be inspected by a
third-party inspector contracted by the owner. But a roofing
specification typically requires the installer to build to the
“manufacturers” recommendations” or standards. This is a good
practice, but how does the manufacturer, who will provide the
warrantee, know the work was installed correctly? When asked,
they will often respond: “We know that sub, they do good work.”
But in this construction professional’s opinion, that is not enough;
that is not a good example of ‘active’ QC. What works well is to
write it in the subcontract agreement that the manufacturer’s
inspector is required to visit the site during the installation. But that
is still not enough as they may do a ‘drive by’ and inspect from
their car. Make them get out of the car, climb up on the roof (you go
with them), fill out an inspection form, and leave it with the sub and
the general contractor (GC). Do you think this sounds reasonable?
It is achievable, but it requires some active QC work from you to
make it happen. Do you have other suggestions related to
inspections and warrantees?
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B. An old-school GC superintendent did not like inspectors rejecting
work, but he was just fine with acceptances and approvals. The
medical office building example for this case study was built of
structural steel and had a metal deck roof structure. The rigid
insulation and rubber roof product were to remain dry during
installation. Unfortunately it rained and saturated the insulation.
The roofer dried it out the best they could and proceeded to finish
the rubber membrane. After a few days of heat, the membrane and
insulation separated from each other. Large pockets of air formed
between the two. The young roofing inspector rejected the roof. The
superintendent and inspector and GC project manager (PM) met on
the roof to discuss the problem. The PM was 10 minutes late and
found the superintendent and inspector toe to toe against the
parapet. But this parapet was not three feet high, but rather was
comprised simply of two 2x6s laid flat so it was only three inches
high. The inspector’s heals were against this very short curb two
stories in the air with the superintendent pounding on his chest with
his finger and cussing and spitting all over the place. If you
intimidate an inspector enough, will he or she change their report?
The PM pulled the two apart and sent the inspector home. This was
obviously not a good example of leadership or communication or
collaboration or a whole lot of construction management concepts
discussed in this book. What should have happened? What would
you recommend happen now? No, firing the superintendent is likely
not one of your options.
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C. A small residential builder was not accustomed to others telling him
what to do. He knew most of the local building inspectors. They
would typically give him a wave from their car window as they
passed by his projects, passing his inspection slips out the window
as they drove away. The builder was a carpenter by trade and did
most of the work by himself with his two sons and a nephew or
two. What background do you suppose building inspectors have?
One day a new inspector showed up at the site. He got out of his
car, was formal with his introductions, and asked to borrow the
contractor’s ladder. The inspector climbed up and took note of the
quantity of 16d galvanized nails securing the top plate of the
framing wall to the window header. How many nails are required?
In commercial construction there are likely some ‘rules’ but for this
builder, the amount needed was the amount he always put in; his
houses didn’t fall down, he never counted the nails. The inspector
told him he was short a few nails. The builder was not short with
his response. There was a lot of loud hollering and the expletives
were flying faster than nails out of a nail gun (exaggeration). The
inspector couldn’t get a word in edge-wise. He started sweating and
huffing and puffing and collapsed – he had a heart attack right then
and there. Well the ambulance got their quickly and the inspector
lived to inspect another day, but he wouldn’t return to this builder’s
projects. Would you? Obviously this is not the way to do business.
What should have happened? You cannot change the attitudes of
older builders (or designers or owners or inspectors) but how can
we manage the team without causing each other to be ill?
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Case study #15.13: Stepped retention

What is retention? What is it used for? How much is it? When is retention
released? The answers to these questions are pretty well understood. A
good industry friend of this author, and also university lecturer, refers to
retention as the ‘prize’ and instructs her students in the classroom and her
project managers and project engineers on the jobsite: “You always have to
keep your eye on the prize, and the prize is your retention check, which
approximately equals your fee.” Retention use to be a flat 10%, but as the
cost of construction has gone up, many project owners, especially private
owners and those working on negotiated projects, only hold 5%. Does an
owner really need 10% of $100 mil, or $10 mil, to be held for a couple of
months after occupancy is achieved just to get the last paint touched up,
rubber base repaired, or as-built drawing turned in? In this industry
professional’s opinion the answer is no. But some public agencies, or large
national private companies, have rules with respect to retention amounts
and release. You have to play by the rules, and the rules are defined in the
contract. Contractors need to understand these conditions before they bid or
propose on a project and certainly before they sign the contract. So, how
might retention be reduced? Here are a couple of suggestions:
Change retention from 10% to 5% in the contract using the above

reasoning.
Hold 10% retention on the first 50% of the project’s progress and
no additional retention held after. That way the project owner
should know by mid-course if the construction team is performing.
At the completion of the project the owner will still be holding 5%.
Have the owner place the retention money in an interest-bearing
escrow account so the owner is not benefiting from holding the
construction team’s money.
Since retention is only held by the general contractor (GC) on its
subcontractors (subs) and not on its jobsite general conditions,
direct craft labor wages, or material costs, get the project owner to
agree to only hold corresponding retention on the GC.
Arrange for early release of retention on subcontractors which
complete their work early, such as the earthwork, shoring, site
utilities, and maybe the concrete subs. Why should the retention
from the utility sub be held for over a year after they have
completed their work and release of the whole project retention is
pending correction of some interior finish work? Owners should be
reminded that subcontractors who are stretched too far on payments
may suffer financial difficulties, on this or another project. Payment
of early subs’ retention and receipt of their final and unconditional
lien releases is valuable protection for both the project owner and
the GC.
With a couple of months remaining in the project, the GC should
ask the project owner to cut the amount of retention in half for
reasons explained above. Then once that check is received, ask for
the remaining amount to be cut in half again. Continue doing this
until a reasonable amount is still being held. How much is
reasonable? Many feel that 200% of the value of the remaining
work is sufficient. This stepped release is fair to all parties,
especially the subcontractors, assuming the ethical GC will release
their proportional share once the owner has released it to the GC.
Do you have other suggestions on reducing retention?

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Case study #15.14: Slow close

An expeditious close-out is in everyone’s best interest as discussed in other
examples in this chapter. Unfortunately, close-out is often shifted from the
responsibility of the project manager (PM) and superintendent to their
project engineer (PE) and foreman. There are several reasons that happens:
The PM’s and superintendent’s resumes are more valuable in
proposals for new work.
It is more fun to start a new project than finish an existing one,
especially if the previous one has problems.
There may not be much money left in the jobsite general conditions
estimate and the PM and superintendent are much more expensive
than the foreman and PE.
But unfortunately the more experienced team is better qualified to achieve

an expeditious closeout than their junior partners. This example project is
the same one as the team case #1.5.A and pay request case #13.1. The
general contractor’s (GC’s) PM had moved off the project and had
delegated the closing responsibilities to the PE. The PM had handled
everything financial related including final change orders with the project
owner and subcontractors, final lien releases from the subcontractors, and
forwarding the final pay request, which was for release of retention. The PE
was responsible for assembling the as-built drawings from their
subcontractors (what subs prepare as-built drawings?) and assembling the
operation and maintenance manuals (O&Ms). The PE struggled with
obtaining responses from the subs. Why might subs respond to a PM and
project superintendent better than a PE or foreman? As-built drawings were
forwarded to the project owner and were rejected for content or format
reasons. O&Ms were also submitted and also returned rejected. The chief
financial officer (CFO) of the company was pressuring the PE to get the
retention check but the project owner was holding it until all facets of the
project, physical and paper, were properly closed out. Can they do that
contractually? Is it ethical? What recommendations do you have for the
CFO, PM, PE, subcontractors, or the retention-holding project owner?
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Case study #15.15: Ideal close

Has there ever been a perfect project close-out? Likely not, but many have
done well. Here are some practices and procedures which, if implemented,
might help improve your close-out batting record.
Read the contract carefully before submitting a bid or proposal. If
the close-out requirements necessary to achieve release of retention
are overwhelmingly unfair, choose another project, or get them
changed before the contract is executed. Do not ‘hope’ that you will
be able to convince an owner and architect to relax these
requirements after construction has started.
Put money in the jobsite general conditions estimate, and time in
the schedule, to allow for the close-out process. Do not assume it
will not cost anything or that you will have other savings to cover
it.
Hire only best-value subcontractors. Some of the steps to
accomplish this include:
Prequalification.
Issue requests for proposal (RFPs) or requests for
quotations (RFQs) which including everything you
expect them to contract to. Include a copy of your
subcontract agreement and their close-out requirements
with the RFP/RFQ.
Do not hire only the lowest price company, but the one
with the most complete proposal, best qualifications, and
a competitive price.
Conduct post-bid interviews and review scope and close-
out requirements.
Prepare a close-out log, similar to a submittal or RFI log, at the
beginning of the project. Review the entire specification book for
any required close-out activities. Don’t be shy. Submit a draft of
this log to the project architect and ask them to review and approve.
Practice good lien release procedures and when individual
subcontractors have completed their work, issue them final change
orders and obtain final lien releases and attempt to get their portion
of the retention released early, as discussed in a previous case study.
Do not let unresolved change orders and back charges fester. If
there are disagreements, get them resolved. Do not assume they will
go away. Contractors have a tendency to put these in a basket and
then combine and process them, often in a confusing manner, at
project completion. This only results in conflicts and delayed
release of retention.
Submit early ‘drafts’ of as-built drawings and operation and
maintenance manuals to your owner and design teams. Find out if
you are on the right track. Get buy-in from them. Require
subcontractors to maintain progress as-built drawings and review
these with each monthly pay request draw. Do not wait until project
completion only to find out the foreman or superintendent in charge
has left for another project, or another subcontractor!
Keep the project manager and superintendent involved as long as
possible, or at least have them participate in early close-out
activities such that no big ticket items remain for the foreman or
project engineer.
Keep good records and practice good open-book communication
tools.
What other recommendations do you have for a timely and ideal close-out?
We can learn from both good and bad experiences.
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16
Leadership
Including ethics and careers
Introduction
Construction leadership is definitely an advanced topic, but most leadership
books and seminars focus on business, religious, military, and/or sports
leadership examples. The project management and superintendent books
referenced in the appendix each have a chapter which is specific to
construction leadership. This chapter includes examples of both good and
bad leadership within construction organizations. Many case studies
throughout this book also connect with leadership. Our examples include
corporate executives but also explore leadership, ethics, and career growth
examples of superintendents, project managers, and project engineers. All
of these people are leaders in some regards and many can become better
leaders if they improve their communication skills (Chapter 11).
Construction personnel need to pay their dues and put in their time to learn
the technical aspect of the industry. Many superintendents start their careers
as carpenter apprentices and move through the ranks as journeymen and
foremen. Most college graduates will start their careers as project engineers
in hopes of becoming a project manager, senior project manager, and
eventually company executive. These growth paths are included in several
examples in this chapter as well. This chapter includes the following case
studies related to leadership, ethics, and construction careers:
16.1: My way or the highway
16.2: Unethical PM
16.3: The law of the lid
16.4: Schedule errors
16.5: Are you a PE?
16.6: In the right place at the right time
16.7: Job walk
16.8: Am I still relevant?
16.9: Second shift PE
16.10: QC foreman
16.11: Rising through the ranks
16.12: I was set up
16.13: Fore
16.14: Never quit learning
16.15: Draw the line
16.16: Donut hoarder
16.17: The squeaky wheel gets __
16.18: Don’t cry PE
studies in this Chapter #16 also overlap with other chapters including:
Case study #16.2 – Chapter 13, cost control
Case study #16.4 – Chapter 7, scheduling
Case studies #16.12 and 16.13 – Chapter 3, construction
organizations
Case study #16.15.A – Chapter 10, subcontractors
Many case studies and chapters cross-connect and references are included
in the example narratives in this chapter. In addition, multiple case
examples included with other chapters also connect with this chapter on
leadership including cases #1.4.B, 2.10, 3.5, 3.13, 3.15, 6.3, 6.7, 6.9, 8.10,
several from Chapters 7, 11, and 14, and others.
Case study #16.1: My way or the highway

Have you ever had one of those bosses who is great at dictating to others
but doesn’t listen to his or her employees’ needs? I think we all have. Or
how about the boss who considers themselves ‘gifted’ or enthroned and
expects others to drop whatever they are doing and cater to their beckon
calls? Some people are accustomed to having other people do things for
them, whatever those things are, day or night. And unfortunately some
employees will do those things, regardless if they fit within their job
descriptions. Imagine you are the project engineer and your project manager
sends you out to buy his lunch or pick up his dry cleaning or walk his dog?
Is that what you went to school for? Or the project owner who is paying a
high wage to a consultant and because of that high wage feels the consultant
should do ‘whatever’ regardless of the scope or their expertise? How do
you respond if your boss asks you to drop everything you are doing and
cater to their needs? How do you respond and A) keep your dignity, and B)
at the same time keep your job?
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Case study #16.2: Unethical PM
This large commercial general contractor had 20 project managers (PMs).
The president of the company was very competitive and encouraged her
employees to earn fees larger than the other PMs – she even posted the
results for all to see. One unethical PM routinely would cost code his
material invoices to other PMs’ job numbers. After receipt of the monthly
job cost history report, the other PMs would investigate these costs, if
discovered, as many projects purchase similar materials from the same
suppliers. If they found an incorrect entry, they would then try to journal
entry it out of their job and into its rightful place. These types of unethical
actions and confusing journal entry transactions make it difficult for
certified public accountants to audit the books, especially on open-book
negotiated projects. Should the unethical PM be terminated? Why was he
doing this? Do we compete against co-workers as well as other contractors?
How would this practice affect as-built costs? If their projects were all
competitively bid lump sum, would these miss-codes impact the bottom
line? If the contractor did a mix of negotiated and bid work would this have
an effect? Do we compete against subcontractors and project owners,
assuming we want to improve our fee at their expense?
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Case study #16.3: The law of the lid

One of John Maxwell’s chapters in The 21 Irrefutable Laws of Leadership
is the law of the lid. Maxwell explains that to be a leader you need to not
only have a good work effort, but a bigger vision to go after larger prizes.
You need to push yourself out of your comfort zone and be willing to take
on new challenges. See Figure 16A. A general contractor’s (GC’s) senior
project manager (SPM) must not have read Maxwell because he obviously
didn’t know the law of the lid. Or did he? The owner of the construction
company and his wife hosted the SPM and his wife to a professional
sporting event. They had a great time and the company owner talked
constantly of the big picture. The SPM was introduced to many business
leaders at that event. The vice president (VP) of the company and his wife
one month later invited the SPM and his wife to an off-Broadway play and
dinner downtown. They had a great time, but the VP spent much of the
evening discussing the lack of leadership abilities of many of the company’s
executives. In three more weeks, the SPM and his wife attended a party at
the chief financial officer’s (CFO’s) executive home. The SPM and CFO
had not shared any personal time outside of work and he was surprised of
the invite – but who can turn down a party invitation? All the company
officers and their spouses were there, but only a couple of the SPM’s
colleagues were in attendance. What was going on?
Three months prior to this the SPM had proposed on a large hospital
project. The GC landed the project largely based on the SPM’s lengthy
medical resume. His VP had thanked him upon project award, given him a
$5,000 bonus, and an extra week’s all-expense paid golf vacation for two.
The VP also indicated the company had three experienced PMs who could
build the project if the SPM didn’t want to travel three hours round trip for
18 months to the jobsite. He could either totally be taken off the project or
take a more executive role and visit it just once every other week or so. This
would let the hospital know he was still involved. Maybe he could take the
hospital administrator out for lunch. The SPM indicated ‘thanks but no
thanks’. He had sold the job and he wanted to see it through. This is similar
to case #3.5. Why did the SPM feel this responsibility? Uh-oh, did the SPM
miss the bigger picture? Was he hitting Maxwell’s leadership lid?
Epitaph: The hospital project was very successful. The SPM saw it 100%
through including close-out. Another SPM was promoted to VP at the same
time. These two didn’t work well together and the GC’s hospital SPM soon
left the company. What mistakes did the SPM make? What mistakes did the
GC’s corporate officers make? Do you suffer from the law of the lid?
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Figure 16A
Case study #16.4: Schedule errors
The chief scheduler took pleasure in finding errors in his employees’ work.
He would pour through their schedules with a red pen and highlight, in his
opinion, obvious errors. If a schedule and scheduler did not have any
apparent inconsistencies, he would take extra time, often inventing an item
requiring correction. An interesting side-note is no one ever saw any
schedule prepared by the chief, let alone a perfect one. A young scheduler
who was quickly aware of his boss’s motif operandi solved the problem. He
would intentionally place a large obvious error right in the middle of the
schedule. After the chief pointed it out, indicating loud enough for everyone
to hear, “Ha-ha, I found your error” the subordinate would apologize and
acknowledge the mistake and complement his superior on his infinite
wisdom. Who was actually displaying leadership skills in this arrangement?
How might the chief scheduler have approached this process in a more
constructive manner? Should the employee have simply called his boss out
on the carpet over this? Did he error by tricking his boss? How might you
have approached this dilemma differently?
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Case study #16.5: Are you a PE?

