I recently had the privilege to present a 75-minute breakout session at the NBOA Annual Conference in Boston where I spoke about the real meaning of "total cost of ownership." I truly enjoy these sessions because I learn a lot during the Q&A and then even more from the people who approach me after the presentation with feedback.

One of the things that occurred to me during my presentation is that I often take for granted that I work for an educational institution and the fact that it's not going anywhere. By "not going anywhere," I mean that my school is staying in its current location for something on the order of at least the next 100 years.

Why is that important? It matters when you approach construction because if I'm purposefully developing a structure to last for at least 75 years (and usually it's quite a bit more than that), it's a completely different value proposition than one that is supposed to last for something less than 25-50 years (a typical cycle for a developer building).

I want to qualify my 75-year stance again because I also understand that there are some buildings, campuses and/or schools that are master planning for a possible relocation to a new site. For them, the value proposition for a new building or major renovation may have to consider the short-term investment, but in most cases this is not true.

This article is predicated on those schools, companies, buildings and campuses that are staying put versus planning a possible near-term en-masse relocation.

What's different about planning for 75-year buildings?

So let's say you're building for more than 25-50 years. What is different? As it turns out, a lot of things are different. A developer who is intending for a building to last for something less than 25-50 years (sometimes even less than 10 years) essentially wants to bring the "product" (the building) to market quickly — speed is everything.

The reasons have to do with return on investment (ROI). In a great many cases, the developer has investors, and they have made a purposeful investment based on a pro-forma business case prepared by the developer that gives a range for possible ROIs. The investors have agreed to the lowest rate proposed by the developer as their minimum attractive rate of return (MARR).

The developer has a lot on the line. The building needs to be up and ready with a lease-out or unit sale at a high percentage of the occupiable space quickly (usually more than 80 percent of occupiable space within the first few months of completion). This means that the process around the planning of construction is secondary to the speed of delivery. Another way to put it is that first-cost/low-cost is everything.

And even another way of thinking about this speed to market is that the planning and details for construction are best served to be highly standardized around speed of delivery over almost any other objective. Quality is typically focused on the visible finishes and not infrastructure elements. Everything relating to infrastructure is done to meet the minimum standards prescribed by codes and regulations.

OK, so what if you're building for something more than 25 years? Say, maybe something on the order of 75. I actually joke with my project teams that my owners' project requirements (OPR) are for 500-year buildings.

This inevitably gets grins around my preconstruction table, but then I remind them that I have two buildings dating to 1890, one from 1917 and so on. (All total, I have 22 buildings of varying age in my inventory.) The grins slowly turn to serious looks.

Design-bid-build is not a good fit

What are some minimum requirements for building a 75-year building? Let me start by telling you what doesn't work — conducting the age-old "design-bid-build." The developer method of hiring an architect to draw up a set of plans and prepare construction specifications for permitting and bidding, selecting a group of general contractors, collecting bids, and then building the project is possibly the worst way to attain a 75-year building.

I love the old saying, "A competitive bid is the only poker game where the losing hand wins." In a great many cases, you don't even want to tell the low bidder how low their bid was. The "winner" of a competitive design-bid-build (DBB) project starts wondering what they left out of the bid the second they are awarded the contract. There are now reams of documentation that DBB projects have large cost overruns when compared to negotiated construction projects.

The graph above is from the book, "Buildings ... The Gifts That Keep on Taking: A Framework for Integrated Decision-Making." This book is published by APPA's Center for Facilities Research. The graph represents large buckets of expense over a typical building's lifespan. Approximately one-third each for planning, design and construction, then maintenance and operations, and then capital renewal.

What if we were to change the size of the slices of the pie in the graph above? What would happen if we put more money into planning, design and construction and lowered the expenses related to capital renewal and maintenance and operations?

You would save a lot of money over the lifetime of owning, operating and maintaining that building, that's what would happen. You'd also have happier occupants because they'd be in a building that "works."

This is no longer conjecture, this is now a documented reality. Even many state governments are now allowing for negotiated pricing with construction management services on construction projects versus DBB. Wow, if state government is seeing the value, it must be real.

Employ a collaborative process

Personally, I haven't yet been able to pull off a true Integrated Project Delivery (IPD) building — a situation in which all stakeholders have "skin" in the game and share in the burden of quality and delivery due to contractual obligations. However, I am intrigued by IPD, and someday I'll utilize this highly collaborative process.

