The best way to build

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Looking at the pros and cons of three basic types of construction

shutterstock_93376225One of the most frequently asked questions I get from dealers is how to go about hiring a general contractor and architect.

Choosing a general contractor (GC) and an architect can be a difficult task. It can be confusing to a dealer who is an expert in selling and servicing vehicles, but not necessarily in building or renovating facilities.

It is particularly tricky when there are tight timelines mandated by an OEM, or that are self-imposed.

One of the biggest mistakes we see is dealers who rush through the planning phase.  It usually adds time and cost to their projects.

Here’s a look at the three basic types of construction that we see at dealerships in Canada: Stipulated Sum, Design Build and Management.

Please note that we are assuming a dealer is building a new facility or expanding an existing one. Renovating an existing facility or retrofitting another building for automotive can be quite complex and do not necessarily follow the examples below.

Stipulated Sum

This is likely the best way to understand your budget prior to beginning a project. It is necessary to hire your architect first and have them do a complete set of construction drawings including all details.  These drawings are then sent out to GCs for pricing.

Pros: Relative cost certainty if construction drawings are of high quality.
Cons:  Change orders are a risk and can be very costly.
Risks: GCs only price based on the construction drawings and details.  If information is missing, it is over and above the scope of work and can cause costly overruns.
Accountability: Your architect needs to be hired first, and is your key representative to accurately set the scope and ensure the GC follows their obligations.

Design Build 

This generally can get you started quickly and cuts planning time. It ensures speed and efficiency as the GC has autonomy on design and coordination issues but can compromise the quality and user input.

Pros: Construction tends to be quickest using the Design Build method.
Cons: Quality of construction tends to be inferior as GCs may cut corners or purchase inferior materials to stay on budget and on time.
Risks: The architect works directly for the GC and will not necessarily represent the dealer’s interests.  There may be a lack of checks and balances.
Accountability: Your general contractor needs to be hired first, and is your key representative and has enough autonomy to keep your project on time and on budget.

Construction Management

This is more collaborative based and the GC and architect are chosen early in the process. GCs typically get paid a percentage of overall budget so it is important to get a good handle on budget early on.

The best method is to speak with your OEM to find out typical cost per square foot of projects similar in scope and geography to yours.

Pros: Collaborative structure that encourages the GC and architect to value engineer building.
Cons: Budgets and timing are harder to manage.
Risks: If the GC and architect are not on the same page, the dealer gets stuck in the middle
Accountability: The GC and architect should be hired simultaneously at the very beginning of your project.  A dealer has much more influence in decisions, timing and cost throughout the building process.

In the late 90s and early 2000s, most projects were either Stipulated Sum or Design Build. Over the past five years, we see many more Management projects.  From our perspective, building quality and efficiency is superior with a Management structure. In cases where there are multiple building projects, we see dealers benefit by keeping the team together for additional projects.

The last point, and perhaps the most important one, is that there are standardized contracts for each of these methods.

Dealers should be aware of the Canadian Construction Documents Committee:

This site is a valuable resource to help ensure you choose the right construction method for you and understand each party’s obligations.

These basic explanations should help you start planning the best route to take for your new build or expansion project.

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