What is it with job titles? What is the difference between a construction
manager and a general contractor (GC)? What is the difference between a
senior project manager (SPM) or a project executive or an account
executive? What is the difference between a senior project engineer and an
assistant project manager? What is the difference between a field engineer
(FE) and a project engineer (PE)? What is the difference between a general
foreman and an assistant superintendent? Okay, I could go on, but you get
the point. Likely you know for certain the answer to each of these
questions. But that is because of your work experience and the company
you work for. The answers vary with different construction industry sectors,
size of contractors, and even union affiliations. Many construction
management and construction engineering graduates enter the industry as a
PE, especially those working for commercial GCs. But even the term
‘project engineer’ has a variety of definitions such as:
Just starting the construction industry, college graduate, works for a
PM but the same person working for a superintendent may be a FE.
Licensed professional engineer (also PE) with an engineering
degree and has passed the state exam. The PE in this case can
‘stamp’ a drawing which is different than a commercial GC PE
stamping a submittal.
An individual responsible for 1,000 engineers on a mega design-
build international construction project. He or she is ‘THE project
engineer’ and has a variety of assistant project engineers and group
supervisors working for them, all of which have a ‘comma’ PE after
their names on their business cards, as they too have PE licenses.
When this author was a GC PM and had PEs working for him, a few of
them also had civil engineering degrees and professional engineering
licenses. I would not allow them to put “PE” on their business cards and
told them to keep their PE stamp at home. Why was that? Was I short-
sighted? Was that unfair? What is your experience with GC PEs who have a
professional stamp?
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Case study #16.6: In the right place at the right time

For many companies, an employee must put in six months of work before
becoming eligible for vacation time. That was the case with this scheduler
working for a large utility contractor. The Christmas holidays were coming
up and everyone on her team (eight schedulers supporting five hundred
design engineers on this mega-project) was taking a week off between
Christmas and the New Year. She had hoped to return home to spend the
holidays with her family but she had to remain at work – the only scheduler
to do so. She had not yet accumulated enough vacation time. During this
period the jobsite was still working. The scheduler’s boss received a rush
project from the jobsite to produce 17 schedules and forwarded the task to
his only available scheduler, as he dashed out the door for his holiday.
Should she have refused? More than half of the schedule requirements were
for engineering scopes outside of her normal discipline. Should she have
only focused on her area of specialty?
She stepped up to the plate and produced a professional package which was
delivered to the jobsite just before the New Year. The jobsite was so pleased
with her work that they requested she travel 3,000 miles and present the
schedules to all the jobsite superintendents; a group of over 30 seasoned
veterans. A site visit was an honor not yet bestowed on any of her
colleagues, all who had seniority over her. The presentation was a success
and the jobsite construction manager (a boss of 5,000) later requested her
transfer to the site, along with a promotion and a raise. Her career
experienced a meteoric success story after this project. Sometimes it pays to
be in the right place at the right time. How might you approach daily tasks
on your jobsite as ‘get-tos’ in lieu of ‘have-tos’? Sometimes it feels we are
drowning in requests for information (RFIs), submittals, meeting notes,
filing, reports, project status logs, etc. But how can we take each of these
and view them as a glass is half full? These are project management tools
and our contribution to the project. Have you ever been the beneficiary (or
opposite) of receiving an opportunity such as this engineer did? How might
you prepare yourself so that when the opportunity arises, you are also in the
right place at the right time?
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Case study #16.7: Job walk

On a large hydroelectric project all the cost and scheduling engineers were
required to spend one hour each day away from their computers and out on
the jobsite. They were directed to observe construction activities, any
activities, from a safe distance. The engineers were of course instructed to
not bother any of the craftsmen. Unfortunately some beginning project
engineers (PEs) today do not even have a hard hat, safety vest, and work
boots. They spend all their time staring at a computer screen. Why did this
example contractor insist on what some felt was a wasted hour? Have you
done this? What would you suggest the cost and schedule engineers focus
on while walking the job? Should they take their cameras with them and
photograph the craftsmen at work? If you are a new PE, take time every day
to get away from your desk and observe construction. It will make you a
better construction manager. And even though you are not bothering the
craftsmen, they acknowledge and appreciate your presence (especially in
the rain) and will reach out and include you. They are great people. Get to
know them.
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Case study #16.8: Am I still relevant?

When are older and more experienced project managers (PMs) and
superintendents no longer relevant? With experience comes wisdom as
evidenced by the hundreds of lessons learned in this book. Because of that,
shouldn’t SPMs and superintendents stay involved with their companies as
long as possible? We all recognize that younger employees have more
current technology skills than do their seniors. Are there relevant careers for
these valuable people outside of working as front-line construction leaders?
A recently retired general contractor chief operating officer (former SPM)
was hired back by his company as a consultant two days a week. The
contractor had acquired a very large negotiated project with a high profile
client and they inserted him as a SPM to help guide the field team. He
called me one day to say: “I’m still relevant.”
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Case study #16.9: Second shift PE

Safety of craftsmen is of course an important goal of all involved with the
built environment. Contractors providing labor on a jobsite are required to
provide liability insurance. If a subcontractor wants to work an off-shift, or
a weekend, does the GC need to be present? If someone is injured and the
general contractor (GC) is not on-site, how is this documented? Does the
GC’s insurance carrier require salaried presence whenever anyone is
working? Volunteering to cover a night shift or a weekend is one way for a
GC project engineer (PE) or assistant superintendent to earn points with his
or her employer. It is a get-to and not a have-to. If you were the one
assigned to work a Saturday while the painter gets caught up, what other
productive activities could you do? What construction management control
activities would you undertake as the GC’s only on-site representative with
respect to the painter’s work that day?
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Case study #16.10: QC foreman

A large general contractor (GC) specializing in new apartment and hotel
construction has a quality control (QC) foreman or two on each project.
These are salaried not hourly employees. Have you experienced a
construction company with QC foremen? These people also perform many
assistant superintendent activities and aspire to one day become project
superintendents. What are typical paths to become a superintendent? After
demobilizing from a 500-unit apartment project, this young ambitious QC
foreman became fully-vested in a new and exciting historic downtown hotel
refurbishment. Unfortunately punch list activities continued to show up on
the previous apartment project as residents moved in and the owner’s
facility managers explored their new building. The foreman did not want to
lose his spot on the hotel project, so he put in 12-hour days, six to seven
days a week for two months balancing finishing one project with the start-
up of another. Why didn’t the GC simply hire an additional foreman? Is it
wrong that a contractor pushes their people like this? Should the foreman be
paid overtime? How far can young ambitious foremen, assistant
superintendents, project engineers, and assistant project managers be
pushed? What happens when they are pushed too hard?
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Case study #16.11: Rising through the ranks

Many people feel that the only way for one to become a superintendent is to
come up through the ranks, from apprentice to carpenter to foreman to
superintendent. A successful project manager (PM) was told by his chief
executive officer (CEO) that the company could hire a PM off of the street,
and train him or her to learn project management skills within one week,
but it takes 20 years to bring a superintendent up through the ranks. Is this
an accurate statement? Needless to say, the PM was not excited by this but
decades later he has seen his share of successful and unsuccessful
superintendents and there was a lot of truth to what the old CEO had told
him. What happens when contractors need new people? Project engineers
become PMs in five to seven years and occasionally a PM is hired from a
competitor. Sure foremen become superintendents, but how does a
contractor hire a new superintendent? See also several case studies in
Chapter 9 regarding promoting and hiring new construction field managers.
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Case study #16.12: I was set up

Don’t you always want to feel your boss has your back? Why would your
boss ever stab you in the back? On a very large negotiated clean room
project the owner had made it clear to its construction manager (CM) that
they expected all aspects of the project to be competitively bid. The finished
project is shown in Figure 16B. The CM had a management staff of 20 on
this project. The project manager (PM) in charge of mechanical, electrical,
and plumbing (MEP) scopes was very experienced in medical work and
was respected by the project owner. During preconstruction (precon), the
CM had utilized and paid for estimating and scheduling assistance from two
reputable mechanical and electrical subcontractors. When it was time to bid
the MEP scopes, the PM sent requests for quotation (RFQs) to three
different subcontractors in each category, including the two who had helped
with precon. This was all done above board with the project owner and the
CM’s senior project manager’s (SPM’s) knowledge.
Both of the mechanical and electrical chief executive officers (CEOs) were
offended to receive the RFQs. They had assumed they were in the driver’s
seat to negotiate the project – as is often the case with precon participants.
Evidently the CM’s SPM had been wined and dined by the subcontractors
and had hinted a negotiation was in the making. The subcontractor CEOs
called the CM’s CEO (they all belong to the same country club) and read
him the riot act. They thought they had a deal! The CM’s CEO asked his
SPM about this but he claimed he had no knowledge of why his PM had
sent the RFQs.
The PM had been set up. He was doing with the project owner had required
and everyone had been made aware. It appeared he might be fired over this
but because the project owner valued his experience he stayed on board.
Why did the SPM not stand up for the PM with all three CEOs? After this
occurrence the PM attempted to get his SPM’s initials on all documentation
before it left the office. Was this prudent? The SPM resisted – why was
that? What long term impacts will this experience have on both the SPM
and PM? How about the three CEOs?
Post script: Both of the companies who had participated during precon
ended up being low bidder. But both assigned different PMs – individuals
who had more of a lump sum pedigree than negotiated. Why did they do
that?
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Figure 16B
Case study #16.13: Fore
Are you a golfer? Golf is a popular past-time of construction managers, as
is fishing. One general contractor (GC) project manager (PM) had been a
competitive golfer at a very young age. Industry tournaments are typically a
scramble or best-ball format. In this manner, one or two good golfers can
often carry a four- or five-some in a tournament, even though a couple of
team members might not be as experienced. We usually play golf with the
project owner, designers, subcontractors, and suppliers associated with our
current project. But this GC would send its PM-golfer all over playing with
other clients. His employer would sign him up for golf tournaments
throughout the summer, even some out of state.
Everyone wants to win, even though there is often considerable ‘games’
and partying at industry golf tournaments. These non-proficient client
golfers enjoyed ‘winning’ and welcomed the PM’s contribution – he being
dubbed a ‘ringer’. Is this unethical? How would you react if you were the
PM on a project but your employer had another PM play in a tournament
with your client, and not you? The PM-golfer may spend two or three
working days a week during the summer playing golf, wining prizes, and
being paid to do so. Who is paying his salary? What if you were told he had
been assigned to cost-plus negotiated projects but is playing golf with other
clients? What if this was discovered in an audit?
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Case study #16.14: Never quit learning

This high-end home builder was also his own estimator, salesman, project
manager, accountant, superintendent and lead carpenter. He often shared
this mantra with those around him “The day I quit learning is the day I die”.
He worked until he was 84 and died on the dance floor at 92, proudly
wearing his 65-year carpenter union membership pin. At that time this was
this state’s record. Why did he work so long? It wasn’t because he needed
the money. This carpenter was ahead of his time. Today it is understood that
learning is a life-long process. How can you continue to learn? How can
you add additional life skills to your toolbox? Attend a seminar. Read a
book. Take a class. Get a mentor. Look around.
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Case study #16.15: Draw the line
We should all be respectable and try to get along with other members of the
built environment. But when is being nice considered too nice? Today there
is considerable attention given to be politically correct and gender and race
neutral in construction, along with many other considerations, and this a
good thing. Please consider the following two situations in regards to
construction ethics.
A. A young project engineer (PE) was on a large aerospace project
with a team of six in the office. This engineer had prior experience
with complicated mechanical and electrical (M&E) projects. See
also case #11.3. He was assigned to be the M&E coordinator on this
project. The electrical subcontractor (sub) owner seemed to take a
liking to the PE. They had lunch about once monthly, walked the
job weekly and even played together in a golf tournament. Does this
seem like too much socializing at this point? It was a tough project
for the sub but these two remained friendly. The sub asked the PE to
go on two different all-expense paid trips. The first was to go
fishing in Alaska with a bunch of other construction management
professionals. Superintendents often are invited to go on fishing
trips by suppliers and subcontractors. This will be an expensive
four-day trip. Should the PE go? Is this crossing the line? The
second trip he was invited on by this same electrical sub owner was
to go to Las Vegas for a long weekend and each of them take their
wives. Again plane and hotel and meals and show tickets were all
included. Is this crossing the line? Should the PE and his wife go?
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B. A senior project manager (SPM) had assisted this younger female
PM with entering the biotechnology construction sector by securing
a competitively bid project for her to manage. These projects are
complicated and the drawings were not perfect so there was upside
fee potential. How might that be? The project owner and architect
knew of the SPM and his experience in this field. Rather than
welcoming him to the team, they asked his office for his
involvement to be limited. What were they afraid of? The two
middle-aged married men were very taken with the young female
PM. Now what do you think is going on? They even invited her to
attend an out of town industry conference with them. If you were
her, would you go? Should her employer let her go? Might the
employer encourage her? When do you draw the line? The PM was
learning as she went along with this first project in this field and her
first as a PM. She did an adequate job and there are always learning
pains. She was very nice to the owner and architect and caved on
nearly every change order opportunity. Now what do you think is
going on? The PM’s office had to step in to strong-arm the project
owner on final change orders to keep the project from being
recorded as a total loser.
Post script: When the project finished and the contractor reported a loss the
SPM was blamed for a bad estimate. Was that fair to him? Unrelated but
neither the owner nor architect invited the young PM to work on any of
their future projects. Was that fair to her?
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Case study #16.16: Donut hoarder

This is obviously a study in leadership, but not good leadership. The lead
cost engineer on this refinery project had a desk in the main jobsite
administration building. His six area cost engineers had their desks out in
mobile office trailers along with the superintendents they worked with. This
is a common physical arrangement with several positions on larger
construction projects. Every Wednesday morning donuts arrived in the main
office. Do you like donuts? Which kind? The cost engineers were busy at
that time each week correcting timesheet errors. By 10:00 they could get to
the office but rarely found a donut hole, let alone a maple bar, left in the
box. When the cost supervisor was confronted he responded: “You need to
get your work done and get in here quicker”. One Wednesday afternoon an
area cost engineer was meeting with the lead at the lead’s desk going over a
draft monthly forecast. The lead opened a desk drawer to get a calculator
and low and behold, the employee caught a glimpse of two jelly-filled
donuts in his desk. When questioned the lead responded: “I’ll have these for
an afternoon snack.” Gee, don’t we always want to work for a generous
supervisor and one who looks out for his or her employees? Provide an
example of both good and bad leadership qualities you have observed on
construction projects.
Post script: Donuts are not good for your health anyhow.
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Case study #16.17: The squeaky wheel gets __
Fill in the blank with this title. Most will say ‘greased’ but that is not
always the case. These two schedulers had spent the past year on a remote
project site on the other side of the country from the corporate office and
their families. The project was a tough one that was running over on costs
and schedule. Ever wonder why so many say their projects are: “Under
budget and ahead of schedule”? Are all projects completed like that? This
one was not. Everyone seemed to be on edge and angry with one another. Is
that indicative of poor cost and schedule status?
The two schedulers decided to put in for transfers. One had performed well
on the project, despite these tough circumstances. The other complained all
the way through and his work was not stellar. After they both (separately)
requested a transfer, one squeaky wheel was greased and returned to his
home state, along with a promotion and a raise. The other squeaky wheel
was replaced and laid off. He wasn’t even reimbursed for his trip home.
Can you guess which was which? What lessons can we learn here? First, do
a good job and keep your head down. Second, when you ask for something,
such as a job change or a raise, be polite and be prepared for a variety of
answers. Be prepared to accept whatever may be their response. It may not
always go in your favor.
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Case study #16.18: Don’t cry PE

Many field supervisors unfortunately continue to rely on their macho
personalities. Some foremen and superintendents make it their personal
goal to force new college graduate project engineers (PEs) to quit. Others
try to get them fired. Why might a seasoned field person resent a new
college graduate out on the jobsite? Do PEs brag about their education?
They shouldn’t. It is often prescribed to PEs they need to pay their dues, get
through the first job or two, and they will be fine. A senior superintendent
told a group of PEs in an internal training session: “You have to have thick
skin”. This may work for some and others use humor to shrug off the
teasing. It doesn’t work for all of us to dish it back – sometimes this fuels
the fire. What has been your approach?
A project manager (PM) hired an intern for the summer in between her
junior and senior years. Her mother was a friend of a friend which is often
the case in construction – it is a close industry. She fit all the co-ed
stereotypes. The PM asked the site team to take it easy on her. One day the
assistant superintendent came into the trailer in a huff and told the intern to
get her hard hat on and bring her camera and get out to the site quick, there
was a problem with the spot footings they poured yesterday. Now she could
prove she belonged in this macho male-dominated industry. This was 30
years ago; thankfully we have made a lot of progress along these lines, but
we still have a ways to go. What did you do on your first internship? Were
you teased? How did you handle it?
The superintendent pointed to the spot footings. They all had an apparent
two-inch diameter and two-inch deep depression. He directed her to take
photographs and send to the structural engineer – this was evidence we had
concrete worms! All of the construction gang had gathered around and
laughed at her. When it was explained that the depression was caused by the
final withdrawal of the concrete vibrator, she stormed back into the trailer,
dropped her camera, and went for a long walk around the site. A very long
walk.
The PM caught up with her after he heard about what had happened. She
was holding back tears. He attempted to apologize for the crew but she
stopped him and said: “I am not going to let them see me cry”. She finished
the day and the summer. The superintendent and intern would later become
friends. Her construction career was successful leading her through PM and
owner’s representative roles. How would you have addressed this problem
if you had been the intern? Should the PM have had her transferred? How
should the assistant superintendent been addressed?
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Notes
17
Advanced case studies
Introduction
We learn lessons from our successes, but more so from our failures. There
are also valuable life lessons to learn from the actions of others, both good
and bad. The advanced case studies presented in this chapter provide
valuable lessons we should all add to our respective toolboxes. These
examples are based on actual experiences and observations of the author,
but names of the real parties are not included and any resemblances of
actual projects are coincidental. Some of the narratives have also been
elaborated on a bit for the reader’s enjoyment. Most of the case studies in
this chapter are quite complex and their topics could be spread across
several chapters. And many of the cases in the previous 16 chapters are also
connected to this chapter and the next on applied projects. A fun way to
present or resolve these issues is to have different individuals or teams take
opposing positions and the balance of the class or group judge which is
most convincing. Although some answers are likely more correct than
others, in many circumstances it ‘depends’ on the reader’s background and
personal bias. This chapter includes the following advanced case studies:
17.1: CM/GC double-dip
17.2: Misrepresentation
17.3: To the victor go the spoils
17.4: Architectural preferences
17.5: Oh rats!
17.6: LD favors
17.7: Design-build accountability
17.8: When is a CM not a CM?

