CREJ - Journal

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July 1-July 14, 2015 — COLORADO REAL ESTATE JOURNAL — Page 23
Construction, Design & Engineering
T here is a growing con-
sensus in the world of
commercial develop-
ment, design, and construction
that an integrated and collab-
orative team approach to design
and construction (IPD philos-
ophy) can improve a project’s
ability to remain within budget
and schedule, mitigate risk and
deliver the same quality as the
more “traditional” design-bid-
build approach. The question
becomes “What about value?”
If the development or project is
unique (and most are) how do
we objectively and confidently
achieve good value?
One of the most difficult
aspects of delivering (or pur-
chasing) integrated design and
construction services is the
subjective perception of value.
What does value really mean?
Who on the team really makes
the decision as to how value is
defined – the owner/developer,
or the end user, an investor or
all stakeholders? The challenge
then becomes how can the team
make the approach objective and
subsequently manage value.
What does value mean? In
the simplest terms, value equals
what you get divided by what
you pay. There are numerous
variations of this value equation
in the marketplace, but over-
all this basic premise resonates
among industry players. In com-
mercial real estate, most projects
are customized and are general-
ly difficult to precisely compare
to another project due to varia-
tions in design, fluctuations in
the marketplace as to when they
were deliv-
ered, etc.,
thus making
it very diffi-
cult to deter-
mine if any
one project
achieved a
higher value
p e r c e p t i o n
over another.
For example,
if you build
two elemen-
tary schools
for the same
district and
they are gen-
erally a pro-
totype lay-
out and one
school is built
for $1 million
less than the
other, on the
surface, the $1 million savings
seems like a great value. This
scenario is often not easy to rep-
licate for some private real estate
developers because what they
build is generally unique.
Industry leaders such as the
Design Build Institute of Ameri-
ca have recently determined that
value is so important it deserves
to be identified, measured and
managed similarly to scope,
schedule or cost. There are soft-
ware tools in the marketplace
that are designed to enable a
group or team of stakeholders
to walk through a process that
defines aspects of the develop-
ment’s or physical building’s
value by scoring certain perspec-
tives identified as important by
the stakehold-
ers. Teams
will then, and
only then, ini-
tiate the value
management
process.
The classic
example of
this type of
thought can
be demon-
strated with
an elementa-
ry school. All
the stakehold-
ers (from the
owner’s or end user’s perspec-
tive) may have very different
views regarding their percep-
tion of value. For instance, a
facility manager tends to fight
for a higher quality and less
maintenance-intensive mechani-
cal HVAC system, while a par-
ent might believe a high value
item is a safer pickup/drop off
area and wide open lines of sight
for child safety reasons. Who is
right? They both are.
Taking the time to truly explain
the expectations and compile (as
a team) a list of important value
perspectives means making
decisions early that will guide
the team and help decide which
features to enhance and those
which can be compromised on
during the early and middle
design phases.
As a designer or construction
manager-general contractor in
the integrated delivery process,
it is dangerous to assume what
might be valuable on any given
project. It is really not up to the
designer or CM/GC to speculate
what is value to the owner. It is,
however, the role of both the
designer and CM/GC to lead
the other stakeholders through
this collaborative process defin-
ing value for the specific project.
In addition, there are many
other benefits included in this
value determination process.
For instance, the team embarks
on the first steps toward true
integration, which is absolutely
essential to being able to effec-
tively collaborate. This value
process forces the designer and
CM/GC to say (without say-
ing) that they are checking their
ego at the door and make no
assumptions toward their cli-
ent’s desires for their building.
“Checking one’s ego at the door”
is important, arguably a critical
factor, in being able to become
an integrated team member and
can enable the team to begin to
trust not only each other, but
also the value process itself.
The other part of the value
equation deals with cost. Mak-
ing scope and design decisions
in the design process always,
with the emphasis on always,
has an effect on cost. A signifi-
cant mistake made in the inte-
grated process is that we rush
to make decisions to change
the design and keep designing
while attempting to determine
accurate costs that impact the
project. A CM/GC that under-
stands its role in participating in
the value management process
ascends in its leadership role
and directly assists in manag-
ing this early design decision-
making process. Experience,
education and instinct drives it
to tell the team to stop design-
ing until the true cost (in dollars
and project impact) implications
are determined so the team can
decide if those desires are worth
the cost. This is true value man-
agement in action.
Our industry likes to use the
term “value engineering” many
times for what is really “scope
reduction” or “cost reduc-
tion” strategies once a project
is designed and is over budget.
Why does this happen? Because
developers and designers make
cost assumptions based on obso-
lete or incorrect cost information.
Most of the time “value engi-
neering” is a reactive approach,
trying to fix a process that could
have been mitigated with a sim-
ple change in philosophy (IPD
philosophy) and approach (team
integration and collaboration).
The idea is to determine
what value really means to the
owner and operator stakehold-
ers from the outset and then
make decisions that can poten-
tially enhance that value during
design. Sometimes this can be
done while keeping the budget
static, while other times bud-
gets fluctuate. Despite these
dynamic project variables, one
factor holds true in that it is
possible for the owner and user
stakeholders to develop a clear
and objective measurement of
the value of their investment by
way of an integrated and collab-
orative process.s
Julie Wanzer,
LEED AP
Marketing/business
development
specialist, gkkworks,
Denver
Douglas Miller,
MS RECM,
LEED GA
Director of business
development and
preconstruction,
Alliance Construction
Solutions LLC,
Denver. He also is
an adjunct professor
at the University
of Denver, Burns
School of Real Estate
and Construction
Management.