The battle to lower branch costs begins earlier than you think.
There is probably no more despised phrase in all of construction than “change order”. The phrase elicits thoughts of pain and suffering beyond measure. Imagine Dante’s Inferno, Nails on a Chalkboard, or Crying Babies on an all-day flight to nowhere! Maybe I went over the edge a little there, but for an owner (who is paying the bills), change orders can be more than a little unpleasant.
What few owners know, or realize is that the battle lines against higher branch costs and change orders are NOT established after the design is produced, and the project is being bid. The fight for lower cost is won much earlier in selecting your project delivery method.
Getting Low = Change Orders
Most community banks or credit unions are accustomed to hiring an architect to design their branches or main office, and then bidding that project amongst qualified general contractors (GCs). Though this method is familiar, it is far from the most effective, and wrought with competing voices.
- Architects design without a clear understanding of costs.
- Furthermore, GCs only bid what they see in drawings.
In the fight to get low (to win the work), GCs are forced to forget what they know. The strategy is to win the work, and then manage change to make a profit.
Another option is available
There is an upgrade available to this methodology – hiring both the designer and GC, simultaneously (under one contract) i.e. design-build. A large study completed by Penn State University compared different methods to deliver construction across the US. Their research uncovered projects using design-build had lower cost (over 6% in savings) and were completed 33% faster. Furthermore, projects using design-build (hiring one firm to design and construct) were also much less likely to incur cost growth (5% less) and schedule growth (11% less) – FEWER CHANGE ORDERS!
Faster. Lower Costs. Fewer Surprises.
Design-build was created to deliver projects faster by overlapping phases of design and construction. So speed to market deals with opportunity cost. The other key benefit is getting constructability input on the front end to nail down costs, schedule, and reduce as many surprises as possible. When we created our company 13 years ago, we had several options available to us. However, we chose design-build because we understood how important cost, quality and schedule are to community banks and credit unions.
In fact, over our last $100 million in construction projects – encompassing 25 states – our change orders average less than 2.45%.
Design-build delivery allows us to partner with our clients, not compete with them on costs. And that partnership is producing greater certainty and predictability to their business. Banking today is very different than in the past. Risk is everywhere. But you can quantify the ROI for Branching.