17.9: Wood floor
17.10: Wood i-joist
17.11: Estimating ethics

17.12: Ethical versus unethical cash improvement methods
17.13: Over-retained
17.14: The ceiling is falling!
17.15: No backup alarm
17.16: Build a better mousetrap
studies in this Chapter #17 also connect with many other chapters
including:
Project owners and developers, Chapter 1
Contracts, Chapter 5
Change orders and claims, Chapter 14
Leadership, Chapter 16
Case study #17.1: CM/GC double-dip

A. One purpose of the construction manager/general contractor
(CM/GC) or construction manager at-risk delivery method is for the
project owner to enlist the services of a builder early in the design
process as a team member. What are some other reasons public
owners are choosing the CM/GC delivery approach? The contractor
is required to bid all portions of the work out once relative portions
of design are complete. In a traditional GC arrangement the builder
may choose to self-perform some scopes such as concrete, steel,
and carpentry. But the CM/GC is required to bid all scopes, unless
agreed otherwise. Some contracts will also allow the contractor to
bid specific scopes in competition against subcontractors (subs) as
stand-alone prices. Why would the CM want to self-perform some
of the work, as is the case with a traditional GC? When this happens
the CM/GC, who operates under an open-book maximum allowable
construction cost issues a lump sum (LS) closed-book subcontract
agreement to itself. Have you seen this occur? Is it successful? How
do the contractors keep their people, material, and equipment
separate? Do they wear two different hard hats?
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B. This large medical facility example project was setup exactly as
described above. None of the usual concrete subs wanted to bid to
the CM as the CM was also bidding concrete to itself. They were
successful and received a $15 mil LS subcontract agreement. This
situation is reflected in Figure 17A. The concrete project manager
(PM) was new to the company and had a LS attitude. It was his goal
to make as much money as possible on this one project. Whereas
the CM’s PM had a fixed fee and her goal was to treat the owner
fairly in hopes of repeat work in the future. She was bombarded
daily with change orders from the in-house concrete sub, many of
them unsubstantiated and others significantly over-priced. When
she complained to the corporate executives they told her to look the
other way and approve the changes. Her concern was if the project
owner later discovered this flagrant behavior in an audit scenario,
the contractor would not be invited back for future work. What
should she do? How should she, or should she, document her
office’s direction?
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C. On another CM/GC example project the contractor was allowed to
negotiate the concrete into its scope. The project owner employed
an estimating consultant who ratified the estimate and kept an
oversight on change orders and audited actual expenditures. Why
would an owner allow the addition of the concrete scope? Why
would an owner have this system of oversight in place? But the CM
had to competitively bid the structural steel erection. They turned
out to be low-bidder on this scope and awarded their own company
a lump sum contract. When the owner and their concrete estimator
offered similar oversight for the structural steel package, the CM
declined. They had to bid against subcontractors and if the
subcontractors had been successful their books would have been
‘closed’. Why did the owner not allow the steel to be negotiated?
Do they have the same open-book audit rights? Why would the CM
not open its steel accounting books?
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D. During the course of construction on this same CM/GC project the
superintendent did everything he could to help the steel
subcontractor superintendent – which was actually his co-employee.
He covered hoisting, forklift use, safety rails, survey alignment, and
cleanup. He provided the subcontractor with a jobsite office trailer
at no cost. After the structural steel was erected and the
subcontractor demobilized, the CM superintendent installed the
bulk of the miscellaneous steel (hand rails, stairs, corner guards,
etc.) with his own carpenters and ironworkers. This work was
contractually included in the steel subcontractor’s scope. Needless
to say the subcontractor made a substantial fee – almost 50% of its
bid. This obviously was not ethical. The superintendent argued it
was the most ‘efficient’ approach. Was he correct? Should the CM’s
PM have stepped in or gone over the superintendent’s head? These
examples are not what the CM/GC delivery method was to
accomplish. How can these abuses be prevented? Should the
CM/GC delivery method be abolished?
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Figure 17A
Case study #17.2: Misrepresentation
A business owner with very little real estate experience needed additional
office space. A local developer had arranged several parcels of land and
was proposing a major waterfront mixed-use business park. Eventually the
project would include a dozen mid-rise buildings, all with views of the lake.
The uses included a hotel, offices, wineries, restaurants, retail,
condominiums, apartments, parking garages, a park, and more. Essentially
this was to be a live-work-play destination. No buildings had yet been built
but the developer had a fairly good set of civil drawings and had the two
six-story signature office buildings at the project’s entrance through the
schematic design (SD) phase. The developer had a complete
preconstruction (precon) team including a geotechnical engineer, surveyor,
architect, structural engineer, and general contractor (GC). Who is missing
from this list?
The GC had prepared a $15 mil budget for one of the two towers – the one
our example business owner was interested in (Tower ‘A’). The two parties
executed an option to purchase this one tower. The purchase and sale (P/S)
agreement included the current set of design documents. All the precon
team then transitioned to the buyer’s team. The developer had prepared a
stand-alone pro forma for tower A and shared this with the buyer.
According to the pro forma, this project ‘penciled’. What is a pro forma?
What does ‘penciled’ mean with respect to real estate development? It
seemed like a perfect fit, but was it?
The business owner was not comfortable with closing quite yet. He didn’t
really understand how to read drawings and although the budget was 12
pages long, he couldn’t make heads or tails from it. If a contractor’s
estimate is lengthy, it must be complete, isn’t it? By the way the GC’s
estimate was labeled as a ‘budget’ but the developer/seller referred to it as a
‘bid’ in all his discussions with the buyer. What are the differences between
the three terms ‘estimate’, ‘budget’, and ‘bid’ as they relate to construction?
The architect recommended the buyer hire an agency construction manager
(CM) who could advise him on the feasibility of the project. Now is when
the tables turn! The CM was well respected and had worked with all the
precon team members before, except he had not worked with the business
park developer. Here are some issues he found within two weeks of diving
into the documents, including the purchase and sale agreement.
Although the P/S agreement indicated tower A included an
underground garage, only 20 stalls were actually under building A.
200 stalls were to be located under future building B and were to be
shared with all the business park tenants and owners. Building A’s
garage space would not be secured from the balance of the garage.
There was an underground tunnel that connected the two garages
and ran under the main park entrance road. You might want to
sketch this as the SD documents did not have it very clear. The
tunnel and main road would not be within tower A’s lot line, but the
work to build these was on its drawings, along with the park’s
primary utility connections (water, sewer, gas, power, phone). The
buyer of tower A would need to pay for these scopes, although
these line items did not show up in the GC’s budget or the
developer’s pro forma. The new building would not be usable until
the road, utilities, tunnel, and complete garage were installed.
The GC’s budget was of course not a bid. The SD documents did
not have enough detail to obtain competitive subcontractor quotes.
The estimator had received a few $/SF plugs from subcontractors
(subs), but very few of them had looked at any drawings and there
were not specifications to accompany an SD set. When is the design
complete enough to solicit competitive sub bids? The estimate was
full of ‘allowances’, ‘plugs’, and ‘contingencies’. Many
construction elements were not included at all in the budget as the
design had not progressed that far. These budget gaps included
shoring at the tunnel and main road. Evidently shoring was to be
performed by a design-build (DB) subcontractor. Other necessary
elements were also missing as the GC had not been provided with
the P/S agreement and was not aware of business park scopes
which were the responsibility of tower A as discussed above. Is the
GC’s estimator at fault here? It would be easy to blame them, but
what would you have done?
The GC’s budget recommended the owner carry a 15%
contingency. Is this a fair amount to accompany SD documents?
The pro forma did not include this line item.
The building design and estimate lacked any finishes. The
developer had contracted with the design team for a ‘cold’ shell.
What is a ‘cold’ shell and how does that compare to a ‘warm’ shell?
The tenant improvement (TI) design work would have fallen under
the responsibility of a tenant if the developer had retained control of
the building. The design fee for the finishes and the cost of the TI
construction was not included in any of the estimates.
Mechanical, electrical, plumbing, and fire protection scopes were
all to be DB and would have also been the tenant’s responsibility.
Only very rough service connections were shown in the documents
and allowed for in the GC’s budget.
Our business owner buyer was also planning on occupying Tower
A, therefore there was not a separate tenant. Where is the estimate
for the TI costs, or finishes, for the buyer covered?
The geotechnical report indicated the water table was only five feet
deep, yet the garage required a 15-foot excavation. The GC had
excluded dewatering.
The GC’s estimator also excluded taxes and many soft costs such as
permits and inspections, but these would eventually need to be paid
for by the property owner. They were not on the pro forma.
We could go on and on but you see where this is going. The CM provided
narratives, evidence, and potential costs for all the above and more to the
potential buyer. Guess what happened to the pro forma when these costs
were plugged in? Did it still pencil? Should the buyer walk away at this
point? He had spent several months performing his due diligence study and
$50,000 of unrecoverable soft costs. Should the two parties renegotiate?
Postscript: The buyer walked away from this deal. The seller was very upset
as the property had been tied up and no other buyers had come forward. All
the design team lost a project. The GC lost a job too. Yes, their budget was
full of holes, but was that their fault? Should they have practiced precon
due diligence and either plugged these holes or flagged them as exclusions?
Were they laying in the weeds and planning on change ordering the new
buyer? Could any of the precon parties be liable from either the buyer or
seller? Because of the CM’s investigation he also lost a potential
construction project. Why do you suppose he did not just look the other
way? What would have happened if he had done just that, the deal went
forward, and the buyer was surprised with all these costs later on? Did he
ruin this deal for everyone? Do you suppose the CM and the
developer/seller are now buddies?
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Case study #17.3: To the victor go the spoils

It is understood that with the bidding procurement process and lump sum
pricing method, contractors take the bulk of the financial risk. If a $10 mil
project costs $11 mil, the contractor loses $1 mil. But if it costs $9 mil, the
contractor’s bid fee is secure and the extra $1 mil in savings is additional
profit. This is the risk-reward tradeoff inherent with bidding and performing
lump sum work. Some project owners and contractors prefer this approach
and others do not. Have you been on a lump sum project? Did it make
money?
But if a project is negotiated and either a cost-plus or guaranteed maximum
price (GMP) pricing method is used, who has the risk and who receives any
reward? In a pure cost-plus scenario, the owner has both. But in a GMP
project the contractor protects the owner from cost overruns (risk) and both
parties typically share if there are savings. Have you been on a GMP
project? Were there any savings? GMP projects are typically open-book and
subject to audit by the owner. What happens if a contractor has material
savings as discussed in the next two examples?
A. A 1,000 LF covered wood frame walkway was designed and built
by the general contractor (GC) to temporarily allow the client’s
customers to safely walk between the parking garage and the open
casino. The contractor chose all Douglas fir #1 heavy-timer framing
materials for the structure. They wanted it to look good and be safe
– what the heck – the owner was paying for it! (sarcasm) At
completion of the project the contractor carefully deconstructed the
walkway. What is the difference between deconstruction and
demolition? Which is more sustainable? But instead of turning over
thousands of board feet of timbers, the contractor loaded it up and
took it home. Can they do this? Who owns the lumber? Should the
GC repay the owner? What does the contract say?
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B. After removing topsoil for a new parking lot this GC discovered a
literal gold mine of clean gravel. They consulted with the
geotechnical (geo) engineer and since a building was not planned
for the site, both parties agreed the gravel could be excavated and
exported and replaced with less-expensive imported select backfill.
They were not substituting bad dirt for good dirt, but rather great
gavel with good dirt. Should the owner have been consulted at this
time? Doesn’t the geo typically work for the owner? The contractor
dug a hole 20’ deep and 200’ in diameter. It seemed there was no
end to the good gravel. The excavation stopped the day the agency
owner’s representative (rep) made his weekly jobsite visit. What do
you suppose the owner’s rep said to the GC’s superintendent? The
contractor of course sold the gravel at three times the value of the
import, including covering for equipment and trucking costs. Can
you figure out how many cubic yards were involved here and at
reasonable material prices, what their profit was? Was this legal?
Was it ethical? Should the owner’s rep look the other way? Should
the GC pay the owner? Would it matter if this were a lump sum or
GMP project? If it were a GMP project, might the over-excavation
equipment cost also have been rolled into the cost of the new
parking lot, essentially part of the cost of the work? Do you know
what a ‘borrow pit’ is?
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Case study #17.4: Architectural preferences
This author once heard a prestigious architect at a college commencement
tell the new graduates: “You must stick to your ideals and be willing to
walk away from a project if your client does not accept your design
proposal.” Do you believe that it is ‘my way or the highway’ when it comes
to design work in the built environment? Sure, designers should recommend
what they feel is best and potentially influence or politely insist. But aren’t
we all, as builders and designers, here to satisfy our clients? The next four
examples represent extreme approaches to architectural influence.
A. An award-winning architect who was designing a boutique
restaurant knew her clients. She knew that the owners and operators
were 90% female and small in stature. Unbeknownst to the owner
or the preconstruction contractor, she chose a custom kitchen
cabinet and shelving system design that was two inches lower than
standard. Her interior design color boards had two totally
unacceptable groupings of materials and colors and one which was
her favorite. Guess which one the client approved? Was this ethical?
She also specified custom appliances which cost twice that of
conventional appliances and were also shorter. The owner pushed
back and demanded commercial size and grade restaurant
appliances. When all the materials were delivered, the appliance
and cabinet heights did not match. The architect’s position: “I
thought this would be better for you.” The client had to pay their
contractors to build custom bases for all the cabinets and lift them
two inches. Case study #4.4 is another example of when the
architect felt he knew better than the client – and in that case he did.
Are there subtle differences between: Present, recommend,
influence, push, insist, and/or demand?
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B. Another smaller architecture firm in town had a very successful
business. Grandfather, father, and now daughter proprietors worked
with many repeat speculative developers. Their clients knew the
real estate development business and the architect drew what the
clients wanted. The architect knew what was a) necessary to gain
city approval, b) sufficient for a guaranteed maximum price
estimates and contracts, but not lump sum, and c) detailed enough
to get competitive subcontractor and supplier pricing. Is this
company selling itself short? Are they violating the design
fraternity creed (likely no such thing – I hope I didn’t offend
anyone)? The GCs enjoyed working with the architect as well
because many details and material selections were left to the
contractor’s means and methods choices. This architectural firm
didn’t receive many awards, but they enjoyed their success with the
built environment community they worked with. Were they wrong?
Were they not as good or as strong as architect A above? Should
they have imposed their design creativity even if it caused prices to
increase or impact the developers’ ability to lease or sell?
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C. Another sole proprietor architect did not personally interface with
his clients or contractors much. He seldom attended coordination
meetings or visited the jobsites. Should this be a requirement? He
communicated mostly through email and occasionally via the
telephone. A lot of his design creativity came from searching the
internet. He even applied for building permits online. On a
downtown tenant improvement project he specified several custom
high-end materials. He found light fixtures and motorized window
blackout shades that were not carried by any local supplier. What
can be the advantages to ‘buy local’? The products were from an
overseas vendor. The contractor complained and attempted to value
engineer these specialties, but the architect did not approve. The
material arrived three weeks late to the site and upon inspection by
the electrical subcontractor, did not have an Underwriters’
Laboratory (UL) sticker. What is a UL sticker and why is that
important? Will the city or Labor and Industries approve materials
or equipment without a UL sticker? When the GC notified the
architect, he said that it was up to them to get stickers added in the
field. Is this possible? What is the process? What will it cost and
who will pay?
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D. This is a similar situation to architect B, but to a different degree.
This one developer knows exactly what he wants to build. He
directs his architect what to draw and how and quantity of sheets
and level of detail of specifications etc. On one project he actually
obtained a rendering form another (former) architect and gave it to
his new architect and told him to replicate it. Is that legal? Is it
ethical? This developer would go so far as to tell his design team,
including engineers: “Draw what I tell you”. This is obviously the
exact opposite of the commencement speech discussed earlier. I
doubt many architects would say this is why they went to college
and this is how they want their careers to be remembered – drawing
what others told them to. How would you react? Would you work
for this developer? What if he paid well?
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Is there a fair balance that can be reached here? Can a designer be creative
but still appease the project owners and contractor’s interests? Propose a
compromise approach. Prepare a scenario where architect A is right for a
particular project and another for B, C, and D. If you could recommend one
change in approach for each architect, what would it be?
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Case study #17.5: Oh rats!
Maybe it is a secret, maybe not, but some biotechnology (biotech)
companies use live animals in their experiments. A general contractor (GC)
had been the successful low bidder on a biotechnology remodel project. The
two-story annex building, apparently utilized for storage, was to undergo a
major renovation. Both floors were to be built-out as state-of-the-art
laboratories (labs). The existing flat tar roof was to be removed and an
additional third floor would be added. This third floor would house all the
mechanical and electrical equipment including boilers, chillers, fans,
pumps, switchgear, and emergency generator. Some of the owner’s process
equipment would end up on this new utility floor as well.
The roof removal, new structural steel frame, metal siding, and new built-
up roof were all scheduled for August to minimize potential weather
damage to the new lab finishes work occurring in parallel on the two floors
below. All was proceeding according to plan until an unexpected
thunderstorm hit the city over a weekend. Although much of the new roof
and siding was in place, the roof drains and flashing had not yet been
completed. Water entered the new space and caused damage to the finishes,
especially the drywall. Should the GC have staffed the project 24-7 just in
case a disaster happens?
The GC’s project superintendent and project manager (PM) were assessing
the damage first thing Monday morning and developing a plan for repairs –
this was all manageable. The owner’s representative appeared from the
building next door and he was very upset about the water damage. He
informed the team that they had killed six valuable laboratory rats in the
basement below. The GC’s team didn’t even know the building had a
basement, let alone it was occupied, apparently including rats. He said the
lab rats were worth $10,000 each and the GC would have to pay this as a
consequential damage and he wanted a separate check for it by the end of
the week. Why did he want a check? If the contract did not specifically
address consequential damages (or loss of business damages) is it assumed
to be included or excluded? Needless to say the parties disagreed. Some of
their points, in relative order included the following:
From the GC:
The unexpected rain storm was an act of god and therefore not
the GC’s responsibility. Is this true?
The owner was to carry property insurance (AKA builder’s risk
insurance) for cases such as this, and the GC’s interest, as well as
that of the rats, should be covered under that policy. Have you
ever seen a copy of the property insurance policy on your
project? When should the contractor have asked to review that
and who should have reviewed it on their behalf?
The PM asked the owner’s representative for a copy of that
policy that morning, but the owner refused to comply. Does the
PM have a right to see it? Why did the owner refuse? Can he
refuse?
From the PM: “$10,000 is a ridiculous price for rats. You can
buy them at the pet store for $5 per each.”
The GC was not planning on making a claim against the owner’s
insurance policy and would pay for the lab floor cosmetic repairs
out of savings generated from their structural work. They felt
this was a fair compromise. Should you ever compromise when
you are confident you are correct?
From the owner:

The GC was negligent by not making the building 100% water
tight before they went home Friday evening. Negligence is a big
term in construction. Can it be proven? Did the GC have this
responsibility under standard contract terms?
The value of one rat is not just for that one rat, but the long
history of generations of rats, and associated experiments, and
documentation that went into where that rat was in the current
experiment. It is the rat’s lifeline that is worth $10,000. The
GC’s PM thought, “Didn’t the rat have brothers and sisters with
the same bloodline?” But his superintendent put his hand on the
PM’s shoulder and held him back.
Rebuttal from the GC:

The GC didn’t even know there was a basement or animals
below – the owner had not shared that knowledge and it wasn’t
reflected in the contract documents. Can the contractor claim the
owner on this basis?
The PM asked to see the basement and the dead rats but the
owner refused because it was a highly secured area. Can the
owner refuse the GC’s request?
The GC’s PM needed to confer with the home office. Would you
do this as well?
Rebuttal from the owner:

