In Search of Quality -- and a Fair Profit

by Edward DiTomas

The author is chief engineer with Turner Construction, New York, NY. This article is based on a presentation to the ASCE Quality Summit, November 18-19, 1993, in San Francisco. All rights reserved.

To clear away any misunderstandings, I am first and foremost a builder -- a polite term for a general contractor. Like others of my ilk, I am always right, and if you try to change anything, it will cost you time and money. After all, I'm in business to make a fair profit.

Yes, money talks, and in today's economy it talks very loudly. We have all felt the sting of the shrinking construction market and we have all found ourselves in strange arenas competing for work that just a few short years ago we would have totally ignored.

Design professionals continue to see fees decline, which means less service can be provided. Less service might translate into fewer details on the documents: "They'll pick it up on the shop drawings"; broader use of performance specifications: "Let the subcontractor determine what is needed"; or perhaps little or no job site representation: "Let the contractor do it, that's what he's paid for." After all, designers are in the business to make a fair profit.

At the same time, contractors find themselves going up against an ever growing pack of competitors to produce lower and lower prices. Having produced the lowest price only means the contractor gets an opportunity to come in and take a final look at the real numbers and the real schedule. It may also mean they have made the biggest mistake. The client may end up with the lowest price which will make the pro forma look good and the financiers happy -- but it certainly will not be the best price or the real price. With saliva glands flowing and the smell of the kill close at hand, the contractor agrees to an unrealistic schedule driven by the cost of the project, not economics and quality. Not to appear as a mere amateur, he volunteers vast offerings of value engineering. And, of course, he's in business to make a fair profit.

Suddenly, reality sets in. The value of value engineering eludes us. The designers now have to redo documents they were not paid enough to do the first time. Weak documents go to the field but there is no designer field representation -- remember, his or her fee was cut. Addenda and bulletins are issued to fill in the gaps. The client looks to the designer to absorb not only the cost of revising the documents, but in some cases all costs attendant to the change.

The contractor has difficulty completing the project for the committed number and has a tight schedule hanging over his head. The client used an extra six months getting to his number, but the end date never changed. Schedules slip as submittals pile up -- remember, the designer's fee was cut. Subs, driven to low numbers, start to cut corners and submit substitutions called "or equal." After all, subs are in business to make a fair profit.

Changes start creeping into the project, but the client doesn't feel it should be his or her responsibility for dollars or time. Anyway, the contingency fund had to be cut to make budget, so the cupboard is bare. Changes, claims, escalation costs and the like will bring the lowest number up to a point that often exceeds what should have been the best price. Everybody needs more staff and other resources to establish damage control. Everybody's attention and all their energies are focused on everything except quality.

It is at this point that quality and economics succumb to the power of that devil -- low price. Think back to the last project when you reduced your fee or cut the schedule to a level determined by an almost uncontrollable desire to secure the work, as opposed to securing the fee and time needed to produce a quality project and make a fair profit. Did you make any profit? Will the client do business with you again? How did it affect your reputation in the design and construction communities?

Now that we have taken a small dose of reality, how do we meet our goal of producing quality projects? I would take all the fun out of your business if I gave you all the answers. Instead, I will merely whet your appetite and start your mental juices flowing with the following possibilities:

Designers

Make the impact of reducing fees emphatically clear to your clients.
Provide schedules for varying levels of service and clearly spell out the differences of service provided for each level.

Make sure the builder knows what services are and are not being provided.
Bring professional pressure to bear on those of your lot who would sell their soul to the low price devil in order to get a project.

General Contractors

Make sure the client knows what your bid or proposal includes and excludes, then educate the client to obtain the same information from all bidders.

Don't let your sales team determine schedules -- let sellers sell and builders build.

Your estimating department and the market should determine cost -- not the person responsible for the client's pro forma and financing. While the client is responsible for determining budgets, the builder should determine cost.

Owners

Listen to your designer and builder. They are the professionals and you paid them a fee for their services, so listen to them.

Make sure the yardsticks used to measure quality on your project are properly defined.

Remember: there is no such thing as a free lunch, you get what you pay for, and one of the first things to go when costs are cut is quality.

Treat all value engineering with a bit of skepticism--make them prove it to you -- first cost, final cost, operating cost, schedule impact and quality impact.

Make sure you clearly understand from all parties the impact of cutting fees, cost and schedule.

Everybody

Keep your last low-priced project firmly in mind when you pursue your next project with glazed eyes and smacking lips.

Bring your respective working groups together to discuss issues, concerns and sensitivities. Above all, learn to work in a cooperative team spirit, respecting each other's expertise. From this cooperative spirit we can once again derive pleasure and a sense of accomplishment by working together.

Involve those that have a fiscal interest in the project -- the lenders, the surety groups, the insurers, etc. They should have an active role in protecting their investment.

Remember: we are all in this business to make a fair profit!
I do not suggest we discard fast-track projects, value engineering, bidding or any of the other useful tools needed to bring about the constructed project. I do urge that as a team, we put each project in a proper perspective and bring about a balance of the processes that meets the team's realistic expectations relative to cost, schedule and quality.

Too many years ago, I worked for an organization whose motto was, "Can do!" The Sea Bees still live and work by that motto.

As the progenitors of projects, we must also look at a motto for survival. Perhaps it should read, "Must do!"