In the meantime, I've done something more akin to what is commonly called, "IPD light." The recipe is actually quite simple, but unless you're in the position to truly call the shots you will always run into opposition from those who value speed and price over process and quality.

The idea that many folks in your finance office don't understand the value of process over cost is hard to believe, but I've found over my career that it's just the way the profession has taken most folks in finance. So, do your research when you're advancing the concept of using a more collaborative approach to project delivery. Fight for what you know is right.

Right after I've verified the internal need for a project, I will typically write an RFP for architectural services, construction management (CM) services, commissioning services (CxA) and owner's representation services. Shortly after selecting the owner's rep and then getting the architect on board, you will then bring on board both the CM and CxA while you're in the early concept phase .

You’re now saying, "No way! My management will never allow that frivolous expense." To that, I say, "You are not building to a 75-year standard." These up-front costs are marginal against the total cost of owning and operating your building over its lifespan.

The highly collaborative approach (IPD light) will be one where you negotiate a cost-plus fee from the CM and where they open their books for you to review each and every bid (you see, you are actually bidding the work). Upon collecting your RFPs, the negotiation phase will be where you establish the cost-plus percentage you're willing to pay the CM for managing the work. You can either establish this in the RFP, leave it for them to propose or propose a range yourself — it's your call.

You'll also be negotiating the preconstruction project estimating fees the CM will be providing based on the continuing collaborative design being put forth by the team. Your CM will be using these estimating tools to help keep you on a pre-established budget or possibly move your budget because of items you either need, missed or really, really want. These items are priced, and then you're allowed to make a decision regarding whether it's worth paying for. Conversely, they may also find tremendous savings.

This process is better than finding out after you bid the work and now have to scramble to either radically redesign the building, find more money, perform dreaded last-minute value engineering or change your program. You are actually constantly value managing (versus value engineering) the design against the program allowing you to build the absolutely best building you can with a well-known budget.

As it relates to these preconstruction services your CM will provide to you, you will ask for a range based on your OPR and brief description of the size and scope of the proposed work. You can take this as a not-to-exceed and then be sure that you stay within the guidelines of the original agreement — if you change the scope from the original agreement, you will owe them some more money.

I often negotiate the extras of a CM contract aggressively to lower them. Pay close attention to the proposed general conditions of your CM. You need to tie that down tightly because if the cost-plus percentage is low, a CM will typically try to make it up with general conditions.

Why it's better to pay more upfront

When your CM is sitting in the design development session with the CxA, discussing details with both the architect and relevant consultants, you will develop value by the accident of collaboration. I also work hard to assure that we are not pressuring the architect to reduce the fees of MEP, structural, civil, landscape, lighting designers, acousticians, envelope consultants, geotech, etc. I need these people at the table, and I don't want to argue over ad-services every time I invite them to a meeting.

If the architect's subconsultants have not planned accordingly for the fees associated with collaboration, then you won't be able to schedule them or you'll get the "C" team from the consultant showing up because they've had to book other work to stay in business. If you get a low number from the architect for the consultants, just be sure that you carry some owner's contingency for extra preconstruction meetings that you will inevitably need.

In the first few weeks of engaging your architect, CM and CxA, you will want them to help develop the basis of design (BOD). This should be done in a highly collaborative manner based on the program requirements established by your end-users.

With an emphasis on this preconstruction planning, you will make much better decisions, in an integrated way, around balancing the efficacy of the MEP systems against the opulence of the finishes. With your CxA on board, you'll also be ensuring that your systems work, including things such as your envelope, something historically left to the chance of field alignment.

When your design team is not just the architect and their consultants (who have been beaten down regarding their fees) and you are working to assure that everybody has a voice for the eventual quality of the building, you will lower your operations and maintenance costs along with future capital renewal costs.

You will meet resistance in suggesting this concept because, once again, the industry has not caught up with concepts on planning and collaboration already being enjoyed in manufacturing.

The design and construction industry is, sadly, the only industry that has not radically increased efficiency and productivity in the last 60 years. Auto manufacturing, computers and electronics have all seen large jumps in efficiency and production. Much of this is due to preplanning for both assembly and production.

It was proven in the last century that you cannot inspect quality into a completed product — it must be integrated into the design and manufacturing. It's time for construction to catch up.