If he didn’t get a check by Friday he would withhold this amount
from the next pay request. Could he do this?
If the GC didn’t pay up, the owner threatened the GC would not
get future projects on this campus. Do you suppose the PM or
superintendent cared at this point?
Later from the GC:

The PM reinforced that the property insurance should pay for
these losses but the owner said he was not going to make a claim
against the property insurance, supposedly to keep rates down.
Could there have been another reason?
After meeting with his supervisor the PM indicated they would
file a claim with their own insurance company, but they would
need to see evidence of the dead rats or at a minimum
photographs of the rats. The owner declined and said the rats had
already been destroyed and no photographs were taken.
The PM could no longer restrain himself and asked if the owner
had yet heard from the animal rights activists or the newspapers
as surely word of this catastrophe would get out. Was the public
aware they were performing experiments on live animals at this
campus and underground?
Later from the owner:

They were not going to pursue a claim against the contractor but
they better be more careful next time. Why did he do that? What
was his motivation?
Even though the documents did not show or require temporary weather
protection, isn’t that understood to be the GC’s responsibility? Where do
these types of estimated costs (if they exist) show up in an estimate?
Couldn’t the GC have just passed this type of liability on to its roofing
subcontractor?
How do you feel about animals being used for laboratory experiments? This
author has a lot of lab experience. He has seen an entire floor of beagles
below ground, none of which will ever see the light of day. Another lab
client located in a very rural and unpopulated area keeps cows and sheep
and monkeys in outdoor cages. There are arguments either way. But rats are
not beagles.
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Case study #17.6: LD favors

This general contractor (GC) prides themselves on customer service. They
have done a dozen negotiated projects with this large aerospace client, all
successfully. The client, or project owner, also does negotiated work with
other contractors. They feel the need to spread the work around. Every now
and then the client requests competitive bids from its cadre of GCs. They
feel this is necessary to keep the contractors’ pricing competitive and not
become overly comfortable. Most of the contractors play along with this
and go after the bid work competitively, but not too low as they do not want
to engage in a change order battle with this preferred client. On this
particular $8 mil project the GC’s project manager (PM) was directed to
make a fair fee but not to offend the client. The project was proceeding as-
planned and she had absorbed a few minor changes primarily associated
with document discrepancies. The owner provided a substantial addition to
the scope, doubling the size of the project to $16 mil (every GC’s dream?)
but holding to the same schedule requirements which included a $25,000
liquidated damages (LDs) clause. The project manager (PM) asked that the
LDs clause be waived in light of this large addition, but the in-house
owner’s representative (rep) indicated it is a corporate requirement and
beyond their control. Everything else continues along as-planned.
This owner typically employs several suppliers and a few subcontractors
direct. This is never a problem when the work is negotiated, the GC simply
adds another foreman and/or project engineer to coordinate the work. But
on a lump sum bid project the PM cannot afford additional jobsite general
conditions staff members. On this project the owner has trouble with several
of their vendors meeting schedule requirements. The PM notes this in the
weekly coordination meetings, but no action is taken. The PM again
requests that the LDs clause be waived but the owner’s rep puts her off.
The GC needs to work four Saturdays at the end of the project to
compensate for these delays. She submits a $15,000 change order proposal
(COP) to the client for the overtime premiums, documenting the reason is
due to the owner’s vendor delays, but this is rejected. Her documentation
indicates the GC is actually due an additional 15 work days due to these
delays. The project ultimately finishes four days late and the owner imposes
a $100,000 LDs penalty. The PM discusses the situation with her home
office and has prepared all of the backup. She has also prepared an Eichleay
formula claim to collect loss of home office overhead and fee potential. Her
boss directs her to back down and her final fee will be impacted by both the
$15,000 COP and $100,000 in LDs. She is thoroughly dejected. Other than
these two related issues, the project was finished with acceptable quality
and safety controls. Was her boss correct? Why did they not pursue the
claim? How could the PM have been more forceful during the course of
construction? Should the contractor refuse to work with this client again?
What would have been a fair compromise on the part of the owner? Why do
owner’s reps from some large clients, including public clients, refuse to
negotiate at the project level? Would the client have removed the GC from
its preferred list if a claim had been pursued? See also case study #1.4.A to
find out ‘the rest of this PM’s story’.
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Case study #17.7: Design-build accountability

The design-build (DB) contracting methodology has been around for
centuries. The old term ‘master-builder’ applied to the party (usually a guy,
sorry gals) who not only designed the project, but also built it and maybe
even financed it. They designed as they went and didn’t have to answer to
anyone, including owners and building code authorities. If you wanted the
‘master’ to deliver you a project, you had to take whatever he had in mind.
Public agencies in the last century have preferred the design-bid-build
procurement system. This allows the most participants, is intended to avoid
public corruption, and should provide the lowest cost to the tax payer…but
does it really? The public system is fraught with lawsuits and expensive
dispute resolution methods. The DB procurement system has again come to
the public forefront as a way to avoid disputes, and still allow the public a
competitive low-cost project. Did it work in the following case study?
The arid southwestern town of Drygulch has been short of water for
decades. The river they once used for a public water supply has been
polluted by cattle ranching. The solution is to drill several deep wells and
pump the water into a large, perfectly round, one million gallon water
storage tank that could pump 250 gallons per minute and would be located
on a hill above the town. The request for proposal (RFP) would eventually
only reference these general performance requirements.
The building official in Drygulch, Bart Bellows, who is also the local
blacksmith, has not built many storage tanks of this size. He has quite a bit
of experience with used bathtubs in his cousins’ cattle fields though. Mr.
Bellows recommended to his three cousins who are the city council
members, that Drygulch take advantage of the new law which allows cities
to use the DB procurement method for projects over $10 million. Bart’s
sister Beulah is the town attorney and she has reviewed the new law and is
convinced Drygulch is exempt from public bidding. Is she correct? Bart’s
mother, Betty, the city Clerk, feels the city can finance the tank by taxing
the unofficial backroom casino revenues and future increased water rates to
the ranchers so that they will not need to pass a bond. Is she correct? Why
didn’t they just impose a mitigation fee on the ranchers? Bart use to watch
the television show, Petty-Coat Junction, so he also is familiar with the
design and construction techniques needed to build such a tank. He decides
to be both the owner’s representative and building inspector to save costs.
There may be a few conflicts of interest in this set-up (list them out), but if
the DB delivery approach pays off as advertised, Drygulch doesn’t feel
there will be any questions raised.
Wet Your Whistle (WYT) Construction Company has been marketing Bart
for quite some time. They have done some of the local ranchers’ irrigation
and septic systems and seem to Bart to be qualified for this project. They
turn in a one-page proposal letter indicating they can build the tank
according to the specifications included in the RFP for $25 million, which
is a bit more than Betty had figured, but she is considering opening the tank
up as a swimming pool during the summer to help with the costs. Bart saw
that trick on Petty-Coat Junction. WYT’s proposal included a detailed five
line item estimate, and three schematic drawings, two elevations and a plan
view. The details of the estimate are as follows: Foundations $5 mil, tank $5
mil, equipment $5 mil, liner $5 mil, and fee $5 mil.
Bart read in a construction management (CM) textbook that inclusion of
contingency in estimates was a way to protect the owner from change
orders and claims, so he insisted WYT increase their estimate by $2 mil.
What is the appropriate contingency in a DB estimate? Who typically
controls a contingency fund? Martin Mathews, the proposed project
manager (PM) for WYT signs a lump-sum DB agreement with Drygulch’s
mayor, Barney Bellows, who is also Bart’s uncle. The A101 contract, with
modified A201 general conditions attached, was originally drafted by the
GC’s PM Martin. Bart was very clever and made sure the agreement
referenced the detailed estimate, WYT’s proposal letter, and the drawings
all as contract exhibits. If there are conflicts in contracts, who is at fault, the
drafter or the recipient? The city building official’s goal was to make sure
everything was in there to avoid any potential conflicts. He also added a
$25,000 per day liquidated damages (LDs) clause to make sure WYT
finished within their 11 month proposal. WYT insisted on a clause that
indicated that as further documents became available during the design
process, they would be incorporated into the contract via change order, as
well as a $10,000 per day bonus if they finished the project earlier than the
contracted completion date. Both parties signed the contract.
The city had also heard about design review boards (DRB). They set up a
DRB (DRB also stands for dispute resolution board) which included all of
the aforementioned Bellows and the esteemed city council. One of the
council members, Barry Bellows, also has a business card which reads
‘Architect’. Although Barry did not pass the state exam, he did attend the
highly acclaimed local community college and took classes from the
architectural department for 3 years. He has designed many of the local
barns and the filling-station. It is important that DRBs include at least one
design professional and Bart was happy to have Barry on the team. Are you
keeping up with your organization chart on this project? The DRB insisted
that WYT incorporate the following design changes: (a) Paint pink and
green tulips on the tank, (b) Include a removable diving board for Betty’s
summer fundraisers, and (c) upgrade from a standard to a supreme
waterproof membrane on the interior walls and the floor to make sure the
tank would not leak. WYT asked for a $3 million change order for the
DRB’s requests and an additional two months to their schedule. WYT had
their schematic drawings updated to design development level, which
reflected these requests and added a reflected ceiling plan, room finish
schedule, and the two remaining exterior elevation drawings. Specifications
were ‘forthcoming’. The city approved and change order number one was
executed. The building permit was issued based upon these current
documents.
WYT of course was not a true design-builder. Very few firms are. Their in-
house management team included all CM graduates but no licensed
architects or engineers. They took the point on a joint-venture arrangement
with a small local architect from Lancaster who also employed civil and
structural engineers, landscape architects, and interior designers. They had
all the bases covered and marketed themselves as a one-stop design firm.
The name of the firm is ‘Architects-In-Lancaster’, or AIL. It turns out that
none of AIL’s employees actually have any professional stamps; they hire
that out if needed, which this JV agreement and the contract with Drygulch
apparently don’t mention. AIL also contracted with design-build
mechanical and electrical contractors, who were in fact, licensed engineers.
The JV agreement indicates AIL is to receive their actual incurred
mechanical and electrical construction costs plus $2 mil of the quoted $5
mil fee for design, plus 25% of any overall construction cost savings. AIL
and WYT would later enter into a home-grown complicated three-party
agreement with a large pre-engineered tank manufacturing firm from Brine
Bluff, Utah, who stamped the tank drawings with their Utah state
engineering stamp. None of the design firms carry errors and omissions
insurance. Should the owner have required this? I trust you are keeping
track of all of the parties and their contractual relationships and cost and
schedule facts.
Three months pass and all is proceeding according to schedule. There have
not been any further change orders and all the parties are getting along well.
Additional construction drawings for the foundation, tank, equipment, and
liner have all been prepared and copies forwarded to the owner for their
information. The DB GC’s PM, Martin, repeatedly told the city there were
not any increased costs and therefore did not bother with a formal
incorporation of the final documents into the contract. The city was happy
with this approach, as they had heard about the dangers of change orders.
But as is the case with many complicated projects, all does not finish as it
starts as reflected in the following updates.
A. Bart unfortunately falls sick and the city reluctantly hires an
owner’s representative (OR). OR immediately requests copies of all
of the contract documents and is a little disturbed about the lack of
formality with the agreement, the owner’s expectations, the
contractor’s commitments, and the design documents. OR takes
daily visits around the tank and began to see what looked like value
engineering, or cost cutting, from the contractor. Some of the things
he noticed included: The tank was supposed to have a vapor barrier
layer under it, but it was not installed. Number four reinforcement
steel had been installed in the foundations in lieu of number five.
The 6,000 psi concrete noted on the structural drawings was
achieving only 4,000 psi at the 28 day breaks. The lesser sacks of
cement not only saved money, but they greatly improved the
schedule. The fiberglass diving board was actually a Douglas fir 2 x
12, which had been used as a foundation form. The liner was
ACME 101, which was not specified and one of the cheaper
products available on the market, at $5/SF of surface area, but
labeled as super-superior-supreme on their web page. OR could not
find any meeting notes, submittals, RFI’s or change orders which
would have allowed the contractor to take these short-cuts. OR had
worked with Martin prior and did not want to blow the whistle on
him, but he was also worried about his liability if he overlooked any
quality, safety, or design oversights by the designer-builder. Could
the owner hold OR responsible if he missed anything on the
jobsite? What if he knew about a glitch, but chose not to take any
action? Do owner’s reps carry any insurance?
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B. OR asked his old friend Martin, the GC’s PM, whom he had known
since high school, under who’s authority or approval did he have to
change the design. Martin responded that this was a performance-
based design-build contract, and the city was getting exactly what
they had requested. OR requested actual cost backup to see if WYT
was under-running their estimate or how the contingency funds
were being allocated but Martin told him his office would not allow
any open-book review on a closed-book job. Is he correct? OR
confided in him that he was worried about his own personal
responsibility with these goings-on and that Martin needed to cover
him with some paperwork. Martin then sent through several RFIs
and submittals to the design team that worked for, or joint-ventured
with, WYT who rubber-stamped them all approved. Is this
acceptable? Where are the checks and balances with a design-build
project? Eventually the project finishes one month ahead of
schedule utilizing the same 20 man crew throughout as estimated.
WYT requests a bonus for finishing early but the city has indicated
that they did not really intend on charging LDs if WYT finished
late, and the two-month extension they received was not justified,
so the bonus clause in change order number one is invalid. If both
parties sign a contract change order, can one party later withdraw
their approval or can they enter into a renegotiation? Do contractors
actually write a check for LDs if the project finishes late? Do
owners actually pay a bonus if the contractor finishes early?
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C. It turns out that there may be some minor punch list issues to
address, but WYT has demobilized and is forwarding all of their
calls to their attorney. The diving board broke and the swimming
fund-raiser isn’t working out for Betty. The tank has cracked and is
leaking and causing erosion to work its way down the field and
covering the councilman’s dairy ranch. The cause of the crack is
unclear. There was not a retention clause in the contract, so none
was withheld. There are not any close-out requirements stipulated
so the city does not have as-built drawings or O&M manuals to
compare anything against. The rancher sues the city for $1 mil. Isn’t
he suing himself? The liner subcontractor was short-paid by $1 mil
and liens the city and is threatening to foreclose. Can they do that?
Drygulch did not receive any interim or unconditional lien releases
from any of the parties and did not request performance and
payment bonds. The city files a claim against WYT for $5 mil to
cover claims against them and the estimated costs of repairs.
Drygulch hired an estimating consultant to provide backup for their
request. The city also files a claim against OR for $500,000, for
missing these obvious design and construction errors, which was
twice his fee. Is that reasonable?
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D. Drygulch separately sues AIL for $2 mil on the basis that their
documents were not stamped, they did not perform field
inspections, and they did not run submittal approvals past the DRB.
Drygulch also claims it is illegal in this state to call yourself an
architect if you haven’t passed the state exam. Is this true? WYT is
happy to step back and allow this direct lawsuit. Can they do that?
WYT reports to AIL that they have spent their entire budget and
there is not any savings. AIL hires a professor from the local
community college to come up with a guestimate of actual costs.
How should actual expenditures be validated? What are typically
consultants’ limits of liability? Can WYT pass their claim on to
anybody? Will Drygulch be able to call any family members to the
stand to testify against each other? Is DB the solution for all
projects? How can DB be more ‘water-tight’?
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Case study #17.8: When is a CM not a CM?

