What Building Owners Want and What’s Their Role in Construction

Jim Sinopoli PE, RCDD, LEED AP Managing Principal, Smart Buildings LLC Contributing Editor

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Building owners become owners either through the need for a building or additional space or a potential financial opportunity with an existing building or site. What owners want is a profitable building, with modest, predictable long-term operational costs. They want a building that is secure and that protects its occupants and assets; a building that minimizes energy consumption; a building with facility management automation systems and top notch engineers, and finally the building owner wants very satisfied tenants and occupants, with amenities related to their productivity and profitability.
 
The building owner is obviously in the driver’s seat when it comes to the necessities of a newly constructed or renovated building. The owner has planned the project and will fund and pay for design and construction. As the eventual purchaser of the building, the owner obviously has significant input and a tremendous stake in a successful project.

The key to success for new construction and renovation is a collaboration with a committed owner or client who is willing to give the design team space to develop a concept. Then both the owner and design team go through both a systematic and difficult process to refine the concept and program. Typically, the owner will see new opportunities to develop the concept for the better, and by the same token, the design team will see additional opportunities to improve the project.

During the development of the project concept, the owner may benefit from an update on the emerging technology of the building Industry, with discussions of the value of particular technology and the return on investment. During the project concept, it is best to discussion eliminate any legacy ideas and specifications.

A good building owner is a leader who can clearly communicate and is transparent in his or her decision-making, listens to experts, and encourages collaboration and innovation among the designers and contractors. Typical considerations for the owner involve the purpose of the building or space, budget, time constraints, the complexity of design, physical conditions, economic conditions, project sequencing, the project delivery method, as well as legal restrictions and environmental impacts.

Before committing to a project, building owners will commission preliminary studies to establish the project feasibility. The building owner (especially for a commercial building) wants to know if the idea is economically sound. Some of the variables that may be assessed are general economic conditions, specific situations in the area or community where the building is to be located, projected population growth, land prices, and current costs of construction. If the project is a commercial building or development, some of the initial studies will also be related to similar existing competing businesses as well as an overall assessment of the business potential and climate.

The  building owner has a long list of responsibilities: development of the program, selection of the site, site analysis, selections of consultants, appointment of the owner’s representative, design approval, budget approval, development of the FF&E, design options, project financing and insurance program, establishment of allowances, execution of the contract, approval of the construction schedule, reconciliation, inspection of the work, project safety, approval of changes, monitoring subs and suppliers payments, resolution of disputes, administration of insurance claims, etc.

The owner’s team usually consists of the owner (or a representative), a construction manager, possibly an existing facility manager or engineer, and major tenants or the overall facility user. The owner will select an architect who will then assemble the design team. Two other project teams may be constituted as well. One would be the contractor team which includes the contractor or design-builder, the contractor’s Project Manager, Construction Manager, Superintendent and any subcontractors. A supplier team will also be established, involving representatives from equipment or material manufacturers, independent product representatives and suppliers or distributors.

There are some approaches to the overall delivery of a building project. Probably the most used and somewhat traditional method is design, bid, and build. In this process, the design of the building is completed, then bid out to qualified contractors; with the competitive bidding used to determine the lowest cost bidder. Government funded projects generally use this method. The downside here is that lowest cost doesn’t necessarily mean the best value for the owner.

A second approach is design, negotiate, and build. This is a more informal process where the contractor is involved in developing the costs and negotiating a contract to construct the project based on some stage of the design. In this case, often the owner is looking for specific expertise, wants a notable architect or needs to expedite the schedule.

Another approach is design-build. In the design-build delivery method, the owner signs on with a single entity for the complete design and construction of a project, providing design and construction under a single contract with the owner. Generally the design and the construction companies enter into a joint venture or one entity subcontracts to the other. At some point after initial design, the sole entity provides a guaranteed maximum price for construction. The potential benefits of this approach are greater collaboration between designers and contactor with fewer change orders or variances (since the designers and contractor are working as one team) and better adherence to the project schedule. This approach may save time and money, as well as reduce the owner’s risk and potential litigation.

Often a building owner will hire a construction management company to handle the project from conception to completion to supplement the owner’s staff and role. A construction management company will either advise the owner or act as a contractor. When acting as a contractor, they are referred to as construction management at risk. Typically the building owner will bring in the construction management company before completion of the design and then incorporate the architect and construction management company into one entity or contract. Once contracted the construction management and the architect design teams review and evaluate the project, eventually coming up with a guaranteed maximum price. There are architectural and engineering firms that can perform construction management at risk as well. The benefits to this approach are enhanced coordination with the design team and contractors, better cohesion in the project team and reduced risk. These different approaches to project delivery are vitally important because they define roles, legal responsibilities, and risks, as well as profoundly impact the schedule, costs, and quality of the building.

The Handoff to Operations

As leader of the design team, the architect along with the contractors have responsibilities for the handoff from construction to operations. The design specifications must address important elements of the transition: startup procedures, closeout requirements, operation and maintenance data, preventative maintenance instructions, and facility operation procedures. A poor transition can mean the building launch and operations get off to a bad start and may never fully recover or only catch-up after considerable cost, effort, and angst.

Studies have identified significant inefficiencies in the capital facilities marketplace primarily related to the lack of exchange of data. The inefficiencies were estimated to be in the billions of dollars. More interesting was the fact that two-thirds of that cost are borne by owners and operators, primarily during ongoing facility operation and maintenance. Other studies have been done regarding the use of Building Information Modeling (BIM), a tool for design, construction, and exchange of data primarily used in design and construction fabrication but very little in building operations. The point is that the handoff from construction completion to operations is often inadequate, setting up suboptimal operations from the start. More effective handoffs prescribe that we embed operations and maintenance into every aspect of design and construction.

Commissioning is the powerful tool for heading off any operational problems such as comfort and health issues. Commissioning can help building owners ensure that things like temperature control and humidity control are handled correctly from day one. Commissioning has been proven to be an effective tool in maximizing building efficiency and comfort. However, it is not uncommon for building owners to believe that the cost to commission a building is too high when added to an already large building construction budget. The truth, however, is that with the improved efficiency from commissioning, utility savings typically pay for the cost of commissioning within a few years. Also, if commissioning prevents health and comfort problems from ever beginning, the building owner is saved the expense of tenant turnover, maintenance, and, worst of all, the effects of an unhealthy building.