Our Story

Painful lesson creates aggressive management program to mitigate risk

In 1995, ADW experienced a very painful project. Against ADW's recommendation on a design/bid/build process, the owner selected the lowest bidder, from five contractors, who was $160,000 low on a $2.5M shopping center.

After reviewing the numbers and scopes with the second lowest contractor, with whom ADW had previously worked, it was apparent that there was a "bust" in the bid. ADW advised the owner, in writing, not to take the lowest bid. However, the owner, assuming even with change orders of half he was still saving $80,000, took the lowest bid and required a Payment and Performance Bond to mitigate risk.

Three months into a seven-month construction duration, the contractor went bankrupt and the surety took over the project. When the surety evaluated their financial position, they were $200,000 in the hole and hired a "hatchet man" to come after the owner for change orders to mitigate the loss.

They ground the project to a halt and fired off one change order after another. The project took two years to complete. The owner lost all of his tenants due to delays, not to mention the additional construction loan interest. In the end, due to ADW's extensive unpaid time to protect the owner's interests, change orders only amounted to 4% of the contract costs.

Out of this painful learning experience, ADW created a team approach to successful construction and risk management. At a very early Design Development Phase in the process, three pre-qualified and approved (by the Architect) contractors are selected. These three are invited to present their firm's budget pricing based on the level of Design Development to-date, an open book, fixed-fee, guaranteed maximum target price, any value engineering, constructability recommendations and a proposed schedule for construction. ADW then sets up back-to-back interviews with each contractor in front of the owner. This allows the owner to first hand see different approaches and interest level and affords the Design Team multiple inputs and ideas on cost reductions and detailing. At the end of the day, all contractors have similar numbers, similar schedules, and are all qualified to construct the project. However, one contractor usually rises to the occasion and creates a "warm and fuzzy" feeling of trust, through their approach and interest level. We then select that contractor to work with us as a team towards a set budget, to build value across the board and provide feedback on cost, budget and schedule.

The contractor, upon completion of the construction documents, then formally prices the project with three subcontractors in each trade. If for some reason the number is out of line, the owner may ask the prior two contractors for a second opinion. This rarely happens, and usually we are off to construction as a team focused on budget and schedule, as opposed to the typical adversarial relationships of design/bid/build low bid approach. Everyone is working toward controlling cost, with a so/so shared savings incentive, it is in the contractors best interest to find "value engineering" ideas without compromising quality. Over the last decade of this method we have helped owners save hundreds of thousands of dollars while mitigating their risks!