Capital City School District (Capital), is about to undergo their largest
construction project ever; construction of three brand new schools (two
elementary schools and one middle school) and remodel of one other
elementary, the other middle school, and their only high school. A total of
six projects all at the same time. They do not have the in-house staffing
available to manage this work, so they employ the largest most qualified
construction management (CM) firm in the state to do the work. This firm
does not hire contractors, designers, or craftsmen, rather they usually
recommend to an owner what construction and design teams should do the
work, and they act as the owner’s representative (rep).
A. CM borrowed from several old state contract documents and
created an agreement between themselves and Capital. The cost of
their management services was a guaranteed maximum price
(GMP) of $500,000 to be billed hourly. The total estimated
construction cost was $10 million, but the CM did not base their fee
on this figure. The agreement referred to CM as “The Construction
Manager” and listed some of their scope as: Solicit and obtain the
services of an architect, oversee the architect’s design efforts,
provide constructability reviews, perform value engineering studies,
prepare a request for quotation (RFQ), obtain bids from contractors,
review bids and make a recommendation to Capital, assist Capital
with preparation of contracts, supervise the construction project,
provide general quality control review, pay request and change
order review, and assist with close-out…general stuff. Are they
really a construction manager? What kind of CM are they?
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B. CM only received a proposal from one architect, a firm who was
highly qualified with school design and a firm CM had worked with
successfully several times prior. Their company is known simply as
Arch. CM drafted an agreement for Arch, again borrowing from old
state documents. Standard AIA agreements were not used for any of
the parties. Arch’s agreement includes all of the standard
expectations and stipulates a fixed fee at 10% of estimated
construction cost, or $1 million. Is this a fair way to determine
design fee? Is this a fair fee? Capital and Arch sign this agreement.
CM does not sign or initial any of the documents, in fact CM’s role
is not mentioned in this or any other agreement that CM drafts.
Who is responsible if there are any design errors on this job? Now
might be a good time to draw an organization chart for this project.
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C. During the design phase, Capital and CM and Arch are all working
together as expected. The owner remains a very active participant,
despite hiring a CM, and continues so throughout construction. CM
prepares very formal design reviews, noting recommendations to
save cost and improve constructability. Many design errors are
discovered and resolved, which should help minimize future change
orders. CM develops three different such documents, with a total of
1,000 entries. The owner does not provide any written reviews.
During the design process, Arch and their second-tier sub
consultants are not playing very well. The electrical engineer is
eventually dismissed. Many of CM’s review comments do not get
incorporated in subsequent design issues. The owner and CM did
not play a role in sub consultant short-listing or selection. Should
they have? Could they have required this? Do architects have
favorites? Do general contractors (GCs) have favorite
subcontractors?
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D. All school projects have to be complete by September 1 in this
state. These six projects are estimated to take a year of construction
time, plus one month of bid cycle, so the CM schedules letting the
RFQ in July the year prior. The design team is not quite there with
their documents but the RFQ is sent to the seven GCs requesting
bids. During the two-week bid cycle the design team produces a
300-page revision. Is that a reasonable size of addendum? This
architect prefers to put very little on the drawings, but rather uses 8
½ x 11 pages of detailed sketches. Many of the same generic
drawings are used on all six projects; in fact many have been used
on other schools. The drawings then refer to a 5.5 inch thick sketch
book. Many of the sketches do not apply to this project; they are
just a conglomerate of the old ‘sticky-backs’. The addendum also
includes several sections of specifications not included with the
original RFQ, and three sets of specifications and cut sheets for
equipment the owner is going to purchase and the contractor has to
coordinate. What does a typical set of for-bid documents look like
on a public works project? How does that differ from a private
negotiated project and why the differences?
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E. One of the seven bidders is a small-time local contractor. Their
largest projects thus far have been a series of You-wash car cleaning
facilities and custom homes, with a total annual volume of $5 mil.
The small GC’s chief executive officer (CEO) is well-known and a
well-liked member in the local community, with connections on the
school board. He has never worked with CM or Arch prior. The
GC’s catchy name is Small-Time Projects, or simply STP. Public
work rules allow anyone who can pay for the drawing set to bid on
the job. They did not ask any questions at the pre-bid meeting or
during the bid cycle. As happens often with public projects, an
unqualified contractor ends up as low-bidder and this was also the
case with STP; in fact they were at $9.5 mil, just under the budget.
The next firm was at $11 mil, with the 3rd and 4th bidders both at
about $11.1 mil. What do you think the right number was? How
low should low be? Most owners feel that within 10% is
competitive. Is that true? CM met with STP and tried to get them to
pull their bid. Can the owner’s agent do this legally? CM reportedly
wrote a letter to Capital, and recommended that STP be
disqualified, but during ‘discovery’ no one seems to have kept a
copy of that letter. STP gets the job. The one-page bid form filled
out and signed by STP on bid day is the official construction
contract. It refers to the ‘contract documents’ and the general
conditions in divisions 00 and 01 of the architect’s specification
book. There is no mention of CM’s role in any of these documents
either. The contract stipulates $1,000 per day liquidated damages,
with no bonus for early completion. How do bid bonds come into
play? Can a low-biding contractor be technically and legally
disqualified (DQ’d)? If they are DQ’d, will STP then have grounds
for a lawsuit? If they are awarded the project, will the second bidder
have grounds for a lawsuit?
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F. The first sign CM had that STP was going to have difficulty was
their inability to provide a construction schedule. CM actually had
to provide the GC with scheduling software. The detailed critical
path schedule required in the contract from the contractor ends up
as a very summary level one-page 8 ½ x 11 bar chart with all six
projects included and no indication of any critical path. The GC’s
project manager (PM) had never worked on a commercial
construction project prior. Can the owner reject the contractor’s
personnel on a lump sum bid job? Construction proceeds fine for
about the first three months, and then the change orders begin to
roll in. With every change order, STP requests additional contract
time and extended general conditions. For example the cost to move
a door due to a design conflict is $200 in material and $200 in labor,
plus three-weeks in schedule extension and $5,000 in jobsite
general conditions. The bid form filled in by the GC indicates 10%
total overhead and fee on changes, but they request 20% (10% +
10%) on top of the above for each submission. The GC also filled in
a figure of $100/day general conditions costs for proven schedule
impacts on the bid form. The CM routinely marks up the changes,
approving all the direct and subcontractor costs requested with the
contracted bid markups, and rejecting the schedule and extension
costs. There will eventually be 750 change requests processed, 250
of which are rejected outright under advice from Arch that the work
is adequately referenced “in the documents”. What is a fair change
order process? How can a project owner ‘control’ the amount of
markups GCs and subcontractors include on change orders? How
can reasonable or ‘actual’ labor and material and subcontractor
pricing be verified? Can anyone (architect, owner, owner’s rep)
physically modify a GC’s change order? Can a GC do this to a
subcontractor?
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G. Complicating this mess are the three specialty vendors selected
solely by the owner: Fried Kitchen Equipment, Sonics Sports
Courts, and Homeland Security Alarms. None of this work is
designed, delivered, installed, or coordinated very well. Who should
take the lead on this? During construction, there is not one
workshop or special meeting to address any of these coordination
problems. Purchase orders (POs) are drafted by CM for Capital to
sign. Should specialty vendors enter into contracts direct with the
project owner or should their costs be run through the GC’s books?
Who is responsible for performance? Should POs be the vehicle to
contract with specialty vendors who also provide field labor or
should they use subcontract agreements? How are issues such as
insurance, safety, labor unions, and security addressed?
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H. Here are some additional facts in this case that are important in
resolving what is likely going to end up in a dispute:
The submittal process is fine for all concerned.

There are not any serious safety accidents.
The quality of the work is relatively acceptable, except the
owner’s vendors are still in there today tweaking their systems.
Weekly meeting notes are available in the files, but they make no
mention of any difficulty by any of the parties. They read as if
all parties are functioning in a collaborative fashion.
There end up a total of 500 requests for information (RFIs) on
the job, many having to do with the owner’s vendors and Arch’s
sketch book. The GC will later claim that it was more like 3,000
because some of the questions applied to all six schools. Some of
the RFIs may be superfluous or duplicates.
CM hardly produces any paperwork, other than change order
reviews.
There are not any RFI, submittal, or change order logs included
with the notes or in the files, until after the claim is submitted.
STP’s claim consultant prepares detailed post-project RFI and
change request logs.
The claims consultant will also later submit a very detailed 1,000
line item schedule to prove how the RFIs and change orders
affected the contractor’s productivity and ability to finish on
time. The cumulative effect of change orders (and RFIs) will be
a point in their ultimate claim presentation.
The GC fires three subs and four others quit on them during
construction.
Capital routinely visits the jobsite without CM and gives
direction to STP and Arch without documentation.
STP goes through three PMs.
STP requested a total of $5 mil in change orders during the
course of construction, of which only $750,000 are approved by
CM. Capital and STP will both sign the changes, not CM. The
GC’s CEO adds a note on the bottom of every change request
indicating they reserve their rights to claim for more money and
time later.
The GC’s CEO gets very involved half-way through the project.
He routinely writes five letters and 10 page-long emails daily to
all parties concerned, including the school board and local city
council. His language is not very professional and often
inflammatory. Most of the parties do not respond to these
complaints.
The CEO begins to hire claims consultants around month 11 and
copies them with correspondence and occasionally brings them
to weekly jobsite meetings. STP will eventually have 10
‘experts’ to provide reports and depositions.
The CEO meets with the school board at the local country club
and discusses the job and complains that the big city architect
and CM are beating him up.
The job actually takes two years.
STP declares bankruptcy at job completion.
The GC, under advice of their consultant, file an official claim
notice at month 25.
Capital is forced to rent portable classrooms at a cost of
$200,000 for the extension.
CM visits the job once weekly. They overrun their GMP by
$200,000 due to the extension.
Arch requests $350,000 in extra services due to all the RFIs and
schedule extension, but this is denied by CM. They are looking
to Capital direct to cover their losses. They file a claim against
their client, Capital.
STP will also claim Capital an additional $10 mil, about the
same amount as was the original construction bid. This happens
in month 26.
STP will later cut a deal with Capital allowing STP to claim the
Architect and CM on behalf of Capital (pass-through) and in
return, Capital will drop their liquidated damages and portables
expenditures claims against STP, and STP received their full
retention. Are pass-through claims allowed?
Arch had gone through a formal design review board process,
with all the school board members and school principals
involved. When the claim is rewritten, Capital indicates they
didn’t like the design of the schools anyhow.
None of the subcontractors place liens on the job. Why is that?
The claim does not include any subcontractor cost. Is that
significant? Subs typically account for 80% or so of the
construction cost. It would seem they would then be 80% of the
claim, or would it?
Arch claims CM for $150,000 in damages for recommending
them for this project. But there is not a formal contract between
the two parties.
Capital eventually also claims CM for the cost of the portables.
CM is only looking for their last $25,000 pay request from
Capital and maybe recover their attorney fees for defending
against these claims, which they feel are all superfluous. They
want to keep Arch as a future client so they do not claim them,
and the GC has declared bankruptcy so why claim them?
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I. Prepare a spreadsheet showing original contract values for all of the
parties. Prepare another which indicates who is claiming who and
for how much. If all of these claims are filed simultaneously, with
the same court, what would be the judge’s first action? Are claim
resolution processes prescribed in the contract the parties should
follow? Place yourself in the position of an expert witness under the
employment of the owner, architect, CM, or GC. Pick one. Prepare
a three-point argument why you are correct. Anticipate the position
of the other side when you do this. Take the position of a mediator –
how might you get all four parties to reconcile? Take the position of
an arbitrator and make a firm irreversible decision in each of the
claims.
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Case study #17.9: Wood floor

One of the floor finishes in a high-end retail tenant improvement (TI)
project is Douglas fir end-grain. The owner instructs the architect that this is
to be a unique and award winning TI project and they expect nothing short
of spectacular! The specifications call for a sole source vendor out of
Canada for the product. The general contractor (GC) was chosen on a
negotiated basis and they in turn partnered with a flooring subcontractor
(sub). Neither the GC nor the selected sub have installed this particular
floor system before, but both have been involved in several high-end wood
flooring projects. Even though the project was negotiated, the owner
imposed a liquidated damages (LDs) clause on the GC but due to the GC’s
long-term relationship with the flooring sub, and the fact this was a
negotiated project, they did not pass on the LDs requirements. The
specifications (specs) call for the contractor to ‘match the architect’s
sample’. The architect’s sample comes from the same vendor as specified
so none of the parties anticipate any problems with the match requirement.
The only other specific requirements in the specs is that the sole-source
supplier is to provide all materials for installation by the GC’s separate floor
covering subcontractor including wood, glue, sandpaper, finish stain,
buffing pads; all described as a ‘kit-of-parts’ in the specs.
After being awarded the job, the GC requests submittals form all of its subs
and suppliers. The architect will not relinquish his sample to match so the
GC writes down the product number from the back of the sample and
forwards to their sub, to share with the supplier, for submittal. The
submittal comes back and is rejected by the architect because the finish
color does not quite match the sample. This process occurs three more
times, with the architect rejecting the revised sample with each submittal.
Now the GC is ready to finish the floors and there is still not an approved
sample. The LDs for finishing the project late are going to be costly, and the
contractor cannot afford to let the schedule slip. Ultimately the architect and
supplier (communicating directly) come up with a solution that they believe
will work. They agree that the best way to match the architect’s color
sample is to mix the stain and oil in the field in lieu of the supplier
providing the specified ‘kit-of-parts’. At first the GC and subcontractor balk
at the idea but in the end decide that the only way they are going to get the
floor finished and stay on schedule is to agree and proceed. The problem
will be resolved in the field.
Due to the very tight schedule, the GC pushes to proceed and finish the
floor over the Fourth of July weekend. It is not clear at this time who will
be picking up the overtime premiums. The architect, GC’s superintendent,
and installer meet on site the Saturday of the three-day weekend to work on
an acceptable finish. The supplier had a previous engagement, a parade, and
could not make it. Is the Fourth of July a holiday in Canada? After a couple
of test areas, the architect approves the in-place sample. Everyone leaves
except for the installer, who goes ahead and finishes the staining process
over the weekend.
On Wednesday, the architect comes back on site and comments that the
floor doesn’t look right – the stain looks more like paint than stain. He
rejects the entire floor. From conversations later with the supplier it turns
out the stain mixture ratio made up in the field is not what they had
recommended. After questioning the supplier as to why they told everybody
that it could be mixed up in the field, the supplier replies: “I didn’t know
you would deviate so much from the normally provided mix ratios” which
had not been shared previously – evidently it is a secret recipe. The supplier
turns out to be a friend of the retail owner and he remarks that the floor
finish is flawed and needs to be replaced immediately. The owner concurs
and directs the contractor to proceed with repairs. The floor finish is sanded
off and re-finished at a cost of $50,000. In addition, the GC incurred LD
costs of $15,000 for finishing late and the flooring sub spent $5,000 on
overtime premiums. The owner is also threating ‘consequential’ damages
due to the delayed opening. Draw a contractual relation organization chart.
Now add lines how this project had non-contractual lines of
communication. How could all of this been prevented? Be objective and
identify errors committed by all the parties, from the owner all the way
down to the supplier. Who should pay for the new finish? Who will likely
pay for the new finish? Should the GC be subjected to LDs?
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Case study #17.10: Wood i-joist

A. An investment company decided to enter into the lucrative real
estate development world. The residential market was very hot at
the time so they decided to build a seven-story 700 unit luxury
apartment project on a river. They did not engage in the services of
a professional owner’s representative. Their board was comprised
of four MBA graduates who tended to play everything loose and
make decisions as they went along. They first engaged the services
of a college friend who was an architect. That architect in turn
contracted typical engineering firms, including a structural
engineer. The architect talked the project owner into bidding this
project out to general contractors (GCs) so that they would pay the
lowest market price possible. Do bid projects always result in lower
costs than negotiated projects? Do private owners typical bid or
negotiate their work? What types of clients use the services of a
professional owner’s representative? Should any in the built
environment contract with friends or relatives?
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B. The successful bidding GC was a company which specialized in bid
work more so than negotiated work. They expected the documents
to tell the whole story, and if they didn’t they would be paid for
changes. They were not concerned with long-term relations as there
was always plenty of bid work available that welcomed low bids.
The GC had bought out all of their subcontractors (subs) and
suppliers (who also were contracted via bid pricing) and had
processed most of the submittals. The project had been proceeding
as-planned and the five story underground concrete garage was
complete and wood framing was ready to start. The framing
subcontractor (Framers) noted the wood i-joist did not have a
manufacturer listed in the technical specification book (specs) nor
did they see a call-out on the drawings. They had received two
prices for this material on bid day and chose the lowest supplier,
Brand X (BX) and forwarded their submittal to the GC for that
product. Upon review of the submittal, the GC’s project engineer
(PE) discovered a note on the concrete foundation bid drawings
which called for Brand Y (BY) i-joist or approved equal. Upon
notifying their subcontractor, Framers responded to the PE that this
was a better product and provided additional supporting
calculations. It was better than ‘equal’ in their opinion and therefore
is ‘approved’. The GC forwarded the submittal for BX as an
alternate with the engineering to show they are within 5% tolerance.
Can suppliers take exceptions to the bid documents? Why do they
do that? Isn’t the purpose of the specifications to call out required
manufacturers? What is the process to get an alternate product
approved and when is that supposed to happen? Should the GC or
the subcontractor provide a substitution request form?
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C. The submittal was forwarded by the architect to the structural
engineer (SE) without comment (or review) and the SE quickly
rejected it noting BX was ‘potentially’ an acceptable manufacturer
but the specific joist flanges submitted did not meet spec. The
framing sub submitted additional information reflecting BX with
saw-cut flanges did meet the specified structural requirements. The
PE held an on-site meeting with all the parties, including Framers,
GC, and the architect. The architect did not ask SE to attend as that
would have been an extra service. The architect said they felt the
BX brand joist would be acceptable (they have used them on other
projects) pending confirmation they meet the city’s requirements for
the fire-rated assembly. The city also was not at this meeting.
Framers promptly ordered i-joist as bid. It was clear to them BX
was approved at this site meeting. Do verbal approvals count? The
GC later submitted additional information reflecting fire-rated
assembly requirements would be met, but the city returned this
submittal stating they would not review until the SE of record had
approved the product. The subcontractor soon begins installation of
joist. They are being pressured by the GC’s superintendent to keep
the job moving. The architect and engineer get together and later
reject the entire submittal and revert to their previous stance that the
joist do not meet spec and are not approved. The project owner is
notified by the architect that there ‘may’ be a problem. By this time
the first floor of joist are installed and the sheeting has been laid
and wall layout for floor two is underway. Why do parties posture
like this? Do superintendents push to get a project moving,
regardless of process or contract? Do you believe in the phrase: “It
is easier to ask for forgiveness than to ask for permission”? Why
did the city not take a stand? Since the owner has contracted with
the GC and the GC with the sub, shouldn’t the GC just resolve this
in favor of the owner?
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D. Many letters and emails begin to flow from all parties. The owner
pressures the architect to approve the first floor as-is. The apartment
rental market has gotten even hotter and pre-leasing has been very
successful. The architect and structural engineer relent on floor one
but are requiring the GC and its sub to meet the requirements of the
contract documents on all upper floors and install Brand Y joist.
Here are some of their positions:
The project owner wants a credit for the BX alternate used in the
amount of $100,000. There is not backup to this amount, they
just feel the builders should be penalized. If they don’t provide
this credit, the first floor will require removal (even though the
architect has now finally approved in writing and the city has
accepted). How could this value have been substantiated?
The owner also threatens the GC with consequential damages if
the project finishes late. Can you have both LDs and
consequential damages in the same contract? Can they
unilaterally sue for consequential damages?
The GC claims the project was bought out based upon the bid
specs, and these did not list a particular manufacturer or flange
type.
Many material alternates were approved both prior to this
occurrence and throughout construction. The owner was always
looking to save money. The design team was not necessarily on
board with many of these substitutions. Did they set a precedent?
The framer is refusing to provide a credit to the GC and the GC
is refusing a credit to the project owner as they had chosen the
bid procurement method and the construction team is contracted
to the bid documents provided by the owner.
The framer claims BX met the structural requirements and since
that was what was included in their bid, the owner had already
benefited from a lower price. How might this have been
substantiated?
The project proceeds but updated drawings will not be
forthcoming with BX listed as an approved alternate.
The framer submits a change order request for $135,000 for the
change from BX to BY for the upper floors due to ‘restocking’
charges. They actually use both products on many of their
projects, but these joist had been fabricated to specific lengths
and will require modification to be acceptable for another
project. Does the project owner or architect approve this change
order?
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E. So, ‘who done it’? Who is responsible? The project owner? The
architect? The structural engineer? The general contractor? The
framing subcontractor? The subcontractor’s suppliers? The city?
Pick one and make a three-point argument why that party is at fault.
Place yourself in the position of another party. Make a three-point
argument why you are not at fault? Hint: There are many fingers in
this pie, as is often the case. Have you been on a project where
alternate materials were either (a) submitted, or (b) delivered and
installed without receiving approval for a substitution request? How
was that resolved?
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Case study #17.11: Estimating ethics

Ethics play a major role in construction management (CM) today. Ethical
business practices are required in all aspects of our industry. This collection
of ethical questions focuses around estimating – arguably the cornerstone of
CM.
A. Should a general contractor (GC) partner with a subcontractor and
agree to only work together in pursuing a project? Will other subs
still bid to the GC, and if their prices are more cost-competitive,
should the GC use them and ignore their informal partnership?
B. Would it be ethical for a GC and architect to have pre-bid

clarification questions, just between those two firms, and not have
the results documented in bid addenda available to all contractors?
Would your answer change if this were a bid or negotiated project?
C. Is it ethical for a GC to market the project owner or architect pre-

bid?
D. General contractors and subcontractors discover many
inconsistencies and errors in the bid documents when preparing a
detailed estimate. Should they hold back their questions until post-
bid or bring them up during the bid cycle?
E. Some contractors ask many questions during the pre-bid meeting.

