If you were around and fortunate enough to have a cell phone 30 years ago, you most likely had a Motorola “brick”. It made calls. It did not have a camera, email, mapping or navigation function, calculator, clock, or play music. It could act as a paperweight, mini-dumbell, or a defensive weapon in a pinch.
Now, think about how much has changed in cell phones in the last 30 years.
Do you know how much has changed in the construction process during that same 30 year period? Not much.
We still construct offices and buildings using the same process, with mostly the same materials, in the same way. Sure, there have been some token design changes and there is often a greater focus on energy savings. Many of these changes are style trends rather than cutting edge innovations, like switching from autumn colors and wood paneling to white finishes and glass.
Here’s how most new building construction projects happened then, and how most still work today:
Imagine a series of adjoining but unconnected rooms. They have walls but no ceilings.
Execs from a company are sitting in the first room. They decide they need a new building. How big and where? They pick a size (let’s say 50,000 SQFT) and some boundaries, write it on a piece of paper, and throw it over the wall into the next room which contains their real estate advisor.
The real estate advisor does some quick calculations and determines that they’ll need 4-5 acres of land, so goes out and identifies some properties and the company purchases one.
The advisor takes the requirement for a 50K SQFT building and the survey, and throws it over the wall to the next room which contains an architect.
The architect then designs the building. Perhaps there are issues because the real estate advisor didn’t properly estimate water retention requirements. Or setback restrictions. Or utility access. Or department of transportation mandates. Perhaps the company didn’t fully consider future expansion needs. Or above average parking requirements. Or fibre optic accessibility. In any case, the architect does his/her best, completes a set of drawings, and throws it over the wall to a contractor for bidding.
The contractor immediately calculates the impact fees of that particular site which were not anticipated. He also calculates the cost of concrete, steel, and other resources that might be in short supply and therefore at premium prices to just a short while ago. He then throws the drawings over the next wall to his subs, to give him pricing.
The subs complain that the design is not the way that they’d do it because the equipment and fixtures were specified from a catalogue/web site supplied to the architect and their engineers by various sales reps. Some of those products have better, more efficient, and less expensive substitutes however the subs are required to bid per the specifications.
Not surprisingly, the final price is significantly above the original planned budget. Perhaps worse, the owners had the opportunity to take advantage of the expertise of the real estate advisor, architect, contractor, and subs and instead severely limited their ability to add value.
So what is the Better Way?
Start with them all in the first room together. Negotiate an open book arrangement and agree to reasonable fees up front for profit and overhead. Now everyone is on the same team.
Perhaps the broker could have suggested a location just outside of the boundaries provided without the impact fees, and perhaps even with economic incentives.
Perhaps the company could have taken advantage of efficient design strategies and only needed 40K SQFT.
Perhaps the contractor could have suggested tilt wall or other construction methods that could save time and money.
Perhaps the subs could have suggested the latest technology in HVAC, lighting, and utility saving features.
Perhaps. Unfortunately, using a 30 year old process, this company will never know.