Most construction companies and builders are familiar with being awarded work based on price or low bids. But Jim explains that in methods such as construction manager at risk (CMAR) and integrated project delivery (IPD), the contract is selected based on qualifications. This qualifications-based selection process usually follows a formal scoring procedure.
- Construction companies are used to being selected based on low bid. Yes, we've always liked to use the term best bid or most qualified bid, but let's face it. Under design bid build, it's usually about price. The clients that I worked for when I was running that street improvement construction company were mostly government agencies, and according to them, they always selected the most qualified bid, not just the low bid, but in reality the most qualified bid was defined as the lowest bid that had been correctly prepared and submitted by a licensed contractor that included a valid bid bond.
That's not setting the bar very high on qualifications. There was no basis to include past performance or experience in evaluating a bid proposal. Even on private work, I had clients who developed select or preferred lists of contractors based on past history and performance, and that did limit the number of contractors who got to submit a bid, but in the end, it still most often came down to price. Did I have clients who would hire me even though I cost more than my competition? Sure I did, and that's where you want to be as a contractor, but none of this is the same as competing for a qualifications based contractor selection.
Qualifications based selection is different. You can't just be good, you have to show them that you're good. When a project owner doesn't have price to use as the main qualifier, they turn to other criteria, and the contractor ends up being chosen in a process that's closer to the process that's used to select an architect. An experienced owner, or one that's done some research, will try to use as much objective criteria as possible to help them choose a contractor under this process. I talked earlier about public agencies using some kind of scoring system to help them rate each contractor and arrive at a final choice, and many private owners are adopting this same system.
Let's go back to one of my project examples, back to that client I mentioned earlier competing for a CM at Risk contract with that public utility company. This agency uses a scoring system that includes five different criteria items and it looks like this. Criteria number one requires the contractor to identify specific project team members who will be involved in this actual project. They want names, qualifications, and assurances that these people will stay involved when the project transitions from pre construction services over to the construction phase.
In the scoring system this is worth 25% of their score. Criteria number two asks the contractor to define the tasks and activities they'll perform during the pre construction phase and it requires them to identify how these tasks will reduce the risk for schedule and budget increases once they move into the construction phase. This is also worth 25% of their score. Number three deals with scheduling. They're asked to describe safeguards and assurances that they'll put in place to ensure that the project starts and ends on time, and they have to provide information and references from past projects showing that they start and finish on time.
This is worth 20% of their score. Item number four in this case is very specific to this project's scope of work because the project contains some unusual work items, so the contractor's asked to prove that they understand these items and explain how they'll go about doing this particular work. This is worth 20%. The last 10% of their score comes from them providing a list of tasks that they want the owner to include in the scope of work for pre construction services, and it asks the contractor to describe how these tasks will bring the most value back to the agency.
While the award of points in each of these categories can be subjective, it does provide a scoring matrix for the selection team to follow and it does use some measurable or score-able criteria for making that selection. In this process the agency scores each proposal they receive and they arrive at a short list of contractors for further consideration. Once that short list is generated, the agency may request further proof of qualifications including project references or safety records, and they'll also schedule interviews with each one of those short listed contractors.
This interview process is the final basis for ranking and choosing the successful CM at Risk contractor. Note that prices are not submitted or discussed in any of these evaluations. In this case, once a contractor's short listed, it all comes down to the interview, so stick with me and let's continue the discussion about that interview process.
- Payment and procurement methods
- The design-bid-build method
- The design-build method
- Construction manager at risk (CMAR)
- Integrated project delivery (IPD)
- Selecting a project delivery method
- Procurement laws
- Delivering the best value to the owner
- Qualifications-based selection
- Changes in the way you are paid