Some contractors will not ask any questions until after the bid is
awarded. Other contractors will pull the owner or architect aside
during the pre-bid walk-through and ask questions one-on-one.
What are the advantages and disadvantages of each of these
scenarios and are these strategies ethical? Reference also case study
#6.17.
F. Is it fair for an owner and/or their design team to issue large

addenda the day before or even the day of a bid and expect that the
GC has ‘informed all bidding subcontractors and suppliers’ (or
similar language typically included in the addendum)?
G. Most contractors will diligently schedule their estimating process.

Most contractors would prefer to get the bid turned in and either
proceed with the project or move on to the next opportunity. But
there is always one firm which cannot seem to get organized and
will ask for a bid extension. Should project owners allow this?
H. Should a GC communicate with a potential owner on bid day or

vice-versa, should the owner communicate with the GC? What
might some of these communications entail?
I. A reverse bid action is where GCs post their bids electronically

with the project owner for all competitors to see pricing
simultaneously. Contractors then raise or lower their prices, not
necessarily based on the expected cost of the work, but to beat the
competition. Is this fair?
J. Do subs bid the same price to all of the GCs? Do they give some
preferential bids? Why would they do this? What risks are the subs
taking? How does the GC respond if they discover they did not
receive the same bid from a sub as did their competitor GCs?
K. Is it ethical to use late sub bids (a) on a public project, (b) on a
private project, and/or (c) if the GC did not receive a valid bid in
that category and used its own plug number?
L. Is it ethical for a private project owner to utilize a late GC bid?

Would your answer change if it was a public or private bid
opening? Would your answer change if you were the low bidder at
(a) bid time, or conversely (b) post bid time?
M. Is it ethical on a private project for a GC to communicate with the

project owner post-bid, but prior to award, to find out how their
price looks and/or inquire whether there is anything else the project
owner needs?
N. Some private owners request voluntary value engineering (VE)

proposals to be submitted with GC bids. There is a strategy from
the GC’s perspective whether they respond with much detail on this
open request. Some owners may then collect all the VE proposals
and share them with all the GCs and ask for new pricing via an
addendum. This is obviously an example of a reverse bid auction as
well. How should GCs respond to this request?
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Case study #17.12: Ethical versus unethical cash improvement methods

A. It can be difficult at times, but it is crucial that contractors generate
a positive cash flow and operate in the black and not in the red.
Explain the accounting terms ‘in the black’ and in ‘in the red’.
Following are some potential ethical cash improvement methods.
Can you think of any others? Has your firm used any of these?
Subcontractors (subs) finance the general contractor (GC) in that

subs are not paid until the client pays the GC and retention is held
from subs the same as what the client holds from the GC.
Employing more subs and reducing the mix of direct labor, direct
material, and equipment rental improves a GC’s cash flow position.
Include a mobilization charge in the schedule of values (SOV). This
is standard with heavy civil construction contracts.
Require the client to make a down payment. This is standard with
many types of custom residential projects or remodel projects.
Many mechanical and electrical equipment manufacturers require
down payments as do elevator subcontractors.
Invoice the client twice monthly, assuming the contract allows this.
The client pays the GC faster, say on the tenth of month two and
not wait until the 30th, or better yet, on the fifth of month two and
not the tenth.
Even though the first month, or partial month, expenditures may be
light, the GC should process an early pay request to improve its
cash flow and test the pay request process.
Reduce retention held from 10% to 5%.
The GC does not withhold retention on labor, material, equipment
or indirect costs; therefore, eliminate the client’s retention held on
these costs. Retention is then only held on the GC equal to the
amount of retention held on its subs.
Release retention on portions of the work which have been
completed and accepted. This is common with early subs such as
demolition, excavation, shoring, and site utilities. This early release
is required to have been negotiated into the prime contract prior.
If the contractor beats their estimate and performs work for less
cost, and they are billing against an established SOV, they will
improve their cash flow position. This is not possible for cost plus
percentage fee or time and material projects where invoices are
based on actual and not estimated or scheduled costs.
Some contracts may allow the GC to invoice all of its insurance and
other markups up-front as a lump sum from the client, and then
make distributions periodically.
Fee will be invoiced proportionately with each monthly draw. The
fee will not be paid out but will be banked by the contractor.
Some GCs negotiate a higher fee to be paid on their direct work
than subcontracted work as direct work is riskier, thereby
improving its bank of fee as many of these tasks occur earlier.
Most clients understand that GCs are not banks and will allow a
small amount of front-loading of the SOV, but just not an excessive
amount.
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B. There are also some potentially unethical cash improvement
methods. If a contractor is discovered utilizing any of these, their
credibility with the project owner, and their subcontractors, will be
damaged. Hopefully you have not experienced any of these
examples. Do you know of other unethical methods?
Modify the estimate before developing the pay request SOV to

reflect more costs on front end construction activities. For example,
if the foundations had been originally estimated at $90,000 and the
hotel room kitchenettes at $350,000 but report those amounts as
$300,000 and $140,000 respectively on the SOV.
Different than falsifying the SOV as mentioned above, front-
loading the SOV also is accomplished by placing a disproportionate
share of jobsite general conditions and fee and other markups such
as insurance and taxes on those activities which occur early in the
project. This seldom can occur on open-book negotiated projects
where these markups are invoiced as separate line items.
Increase the amount subs are billing on their monthly requests and
falsely report those amounts on the GC’s schedule of values to the
client.
Hold money back from the subs’ checks beyond the retention held
due to unresolved disputes or back-charges, even though the subs’
invoices were applied to the SOV at face value and approved by the
project owner.
Hold the subs’ money long after the GC is paid. Ten days after the
client pays the GC is our suggested time-period for a team-build
project, but some GC’s pay their subs 30 days after they are paid,
and some subs do the same with their third-tier subs and suppliers.
Hold more retention from subs than the client holds from the GC.
For example, if the client holds 5% on the GC and the GC holds
10% from the subs. This is usually not allowed by contract.
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Case study #17.13: Over-retained

Retention is a tool project owners use with general contractors (GCs) and
GCs use with subcontractors (subs). Retention terms are typically defined in
contract agreements. What is the purpose of retention? When is it released?
What does it approximately equal to? Retention used to be a flat 10% held
from each pay request but has been revised for most contracts today to 5%
due to project size and cost of money. How much would a project owner be
holding with a 10% retention clause on a $100 mil project? Do they need
that much to make sure the paint touchup is complete and the as-built
drawings are turned in? Many public projects still require 10% held, which
can be a significant cash flow burden to contractors, especially to subs. If a
GC subs out 100% of the work (or close) and a project owner holds 10%
retention, whose money is actually being held back?
The president of a mechanical subcontractor was friends with the owner’s
representative (rep) on this large negotiated example hospital project. They
have worked on many successful projects together prior. This case study is
connected with case #14.10. It was a long difficult project and the
mechanical sub was struggling with cash flow. They were three-quarters
complete when the sub called the owner’s rep direct and requested some
help, especially with the 10% retention. Should subs and owners talk direct,
even if they have prior relations? The owner’s rep responded: “What are
you talking about? This project only has 5% retention” which was
customary on all of his projects. Why would an owner’s rep advocate for
5% in lieu of 10% retention held? Here are a few facts of the case:
This is a $50 mil project;
The mechanical sub’s original contract was for $10 mil;
AIA A102 and A201 contract documents were used for the prime
agreement;
The owner holds 5% retention on the GC;
The contract clause requires the GC to hold the same retention on
their subs, unless approved otherwise;
75% has been invoiced;
Assume the GC has 5% jobsite general conditions in their estimate,
a total of 5% fee and other markups, and the balance of the project
is 100% subcontracted out;
The GC is holding 10% on all of their subcontractors.
Now you run the math:

What is the total value of the subcontracts?
At 75% complete, how much total gross has been invoiced?
At 75% complete, what is the total value of the subcontract work in
place?
How much total retention is the owner holding on the GC?
How much total retention should the GC be holding on all of the
subs, assuming the 5% contract clause?
How much retention is the GC actually holding on all of the subs?
How much retention should the GC be holding on the mechanical
sub, assuming the 5% contract clause?
How much retention is the GC actually holding on the mechanical
sub?
How much net is the GC banking?
When confronted, and audited (can the owner do that with an A102
contract?), the GC indicated they were holding 10% on their subcontractors
for the owner’s best interest. What are they talking about? What interests?
Do you agree this is a good practice? Yes it is done. Is it legal? Is it ethical?
Post script: The over-held retention was released two weeks after the audit,
but the mechanical sub still suffered on this project.
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Figure 17B
Case study #17.14: The ceiling is falling!

This is different than the Chicken Little phrase: “The sky is falling”. This
ceiling really was falling. A concrete domed stadium utilized a fiberboard
panel during construction as a form liner for the underside of the cast-in-
place dome. The liner panels measured about five feet square and were two
inches thick. The liner panels were laid inside of the form and utilized metal
stick pins that caused them to be attached to the wet concrete. When the
form was dropped and removed, the form liner panels stayed in place. The
exact purpose of the panels remains unclear. They were likely for insulation
and acoustical purposes but if you had ever attended a football game or rock
concert in the stadium, you know they were unsuccessful. You might draw a
sketch of this form liner process.
The concrete dome was of course the stadium roof. It did not have a typical
roofing material on top of it. Rather the concrete was sealed and later
painted. If you know anything about concrete you know it is porous and
does not do a thorough job of shedding water. Over the years this concrete
surface weathered badly and rain water found its way through the dome.
The water found the metal form liner pins and began rusting them away.
The panels themselves were already heavy, but when they became saturated
with water they were too heavy. The rebar in the concrete was also likely
deteriorating but little was reported on that. Why? What happens to
concrete when the rebar rusts? Well the good news is the dome didn’t fall,
but the ceiling panels did. See Figure 17B. Can you imagine the force of a
now saturated 100 pound five foot square panel falling from 300 feet in the
air? Can you imagine that panel landing in the stadium seating?
Because this was deemed to be a safety emergency, the public stadium
owner hired a contractor on a time and material (T&M) basis to remove the
panels. This was a difficult job working that high in the air with two men in
a swaying crane bucket muscling the heavy rain sodden panels away from
the concrete roof. One craftsman was killed in the process. Many others
were injured. Also as part of the emergency repairs the owner had the same
contractor put a traditional roof membrane on the top side of the dome. All-
in this contractor spent $60 mil, more than twice the original cost to build
the stadium. The contractor worked 24 hours a day, seven days a week.
Their open-book invoices included timecards, material and equipment
invoices, and subcontractor backup. But isn’t public work supposed to be
competitively bid? How did they get around that? Was this illegal?
The owner filed a claim with their insurance company for the $60 mil. The
insurance company offered to pay $2 mil for the repairs. This is similar to
the camp case study #6.13. The insurance company hired an estimating
consultant from another state who prepared his estimate utilizing a national
published database. He did not solicit local market pricing for equipment
rental or materials or subcontractor pricing. The estimator did not visit the
facility. How many concrete dome ceiling repair projects are included in a
published database? So what is wrong with this situation thus far? The
stadium owner hired a construction consultant to prepare another third
estimate. The estimator later testified: “What good is an estimate for what
work might have cost when you already have the best estimate available –
the actual cost of the work supported by auditable backup?” The owner
prevailed. What lessons can we learn from this experience?
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Case study #17.15: No backup alarm

One of the contractor’s defenses was: “She was bumped earlier in the day
and warned to watch out.” This beautiful young woman, a former
competitive surfer and model, was working as a flagger and was run over
by the track hoe operated by her employer while in reverse. The track hoe
was a rental. Many women get jobs as flaggers. The pay is good. But why
also might a heavy civil contractor seek out women and minority flaggers
and truck drivers? Hint: They do mostly public projects.
The flagger lost one leg and half of the other. This was devastating. She
filed a $6 mil lawsuit against the city who was the client on this downtown
sewer repair project. The city was also the designer and the inspector of the
work. A construction employee cannot sue their employer for jobsite
injuries in this state. Why is that? Therefore she sued the client. Can she do
that? She didn’t have a personal contract with the city. Who else might she
have a claim against? Everyone agrees this was a tragedy. Everyone agrees
she has suffered and will continue to do so for the rest of her life. But the
question is, who compensates her?
During the pre-trial jury selection attorneys from both sides interviewed a
pool of 100 potential jurors. They asked questions if the jurors had
knowledge of the case or had suffered similar injuries, etc. What else might
they have asked? They agreed on 12. Who is a typical juror? Have you
heard the phrase: ‘A jury of your peers’? Have you ever been on a jury?
Have your peers? The trial lasted three weeks. The jurors were allowed to
take notes but they were not allowed to discuss the case with each other or
anyone outside of the courtroom. They didn’t know each other’s
backgrounds until both attorneys ‘rested’ and the jury was retired to the jury
room to begin their deliberations. How long do you suppose the jury
debated the flagger’s fate? How would you vote thus far? Here are a few
facts that might help.
The day of the accident the project ran late and the contractor was
exposed to liquidated damages while working during rush hour.
They were ‘rushing’ to finish.
There were supposed to be two flaggers on the project but one
called in sick. Our flagger ran back and forth and covered both ends
of the site. She was a hard worker and a good employee.
The track hoe did not have a backup alarm.
The track hoe had been rented by the civil contractor from a third-
party equipment rental company. It was unclear how this piece of
equipment entered the country.
The track hoe had been purchased third-hand and the
manufacturer’s name and serial number had been ground off the
machine.
It was later discovered there were several after-market parts on the
equipment.
There was a full-time city sewer inspector on site.
Sometimes juries take a quick vote just to see where everyone is. That was
the case with this trial and the first vote was 9-3 in the city’s favor. Are you
surprised? Why do you feel it went that way? The judge in this case said the
jury did not need to come to a unanimous decision (12-0) but rather a super
majority of at least 10-2 would be required. At this time each of the jurors
was allowed to introduce themselves a bit more and explain their beliefs in
the case. One of the three holdouts was a bus driver who was being paid a
full wage to be on jury duty and didn’t want to go back to work. Do all
employers pay their people while on jury duty? Should they? Another
holdout wanted to hear more. This is a productive position. The third was a
former city employee who thought the city owed everybody, including him.
Was he being open-minded?
As each of the jurors explained their views it became quickly apparent that
the built environment community was well represented. One juror was a
real estate developer. One was an architect and the third was a general
contractor. Should they have been allowed on the jury? Juries are allowed to
ask to see physical evidence and one of these three asked the bailiff for a
copy of the contract between the city and the contractor. Later it was
reported that the attorneys were surprised of this request. They thought the
jury would want to see medical records. The developer opened the contract
and read the following clause to her colleagues: “The city is not responsible
for safety. The contractor is completely responsible for safety. The
contractor’s superintendent, or representative, is the individual responsible
for safety.” These three jurors felt the contract would state such, as most do,
and that is why they voted in favor of the city. The final vote was 11-1. Can
you guess who the holdout was? The jury was not allowed to know before
deliberation, but the former flagger had previously settled claims and was in
the process of filing other claims. Who might those claims be filed against?
Have you ever been on a jury? When you get a chance, do so, it is an
educational experience.
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Case study #17.16: Build a better mousetrap

If all general contractors (GCs) utilize the same union wage rates, receive
all the same subcontractor (sub) and supplier quotes on bid day, and achieve
the same productivity levels, how does one become low bidder?
Unreasonably low fees and/or jobsite general conditions estimates are one
way, but not necessarily healthy in the long run. Diving on cost in
anticipation for later change orders is risky and raises ethical questions. A
shorter construction schedule, as posed in case studies #7.11 and 10.9, is
another method but has potential issues. But one alternate way is for the
contractor to build the same project in a different and more efficient manner
than its competition. Essentially building a better mousetrap. This was the
situation in tower crane case study #7.8 and follows is another example. A
private utility company utilized a one mile three-side wooden flume to carry
water from a dammed lake to a power plant. The fume was 20’ wide by 10’
deep but it was located 40’ below the ground level. You are going to need at
least one sketch for this one. At the top of a very steep slope (4V: 1H) was a
service road on each side which was to remain active throughout
construction. It was up to the competing GCs to figure out how to remove
the wooden sides and bottom of the flume, hold the steep slope back, and
replace it with a cast-in-place (CIP) three-sided concrete flume.
All but one of the bidding GCs figured a soldier pile and lagging temporary
shoring system on both sides. How many square feet of shoring lagging
would this be? Cutting the slope back would eliminate the service roads and
was not an option. The problem with the shoring approach is the only sub to
bid on its $2 mil portion of the project included a ‘rock clause’ in its bid.
Do you know what that is? Essentially if the drill rig hits a rock that soldier
pile location must be abandoned and another attempted and the sub collects
on a change order. If the existing ground was sand or silt or pea gravel or
even glacial till, this might be acceptable. But the owner’s soils report
indicated that 8” to 24” diameter cobbles were to be expected throughout
the project, in fact many of them could be seen from the surface and were
lined along the side of the service road as a make-shift curb. Discovering a
cobble could hardly be considered an unknown condition.
Our GC knew this was a no-win condition and decided to take a different
approach; essentially estimate a better mousetrap. They planned on using a
series of pre-cast concrete ecology blocks at the top and bottom of the steep
slope on each side and cover the banks with chain link fence to hold the
small slides. If ecology blocks are 8’ long, how many would be required?
How many square feet of fence? The got a deal from the state highway
department to rent the blocks. The fencing would also be rented. This is
maybe the time for an additional sketch. The GC also designed a one-sided
ganged form system to build the CIP walls which allowed the craftsmen
always to be working on the inside of the wall, no one would be trapped
against the slope and behind the form. When both wall form sides were up
they were braced horizontally against each other. Essentially the form then
provided an additional safety barrier.
Would this meet with OSHA standards? In fact the contractor met with the
state department of Labor and Industries and explained their system before
the bid and received a tentative nod of approval (nothing in writing of
course) with some additional stipulations. Do you have any idea what those
might have been? The GC was $1 mil low on its bid but provided their
means and methods as a qualifier. The owner was intrigued and interviewed
them and hired them. Can they do this legally? Is this ethical from either of
the parties? The GC ended up making a clear $1 mil fee on the $7 mil
project. Is that a good percentage? What other ‘mousetraps’ have you
experienced?
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Potential advanced exercises:
These potential exercises can be applied to many of the different case
studies this chapter and throughout book and with many potential
variations. The options are limitless.
1. An instructor or facilitator can easily change things around by:

a. Changing dollar values or time frames;
b. Changing responsibilities from architect to engineer or
from one subcontractor to another;
c. Changing project type from hospital to bridge;
d. Applying a similar situation to a case study already being
utilized, and others.
2. Provide a list of ‘lessons-learned’. What did the parties do wrong?
What should they have done better to have prevented the situation
from occurring? What should they do now?
3. Take a position, owner, designer, general contractor, subcontractor,
supplier, city, project manager, superintendent, inspector, etc.
Prepare a three-point argument, why are you right? Choose one of
the other parties, why are they at fault? Do we care who is at fault
as long as it is not us?
4. Sometimes we learn more from taking another perspective. Take the
perspective of the party which is obviously (to you) at fault. Prepare
a three-point argument why it is not your fault, or at least not 100%
your fault. Who else could be at fault? Maybe all of the other
parties play a contributing factor. If you are making an argument to
a jury, it needs to be ‘beyond a reasonable doubt’. Can you provide
some doubt?
5. The contract will ultimately decide the dispute resolution process.
There is typically an order that the parties must follow – they
cannot simply go to court. This process often includes: Mediation,
Dispute resolution board (DRB), Arbitration, and then Litigation.
Take the position of either the mediator, DRB, arbitrator, or judge.
Listen to the arguments made by others why their represented party
(or position) is not at fault and someone else is. Ask them questions.
Make a reasonable decision.
6. Mediation is often the first method of dispute resolution required in
the contract. Assume the role of the mediator and attempt to get the
parties to agree on a mutually acceptable decision. Listen to their
joint arguments. Then meet with each party individually. Ask them
additional questions. Tell them why their position is not 100%
correct – the parties often feel they are 100% correct, but is
anybody? Will they come off of their demands, just a little bit?
Then go to the second party and go through the same steps. Then
return back to the first party. After two rounds of this, how close did
you come to an acceptable resolution?
Notes
18
Applied construction projects
Introduction
Many of the previous examples highlight what happened during a
construction project or towards project completion. The cases here set the
projects up and discuss procurement, delivery, pricing, contracts, and
construction organizations. All the cases in this chapter connect with the
most important document on any construction project, the contract (Chapter
5). Each of these cases could be added to an example or two from the
previous 17 chapters to create a more involved and longer discussion. Most
of the applied project examples also reference other specific case studies
within their respective narratives. This chapter includes the following case
studies which introduce a variety of unique construction projects:
18.1: Speculative developer
18.2: Executive townhomes
18.3: Unit price bids
18.4: Bohemian mixed-use development
18.5: Infrastructure financing
18.6: Build-to-suit projects
18.7: Owner contracts with specialists
18.8: CMAR hotel
18.9: Multiple-prime school delivery
18.10: Mixed-use development
18.11: Heavy civil roundabout
18.12: Commercial-industrial hybrid
studies in this Chapter #18 also connect with other examples threaded in the
book. The project descriptions included here could be combined or cross-
referenced with numerous other cases. For example, this chapter has
overlaps with:
Project developers and owners in Chapter 1
The design team in Chapter 2
Contracts from Chapter 5
Estimates in Chapter 6
Scheduling from Chapter 7, and others.
Case study #18.1: Speculative developer

This example project owner chose to utilize a lump sum (LS) bid
procurement process and a traditional general contractor (GC) delivery
method where the owner has two separate contracts, one with the GC and
one with the architect. Why would a private owner choose LS? What role
does an owner’s architect take in advising an owner of procurement,
contracting, and pricing methods for a contractor? All of the parties entered
into standard American Institute of Architects (AIA) contract agreements.
Why do architects prefer AIA contracts?
This is a large mixed use development (MXD) project which includes,
offices, a small restaurant, delicatessen and small grocery store, two floors
of underground parking, and utilizes many sustainable enhancements. The
project is being built by the developer on speculation of attracting tenants.
Should a developer start construction before signing up a tenant? It is
considered a shell and core construction style with minimal tenant
improvements (TI) planned at the outset. The interiors will be built out as
TI once the tenants are identified. Make a spreadsheet and list what is
included with shell versus TI. For example, foundations are part of shell
and carpet is part of TI. Now it is your turn.
The building structure includes a variety of cast-in-place concrete systems
including elevated slabs and slabs on metal deck. The structural engineer
transitioned from all concrete to all steel as the building rose out of the
ground. It has extensive excavation and shoring elements, complicated
siding system, green roofs and terraces, and several elevators. Why would a
speculative developer include sustainable elements? Aren’t they expensive?
The mechanical and electrical (M&E) design is minimal in a shell and core
project. Design-build (DB) subcontractors will bid to the established criteria
and the M&E designers will continue throughout construction on a design-
assist basis. This may also be referred to as a bridging delivery method.
Make an argument why M&E engineers might prefer a design-bid-build
delivery method with 100% drawings and specifications and another in
favor of pure DB. Is bridging a good compromise?
The total estimate at schematic design was approximately $50 million and
the construction duration was planned for 20 months. What happens at
project completion if the developer has not yet secured a tenant? Do the
designers and builders get paid? When does the owner transfer from a
construction loan to a permanent loan?
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Case study #18.2: Executive townhomes

This sample project is a four-unit executive townhome project which is
primarily wood frame construction with added structural steel supports over
cast-in-place concrete foundations and also had significant excavation and
shoring elements. This is the same project which involved the furnace
relocations discussed in case study #1.12 and shown in Figure 1. What
differentiates residential from commercial construction techniques? Does
the concrete and shoring know any different? The project was built on a hill
with wonderful views of downtown and the water. The building is five
stories tall with an occupied roof deck and garden. Each home has an
underground parking garage. There are expansive windows to take
advantage of the view and many sustainable features, including bio
filtration planters. Why are many cities requiring storm water control
systems such as this? The interior finishes were all very high end and many
rooms have exposed structural elements which double as architectural
features.
The development entity was a joint-venture between the previous property
owner and the general contractor (GC). They established a Limited Liability
Company (LLC) as their one-project development company. Why did they
form a LLC? The developer/GC primarily hires subcontractors but employs
a full-time superintendent and has a few craftsmen, including carpenters,
who pick up the scopes that do not fit neatly into subcontract packages.
Typical with most residential construction, this GC uses merit-shop labor
which cost $15-$20 less per hour and are often more flexible with task
assignments. Is all residential construction completed with merit shop
labor? The total estimated cost of construction, exclusive of land purchase,
demolition, financing and soft costs, was $3.3 million (mil). This was a
very successful development project and the townhomes ended up selling
for approximately $2 mil each. Put your developer hat on and complete the
development cost estimate. Make whatever assumptions as necessary. The
$3.3 mil was just for construction. How much did the developer make or
lose on this deal?
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Case study #18.3: Unit price bids

The highway overpass project type is typically a heavy civil unit price bid
project. This example project involves reconstruction of an existing
highway overpass. The current overpass had been there for 40 years and
had lived its useful life and was in need of significant seismic repairs and
necessary expansion to handle increased traffic flow. The state designed the
project internally and sought competitive public bids on a lump sum basis
comprised of unit-prices. The state’s bid form had 200 separate stand-alone
unit price bids. The successful general contractor’s total bid was $9,510,000
for a 14 month project. Their jobsite general conditions amounted to
$912,060 which was approximately 9.6% of the total bid. Why do public
agencies often utilize competitive bid procurement methods? Why do civil
projects base their total contract value on unit prices submitted by the
contractor, but applied to material quantities estimated by the project
owner? What happens if the actual quantities are less than estimated? What
happens if the actual quantities are more than estimated?
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Case study #18.4: Bohemian mixed-use development

This example project is called a mixed-use development (MXD), which
includes more than one and often three or more different types or uses. In
this case, the developer built a four-story wood-frame 100 unit apartment
building over one floor of cast-in place concrete shelled space, which would
later be built out as a restaurant, coffee shop, grocery store, and some
offices. Below this ‘podium’ level were two stories of post-tension concrete
parking garage, which also serve as a separate profit center for the
developer. This project was built in a thriving area for young educated
professionals who are active in their academic and art and athletic pursuits.
The developer felt the project represented a gathering place for the mix of
different types of people from this new active generation, often labeled
‘bohemian,’ to come together. Because of the dense neighborhood, parking
was in short demand and the developer enhanced his pro forma by renting
some of the parking to adjacent businesses.
This developer had been active in the built environment his entire life and
had many successful projects with repeat design and construction team
members. He chose to negotiate this project when it was 50% designed.
There were three contractors asked to prepare competitive proposals and
one was selected after interviews based upon a long list of criteria including
fee, organization, budget, and past experience with these types of projects
constructed in busy neighborhoods. The successful general contractor (GC)
was local. The developer and GC executed an AIA A102 guaranteed
maximum price contract which included an 80-20 savings split. The total
price was over $18 million and the project duration was scheduled for 18
months. What other selection criteria would you suggest the developer use?
Why did the developer choose the negotiated over bid procurement
process? What other combinations of uses might comprise a MXD project?
Should the apartment GC also build out the first floor retail spaces?
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Case study #18.5: Infrastructure financing

A road construction project may be initiated by a city, county, state, or the
federal government to address an increase of traffic due to population
growth in a suburban area. The project will need to produce an
infrastructure that fits within its underlying social, natural, and economic
environments. These necessary parameters are defined as follows:
Social environment: Studies will be performed to evaluate how the
new road will benefit the public and outreach activities will be
conducted to involve and/or inform the public in the design and
construction process.
Natural environment: Environmental studies will be performed to
evaluate if the impact on the natural environment is overtaking the
expected advantages of the new road. These studies will also
suggest mitigation measures that would be necessary to reduce or
eliminate these impacts during construction.
Economic environment: The impact of the project on the local
economy should be evaluated, including the impact of the cost of
this project on the city’s economy at project completion. Also, the
impact of construction activities on existing businesses will be
evaluated and mitigation measures may be needed during
construction to minimize this impact.
How are public infrastructure projects such as roads, bridges, utilities,

parks, and libraries financed? What other types of public projects are there?
What if a project is bid over budget? Is it cancelled? Who (individual)
ultimately addresses these three parameters to determine if the project will
be pursued?
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Case study #18.6: Build-to-suit projects
Some project owners build facilities for their own use. Therefore, they will
not only retain ownership at completion, but they will also be end users of
the facility. Private citizens, governmental agencies, and companies that
need facilities to support their core business often build these facilities to
suit their own needs and use. Some build-to-suit projects include the
following:
A perspective homeowner buys a piece of land and has his or her
dream home built on it.
A university needs a new library building and decides to have it
built on a vacant campus lot.
An oil company needs to revamp an existing refinery that it has just
purchased.
As the end users of facilities, project owners should be able to identify the
needs that the project must fulfill and set the project objectives accordingly.
They often are motivated to build something that would reduce costs during
the operations of the built facility. Therefore, the homeowner would
probably attempt to obtain an attractive and comfortable home; the
university would seek a library building that is both durable and
inexpensive to operate and maintain; and the oil company would seek a
facility that is easy and safe to operate while limiting the need for
extraordinary maintenance. This all factors into a study of life-cycle
costing. Who prepares estimates on behalf of project owners? Address this
with our three examples listed above. How might a project owner address
design and construction standards differently if they plan to occupy the
project for 20 years versus selling it within a year of completion?
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Case study #18.7: Owner contracts with specialists

An example small high-technology company needs a new office building.
This is a big investment for the firm. The ownership plans to evaluate all
design options and finalize the design for the new office building before
hiring a general contractor (GC). They are conservative and want to take on
this endeavor one step at a time.
This owner does not have in-house design expertise, so they hire an
architecture firm that will help evaluate design options and produce
a complete design package. This will include plans and
specifications that can be used by the owner to understand they are
getting what they need. Their architect has also advised them that a
full set of drawings and specifications will result in lower
contractor bids. Is this always true?
During the design phase, the owner, who also does not have in-
house construction expertise, selects and hires an agency
construction management (CM) firm. The CM can help select a GC
once the design is completed and supervise the execution of the
project. Also, the agency CM will review the design to identify
potential issues with constructability and provide suggestions
before the design is submitted to competitive pricing. Why doesn’t
the architect also provide these services? How do you suggest the
owner contracts with the CM?
Once the design is completed, the owner, architect, and the agency
CM work to identify a GC which will price the project. Since the
team has chosen the bid procurement method, how would you
recommend they choose contractors to request bids from? How
many GCs should bid the project? 1, 3, 5, 10? Does the length and
makeup of the bid list vary on a project pending its size and
complexity? If you were a bidding GC, how long of bid list would
you prefer? How would your answers differ if a negotiated
procurement option would be utilized?
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Case study #18.8: CMAR hotel

A sample developer is planning a new high-rise tower to include
underground parking, retail at the ground level, and upper-story hotel and
apartment units. Operators for the retail and hotel have not yet been
identified. This is the largest project to date for this developer, and their
ownership prefers to retain some control over the design. Time is money, so
the developer would like to overlap design and construction activities
without waiting for a hotel operator to decide details on that portion of the
building. Therefore, the developer decides to use a construction manager at-
risk (CMAR) approach where an architect and builder are selected early on,
and work together to further the design to a level of detail that can
competitively be priced.
This owner does not have in-house design expertise, so they hire an
architecture firm that will eventually work collaboratively with a
builder to further the design to a level of definition that can be
priced. What basis should an owner use to contract with an
architect? What basis should an owner use to contract with a CM?
Once the architectural and structural designs reach around 60%

completion, the owner and the builder negotiate a price agreement
on the structural scope and sign a contract that guarantees the price
of the structure while establishing allowances for the envelope,
building systems, and finishes. The CMAR delivery method allows
the builder to move forward and begin construction, some of which
they hope to self-perform. How does the owner know if the CM’s
price is competitive?
Once the remaining design packages reach about 90% completion,

the owner and the builder re-evaluate the allowances and adjust
them upward or downward depending on competitive subcontractor
bids for these packages. As soon as the owner and builder reach an
agreement on each scope they change order the allowance out of the
guaranteed maximum price. When the hotel and retail tenants
become known, how should the owner address additional design
and construction services? How can a CM improve its fee position
over the course of construction? Compare fee improvement
methods for a CMAR both with some direct work and one which
subcontracts 100% of the project out.
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Case study #18.9: Multiple-prime school delivery

Experienced project owners may engage in construction without the use of
a general contractor and employ major subcontractors direct. This is often
known as five primes or multiple prime delivery method. Case study #1.6
was a similar delivery approach but for a residential project. A school
district needs to build a new two-story above ground primary school to
support the growing population of school-age children who reside in the
community. This school district has significant experience utilizing direct
contracts with different trades, including mechanical, electrical, plumbing,
and building envelope. Recent renovations were successfully conducted by
the district’s staff. Is the scope of construction ‘renovations’ the same as
construction of a new building?
This sample owner does not have in-house design expertise, so they
hire an architecture firm that will help evaluate design options and
produce a design package. This package will include plans and
specifications that can be used by the owner to understand what
they are getting and what they need for a contractor to price the
costs for constructing the building.
Since the school district has a staff of individuals with construction
management expertise, it does not feel it needs to hire an external
agency construction management firm. Is this a mistake?
Once the design is completed, the owner’s staff works to identify
specialty contractors to deliver the individual components of the
project, including:
An earthmoving contractor that will prepare the land for

construction and major site utilities;
A structural contractor which will build the foundations and
structure;
An envelope contractor which will fabricate and install the
selected building envelope including siding, roofing, and
glazing;
A mechanical and plumbing contractor;
An electrical contractor which;
A finishes contractor that will frame and paint, lay floor
covering, design and install cabinets, and install doors. This
last team member functions more as a tenant improvement
general contractor (GC).
They ended up with six- primes in lieu of five. Does it make a difference?
During the construction execution, the owner’s decision to not hire a GC
translates them into being directly responsible for self-performing some of
the GC’s typical responsibilities, including the coordination and supervision
of the multiple contracts with their specialty contractors and lead designer.
Who now has absorbed more risk – the owner or specialty contractors?
Does the architect take on additional liability under a multiple prime
delivery arrangement? Could an owner also contract with five design and
engineering firms and not run the total design scope through a principle
architect? If you were a GC, would you have pursued the structure or
finishes package described above? How much do you suppose an owner
saves in a multiple prime delivery method?
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Case study #18.10: Mixed-use development

An established family owned business had acquired a large parcel of
property. They set up a separate Limited Liability Corporation to design,
build, and manage this long-term investment. The city favored
developments which had multiple uses, or MXD, where several different
types of businesses, including residential, are all in the same structure.
MXDs are intended to reduce traffic flow. The owner chose the lead design
firm and their principal also acted as the design project manager (PM) on
this large 250,000-square-foot MXD project. How should project owners
procure design services? How are design fees structured? See also case
study #2.4. After extensive market research, the design and owner teams
geared the project for future retail, restaurant, office, and even a lumber
store as tenants. In this case, the zoning did not permit residential use. The
building would eventually comprise two stories of parking garage below
grade and three occupied stories above grade. The structural engineer chose
cast-in-place (CIP) concrete columns and post-tension concrete beams and
slabs with some areas of conventional CIP concrete slabs as well.
After completion of schematic design, the owner received three negotiated
proposals from large local general contractors (GCs) with whom they had
prior relations. Why might a private owner choose to negotiate over bid?
The owner and successful GC entered into a preconstruction (precon)
contract, and the GC participated throughout the balance of design by
developing estimates, schedules, constructability reviews, value engineering
proposals, site logistics plans, and many other precon plans. What are some
other precon services a contractor might provide? What are the advantages
of a precon contract over a verbal agreement? How might the GC’s precon
fee be structured? See also several case studies discussed in Chapter 4 on
preconstruction.
The GC’s PM and superintendent, who were proposed at the initial
interview, took the lead during preconstruction and were assigned to follow
the project through construction completion. What are the advantages of the
GC’s (and subcontractors if applicable) project precon team continuing
through construction? How might the project owner and GC move from a
precon agreement to a construction agreement? What pricing method and
contract format would you recommend? Did this project owner also need an
agency construction manager? What might be some advantages and
disadvantages of adding that team member and when should they be
included?
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Case study #18.11: Heavy civil roundabout

This heavy civil case study example project is for construction of a major
road roundabout with four spurs. The previous intersection configuration
had two misaligned roads interesting this busy highway and was a scene of
frequent automobile accidents and did not safely accommodate pedestrians
or bicycles. The city floated a public bond and received matching funds
from the state. How are bond funds generated and how are they paid back?
A detailed design was prepared by a civil engineering company which
would also provide third-party contracted owner’s representative services.
Is this a conflict of interest? In civil and public work, this position is often
known as the resident engineer. They prepared a 127 line-item unit-price
engineer’s estimate which totaled $5,053,821. How did they achieve such
an exact number? Shouldn’t early budget estimates be rounded off?
The project was subject to public bidding rules, including prevailing wage
rates. What are prevailing wage rates, why are they used, and who do they
benefit? Five competitive unit-price bids were received. Why do civil
projects often use unit price bids? If the civil engineer incorrectly estimated
the quantities, who is at risk? The low-bidding general contractor’s (GC’s)
total unit-price bid package of $4,721,724 was deemed responsive and was
under the engineer’s estimate. What do public owners do when bids are
under the estimated amount, in this case over $300,000? What would
happen if all bids were over the public owner’s budget?
The low-bidder was given the project award without bid protest. The
project was completed successfully in just over seven months. The civil GC
performed all earthwork, site utilities, asphalt, and concrete curbs and walks
with in-house forces. They subcontracted out pavement striping, landscape,
and electrical re-routes which is customary for this type of contractor. Does
a public owner have a say in what a GC subcontracts out versus self-
performed? There were not any safety accidents, and the project was
completed without any outstanding claims. Do many public projects finish
without a claim?
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Case study #18.12: Commercial-industrial hybrid

By definition, a mixed-use development (MXD) project includes three or
more uses. This project not only crosses multiple commercial uses, but it
mixes commercial and industrial all in one project. This is a 29,400 square
foot facility with a negotiated guaranteed maximum price of just over $7
million. The project includes a first-floor brewery and restaurant and
shelled upper-floor office space, waiting for a tenant. After a tenant is
identified, how would their build-out be folded into the project? There are
multiple potential answers. See also case study #3.3. The project owner
added an underground parking garage on an adjacent site with a park on its
lid and seating for an outdoor movie theatre to be projected onto one of the
exterior brewery walls. See Figure 18. This commercial MXD project
includes almost $1 million of specialized industrial process piping, tanks,
and control valves for the brewery fit-up. Make a long list of potential uses
for MXD projects. Cities are favoring MXD in the inner-city, why is that?
Why might a developer also favor a MXD? What type of subcontractor will
install the process system for the brewery and what crafts will they employ?
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Figure 18
List of abbreviations
We use many abbreviations and acronyms in construction, it is almost like
another language. All of those utilized in this book have been included in
this appendix, along with many other standard construction management
abbreviations.
2D, 3D, 4D, 5D two-dimensional (length and width), three-
dimensional (depth), four-dimensional (time) and five-
dimensional (cost)
A4S all four sides
AB anchor bolt
ABC activity-based costing
ACE assumptions, clarifications, and exclusions (bid and/or
contract document)
ACP asphalt
ACT acoustical ceiling tile, formerly asbestos ceiling tile
ADA Americans with Disabilities Act (law or building codes)
ADR alternative dispute resolution
AEC architecture, engineering and construction (design-build
company type)
AGC Associated General Contractors of America
AHJ authority having jurisdiction, often city building
department
AHU air handling unit (mechanical equipment)
AIA American Institute of Architects
AIL Architects in Landcaster, fictitious case study firm
AKA also known as
Allow allowance
Alt alternate or alternative
Arch architect or architectural
ASI architect’s supplemental instruction, AIA form G710
Asst assistant or assist
BC back charge
BCF bank cubic feet
BCY bank cubic yard
BE built environment
BF board foot (lumber); also backfill
BIM building information models or modeling
Board board of directors (BOD) or Dispute Resolution Board
(DRB)
BOT build – operate – transfer (delivery method), or bottom (also
BTM) or bottom of truss
BTR better (lumber grading, for example DF#2 and BTR)
BTU British thermal units (heat)
BY bank yard (cubic yard of dirt before excavation)
CA construction administration (architect’s role during
construction), also carpenter
CAD computer-aided design
CD(s) construction document(s) (design phase or drawings)
CE civil engineer or engineering, also construction engineering
or chief estimator
CEO chief executive officer
Cert certificate or certified
CF cubic foot or cubic feet
CFO chief financial officer
CIP cast-in-place (concrete)
CM construction manager or management
CM cement mason, concrete finishing craftsman
CM/GC construction manager/general contractor (also known as
GC/CM or CMAR)
CMA construction manager agency (delivery method)
CMAR construction manager at-risk (delivery method); also
CM/GC
CO change order, county, or cased opening
C-O close-out
C of O certificate of occupancy
Contractor general contractor or subcontractor
COO chief operating officer, also construction operations officer
Coor(n) coordination (process or drawings)
COP change order proposal
CP cost proposal, cost plus, carpet (also CPT), or critical path
CPFF cost-plus fixed fee
CPM critical path method, also critical path network (CPN)
CPPF cost-plus percentage fee (similar to T&M)
CPT complete or carpet (also CP)
Craft craftsman (construction field worker)
CSI Construction Specifications Institute
CVG clear vertical grain (Douglass fir trim)
CY cubic yard
D dimension, diameter (also dia), dryer, or depth
d penny (nail gauge such as 8d or 16d)
DA development agent (similar to owner’s representative), also
district attorney
DB or D-B or D/B design-build (delivery method)
DBB design-bid-build (delivery method)
DBO design build operate
DBOM design build operate maintain
DD design development (documents or phase)
Demo demolition
Demob demobilization
DF Douglass fir (tree species and lumber grade)
DFH(W) doors, frames, and hardware
Dia diameter
DL direct labor (estimate or cost area)
DM direct material (estimate or cost area)
Doc(s) document(s)
DQ or DQ’ddisqualify, or disqualified
DRB Dispute Resolution Board, or design review board, also
board
E engineer, east, exit, existing, or electrical
EA each
ECD estimated completion date (schedule)
EE electrical engineer
Elect electrical (subcontractor or systems)
EMR experience modification rating (safety)
EPC engineering, procurement and construction (design build
delivery)
Est estimate
ETA estimated time of arrival
EV earned value
EVM earned value method
EW each way or East-West
F furniture, Fahrenheit, or fire protection
FE field engineer or fire extinguisher
FF finished floor (elevation); also finish to finish
(schedule); also free float (schedule)
FF&E fixtures, furniture and equipment (often owner
supplied)
FIC furnished and installed by contractor
FIO furnished and installed by owner
FOB freight on board or free on board (material delivery
location)
FOIC furnished by owner and installed by contractor, also OFCI
FP food processing (equipment or industry sector), also fire
protection
FT foot or feet
F10.5 spot footing size, 10’-6” x 10’-6”
GC general conditions, also general contractor
GC/CM general contractor/construction manager delivery method,
see also CM/GC and CMAR
Gen or general general contractor
Geo or geotech geotechnical (report or engineer); also known as
soils engineer or report
GF general foreman (similar to an assistant superintendent)
GMP guaranteed maximum price (estimate or contract)
GWB gypsum wall board (also sheetrock or wall board or
drywall)
H height (also HT) or horizontal
HM hollow metal (door or frame)
HO home office
HOOH home office overhead
HR human resources, also hour
HT height (also H)
HVAC heating, ventilating, and air conditioning (mechanical
system or contractor)
IPD integrated project delivery
ITB instructions to bidders, also invitation to bid
IW ironworker (craftsman)
JIT just-in-time (material deliveries)
JV joint venture
Lab laboratory
LDs liquidated damages
LEED Leadership in Energy and Environmental Design
(sustainability)
LLC limited liability company or corporation
LLP limited liability partnership
LOI letter of intent
LR lien release
LS lump sum (cost estimate, bid, contract, agreement, or
process); also life safety (drawing); also late start (schedule)
M&E mechanical and electrical (contractors or designers)
M&M means and methods
MACC maximum allowable construction cost (similar to
GMP)
MBA master in business administration (college degree)
MBE minority owned business enterprise
MBF thousand board feet (dimensional lumber measure)
ME mechanical engineer
Mech mechanical (subcontractor or systems)
MEP mechanical, electrical, and plumbing (systems or
contractors)
MH(s) man-hour(s) or man hole (sanitary sewer)
Mil million
Mo(s) month(s)
Mob mobilization or medical office building (MOB)
MS Microsoft
MUP master use permit (entitlement permit)
NA or N/A not applicable or not available
NCR non-conformance report
NIC not-in-contract, also not included
No number (also #), or north
NTP notice to proceed
O&M(s) operation and maintenance manual(s)
OAC owner-architect-contractor (commercial construction
project meeting)
OC on center (dimension)
OE operating engineer, also owner’s equity
OFCI owner furnished contractor installed, also FOIC
OH overhead
OH&P overhead and profit (also known as fee)
OIC officer-in-charge
OM order-of-magnitude (cost estimate)
OR owner’s representative
OSHA Occupational Safety and Health Administration
OT overtime
PE project engineer, pay estimate, professional engineer, or
project executive
PEx project executive, also PE or PX
PL punch list (also punch), plate, plastic laminate (also plam)
PM project manager or management
PNW Pacific Northwest
PO purchase order or project owner
PPE personal protective equipment (safety)
PPP or P3 public-private partnership (delivery method) or Primavera
Project Planner
PR payment request, pair (doors); or public relations
Precon preconstruction (services or contract or fee)
Prefab prefabricated
P/S purchase and sale agreement
PT post tension (concrete cables), pressure treated (lumber), also
physical therapy
Punch punch list, also PL
PX project executive, also PE or PEx
QC quality control
QTO quantity take-off
QTY quantity, also Q
Rebar concrete reinforcement steel
Recap cost recapitulation sheet (estimating)
Rep representative (owner’s representative)
RFI request for information, or request for interpretation
RFP request for proposal
RFQ request for qualifications, also request for quotation
R/I rough-in
ROI return on investment
ROM rough-order-of-magnitude (cost estimate)
ROT rule of thumb
S structural, south, supply, or survey (drawing)
Schd schedule
SD(s) schematic design (documents or phase); also smoke detector,
soap dispenser, or storm drain
SE structural engineer, or south east
SF square foot or square feet, also start to finish (schedule
relationship)
SFCA square foot of contact area
SFF square foot of floor
SFW square foot of wall
SGF super general foreman
SHT(s) sheet(s) (plywood)
Sim similar
SOG slab-on-grade (concrete)
SOMD slab on metal deck (concrete composite slab)
SOV schedule of values (estimate or pay request)
Spec or specs specifications, also speculation
SPM senior project manager
Sprinks fire sprinklers, also nickname for fire protection sprinkler fitters
SQ square (one hundred square feet, roofing measure)
STP Small Time Projects (fictitious case study GC), also the
AGC’s Superintendent Training Program,
S/U start-up
Sub(s) subcontractor(s)
Subm submittal
Super or Supt superintendent
SVP senior vice president
SWPPP storm water pollution protection plan
SY square yard
T thermostat, time, thickness, title sheet (drawing), topography
(drawing), or ton
T&B top and bottom
T&M time and materials (contract or billing); similar to CPPF
TBD to be determined
TC tower crane
TCO temporary certificate of occupancy
TESC temporary erosion and storm water control
TI tenant improvement
TJI Truss Joist International (engineered lumber/’I’ beam)
TN or Ton tonnage (2,000 pounds)
TNG tongue and groove (also T&G)
Trade tradesman (construction field worker)
TVD target value design
Typ typical
U.L. Underwriter’s Laboratory
UMH unit man-hours
UNO unless noted otherwise, also unless otherwise noted (UON)
UP unit price
U.S. or USA United States of America
USGBC United States Green Building Council (sustainability)
UW University of Washington
V volume, vacuum, volt (electrical), vent, valve, or vertical
VCT vinyl composition tile
VE value engineering
Vol volume or volt
VP vice president
W west, width, wide flange (steel beam), waste, water, watt
(electrical), or washer (clothes)
W or w/ with
WA Washington State
WBS work breakdown structure
WBE women-owned business enterprise
WK or wks weeks
w/o without
WRT with respect to
WT weight
WWF welded wire fabric, also known as wire mesh (concrete
reinforcement)
WYT Wet Your Whistle (fictitious case study GC)
X times (multiplication), cross bracing, or ‘by’ as in
dimensional lumber (for example: 2x4)
YD yard
YR year
References
AIA Document A102 – 2017 Standard Form of Agreement
between Owner and Contractor where the basis of payment is Cost
of the work Plus a Fee with a Guaranteed Maximum Price.
Retrieved 2019 from American Institute of Architects [AIA].
http://aiad8.prod.acquia-sites.com/sites/default/files/2017-
07/A102_2017.sample2.pdf.
AIA Document A201 – 2017 General Conditions of the Contract
for Construction. Retrieved 2019 from American Institute of
Architects [AIA]. https://www.aiacontracts.org/contract-
documents/25131-general-conditions-of-the-contract-for-
construction.
American Institute of Architects. Contract documents produced
by the AIA. aiacontracts.org.
ConsensusDocs. Contract association which replaced the AGC
contracts. https://www.consensusdocs.org.
Construction Specification Institute: National association of
builders and material suppliers, source of the Master Format CSI
divisions and specification sections. csiresources.org.
Holm, L. (2019). 101 Case Studies in Construction
Management. New York, NY: Routledge.
Holm, L. (2022). A Contractor’s Guide to Planning, Scheduling,
and Control. Hoboken, NJ: John Wiley and Sons, Inc.
Holm, L. (2020). Construction Contract Documents, Amazon.
Holm, L., Schaufelberger, J. (2021). Construction Cost
Estimating. New York, NY: Routledge, previous editions published
by Prentice Hall and LAD.
Holm, L., and Schaufelberger, J. (2020). Construction
Superintendents, Essential Skills for the Next Generation, New
York, NY: Routledge.
Holm, L. (2019). Cost Accounting and Financial Management
for Construction Project Managers. New York, NY: Routledge.
Migliaccio, G., and Holm, L. (2018). Introduction to
Construction Project Engineering. New York, NY: Routledge.
Schaufelberger, J., and Migliaccio, G. (2019). Construction
Equipment Management (2nd ed.). New York, NY: Routledge.
Schaufelberger, J., and Lin, K. (2014). Construction Project
Safety. Hoboken, NJ. John Wiley and Sons, Inc.
Schaufelberger, J., and Holm, L. (2017). Management of
Construction Projects, A Constructor’s Perspective (2nd ed.). New
York, NY: Routledge.
Author background
Len Holm grew up in a construction family. His father Arne Holm was a
high-end residential and light commercial general contractor in Grays
Harbor County, Washington. Len was shoveling concrete and driving nails
from the age of 10. He eventually became a journeyman carpenter and
foreman. Len was the only member of his family to go to college and
earned bachelor degrees in Building Construction and Economics and a
master’s degree in Construction Management all from the University of
Washington. Len’s first job out of college in the early 1980s was as an
estimator and a scheduler traveling around the country building power
plants for Bechtel, one of the largest engineering and construction firms in
the world. He later found his way back to Seattle and worked on numerous
high-technology, medical, and industrial projects with a large local general
contractor as a project manager, senior project manager, and company
stockholder. Len founded his own company, Holm Construction Services,
in 1994 which has provided a variety of construction consulting services on
hundreds of residential and commercial projects including owner’s
representation, expert witness, and contractor training. He has been an
associate teaching professor at the University of Washington since 1993 and
has taught over 140 quarter-long courses on 13 different topics to
approximately 4,000 students. Len has authored and co-authored a dozen
books and several articles on a variety of construction issues including
project management, estimating, and dispute resolution. These books are
standard textbooks for many construction management programs
throughout the United States and in other countries: Management of
Construction Projects, A Constructor’s Perspective; Construction Cost
Estimating; and Construction Superintendents, Essential Skills for the Next
Generation co-authored with John Schaufelberger. Several others have been
written solo including Cost Accounting and Financial Management for
Construction Project Managers; 101 Case Studies in Construction
Management; Construction Contract Documents, and most recently,
Planning, Scheduling and Control. Questions or comments regarding this
book may be sent to holmcon@aol.com. I hope you enjoyed this new
endeavor.
Notes
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Construction Management Case Studies A Lifetime of Lessons

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Construction Management

In addition, multiple case examples included with other chapters also

Case study #1.1: Lucky developer

Case study #1.2: New owner’s representative

Case study #1.3: No loyalty

Case study #1.4: Black-listed PM

The experienced PM and superintendent team participate actively during

Case study #1.5: Team play

Case study #1.6: Multiple-multiple primes

Case study #1.7: Collaboration meeting

B. Another large family-owned business decided to build a personal

Case study #1.8: Green agent

Case study #1.9: New partner, new deal

Case study #1.10: Short pants

Case study #1.11: Users

Case study #1.12: Noisy furnace

Case study #1.14: Mitigation fees

Can you think of other public infrastructure needs that development

Case study #1.15: Sustainability trade-offs

What sustainability tradeoffs have you experienced? When project owners,

Case study #1.16: Arm waving

In addition, multiple case examples included with other chapters also

Case study #2.1: Architectural help

Case study #2.2: ADA advice

Case study #2.3: Leaking garage

Case study #2.4: Architectural fees

Architects often have an opinion about the accuracy of a contractor’s

A. The architect’s sub consultant fees may be structured similar but

Case study #2.5: Give two to get one

Case study #2.6: Pay request signatures

Case study #2.7: Safety voice

Planning for and preventing a potential safety violation?

Case study #2.8: GC’s architect is ‘low-value added’

Case study #2.9: Design QC

Case study #2.10: Come up with my estimate

Case study #2.11: Architect’s inspections

Case study #2.13: The intern

Case study #2.14: Design teams

Case study #2.15: 700 sketches

3.3: Shell versus TI

In addition, multiple case examples included with other chapters also

Case study #3.1: No room with a view

Case study #3.3: Shell versus TI

Case study #3.4: One-project JV

Case study #3.5: Make yourself valuable

Case study #3.6: Moving expenses

Case study #3.8: Branch office shutdown

Case study #3.10: One-focus, one-job contractor

Case study #3.11: Nuclear engineers

Case study #3.12: Trading local

Case study #3.13: Project controls specialists

Case study #3.14: Residential organization

Many of these residential contractor employees have worked, or will later

Case study #3.15: My reputation is at stake

This contractual arrangement is also known as a ‘pass-through contract’.

This chapter includes the following case studies related to preconstruction

4.10: Cupcake permits

Case study #4.1: Laboratory interstitial floors

A: A private university teamed with a national architect and a major local

Case study #4.6: Precon plans

Case study #4.7: Sewer easement

In addition, multiple case examples included with other chapters also