November 16, 2000 3:16 PM CST
Persons and companies involved in the project (owner, general contractor, subcontractor, suppliers, architect, etc.) enter into a formal agreement, or covenant, vowing an atmosphere of trust, comraderie, and good faith. Working together, they develop a stated, written declaration of commitment, communication, and fellowship with the ultimate goal being the eradication of disputes, misinterpretations, and misunderstandings that can permeate, plague and eventually spoil a construction project - possibly leading to costly claims and litigation.
In addition to this covenant, details of the project - construction costs, value engineering, contractor fees, scheduling, even dispute resolution - are discussed in an open forum. The implementation of those items discussed is mutually ordained, noted as part of the agreement, and becomes law. Who and what is included in these discussions is entirely up to the group.
The theory behind partnering is laudable - and likely grew from negative past experiences of both owner, architect, and contractor. The problem with the theory is that, well, it's a theory - and we're working with people. Given the myriad of personalities and temperaments out there, the odds of eliminating all misunderstandings are pretty high. Perhaps the best we can hope is that we improve a good percentage - but that's still better than the old (competitive bid) way!
Competitive-bid, of course, is where a number of general contractors are invited to quote on a project and the low-bidder (the winner ?) gets the work. There may or may not be an established relationship with the owner. The project is bid and let. What happens next is one of the true oddities of the construction process. All of a sudden, it becomes an "on-your-mark ... get-set ... grab the money" free-for-all ultimately pitting the GC against the architect against the owner (and back again). You don't have to be Einstein to see this isn't the best working atmosphere in the world. Partnering attempts to correct this ill-fated relationship.
The contractor and sub-contractor, wearing his businessman's hat, needs to analyze the situation and weigh the cost against the profit. Office time costs money; exactly the same type of money you pay a carpenter, steel worker, or electrician. If the total job cost is only $25,000 (and your negotiated percentage or fixed fee is, perhaps, $5,000), you're clearly not going to be able to devote many man-hours to development. On the other hand, a $3,000,000 contract (and a $ 250,000 fee) make the office costs pretty easy to stomach.
This may mean that, every now and then, you'll be asked to break out the cost of individual items or groups of items such as fixtures or separate labor numbers. Now, it's no secret that you don't like to do this - no one does. It's more work and there's a natural (and perhaps well-founded) tendency to feel "over-exposed" from a business and bargaining standpoint. You're concerned that with so many of your numbers hanging out there, it won't be long before they (the GC, owner, and architect) determine where your profit lies. If you've ever felt this way, there are a couple of things you need to know. First, most of the time, the reason we've asked you to break out a number is because the owner asked us to break out the number. Secondly (and please listen very carefully): "We don't care what your profit is!" I have never argued with a sub over their profit margin - other things, yes - but not the profit margin. As far as I'm concerned, if you've given us a professional, lump-sum quotation that includes complete scope of work and reasonable delivery of service, it's wonderful that you're making good profit ! As a matter of fact, even if your profit did turn out to be higher than I thought - the only thing I'd be is jealous.
I know this doesn't sound like much - after all, it's just a piece of paper - but the human condition (and pride) is a peculiar thing. People don't like having themselves perceived as unethical or dishonorable. The "realness" of the partnering document re-enforces a person's natural inclination towards honesty (and, yes, I do believe it's natural). This tool that solidifies loyalty and commitment has no handle, switch, or motor, but is every bit as real and effective as a circular saw.
Partnering to Success
Working with each other instead of against each other
Partnering - that magical, mystical expression racing around the construction world these days - seems to be picking up speed. For years, the only time you heard the word was in relation to government and military work. Now, it seems everyone is fiddling around with this mercurial construction management philosophy.
What is Partnering?
Well, that seems to be part of the problem - you see, it can mean different things to different people. So let's start with a general definition. Simply stated, partnering means "working with each other instead of against each other." More precisely (and when applied to construction) partnering is a management philosophy that attempts to improve construction project development and deployment through teamwork among all parties involved. Persons and companies involved in the project (owner, general contractor, subcontractor, suppliers, architect, etc.) enter into a formal agreement, or covenant, vowing an atmosphere of trust, comraderie, and good faith. Working together, they develop a stated, written declaration of commitment, communication, and fellowship with the ultimate goal being the eradication of disputes, misinterpretations, and misunderstandings that can permeate, plague and eventually spoil a construction project - possibly leading to costly claims and litigation.
In addition to this covenant, details of the project - construction costs, value engineering, contractor fees, scheduling, even dispute resolution - are discussed in an open forum. The implementation of those items discussed is mutually ordained, noted as part of the agreement, and becomes law. Who and what is included in these discussions is entirely up to the group.
The theory behind partnering is laudable - and likely grew from negative past experiences of both owner, architect, and contractor. The problem with the theory is that, well, it's a theory - and we're working with people. Given the myriad of personalities and temperaments out there, the odds of eliminating all misunderstandings are pretty high. Perhaps the best we can hope is that we improve a good percentage - but that's still better than the old (competitive bid) way!
Why Partner?
Just for fun, sit down sometime with an experienced commercial general contractor (CGC), owners' construction representative, or architect and ask them about any jobs in the past that didn't go quite like they'd planned - oh, and be ready to stay awhile. You'll be regaled with tales of loathsome contractors, bumbling architects, and lunatic owners (depending on whose regaling). With some minor differences, the storyteller will always be the "good guy" (you'll be able to tell by his white hat) and everyone else the "bad guy". The tale will likely be chocked full of change-orders, poor documents, bad communication and "the other guys just not understanding our side". And if you dig a little deeper, you'll very often find out the job was a competitive bid job. Competitive-bid, of course, is where a number of general contractors are invited to quote on a project and the low-bidder (the winner ?) gets the work. There may or may not be an established relationship with the owner. The project is bid and let. What happens next is one of the true oddities of the construction process. All of a sudden, it becomes an "on-your-mark ... get-set ... grab the money" free-for-all ultimately pitting the GC against the architect against the owner (and back again). You don't have to be Einstein to see this isn't the best working atmosphere in the world. Partnering attempts to correct this ill-fated relationship.
What Types of Jobs are Partnered?
On paper, virtually any job can be partnered. In reality, a little common sense needs to be employed. Partnering takes a lot of communication. Remember, the name of the game is no surprises and to reach this level, there are: preliminary meetings, bid meetings, post meetings, emergency meetings ... you get the point. It uses up office time - and money - in a hurry.The contractor and sub-contractor, wearing his businessman's hat, needs to analyze the situation and weigh the cost against the profit. Office time costs money; exactly the same type of money you pay a carpenter, steel worker, or electrician. If the total job cost is only $25,000 (and your negotiated percentage or fixed fee is, perhaps, $5,000), you're clearly not going to be able to devote many man-hours to development. On the other hand, a $3,000,000 contract (and a $ 250,000 fee) make the office costs pretty easy to stomach.
What Type of Customer Uses Partnering?
Again, most any owner could be a candidate. I've found that larger institutions such as medical facilities, manufacturing, retail chain stores - any place with ongoing work and maintenance - tend to be more approachable regarding partnering. They might even approach you with the concept. Of course, if they do, jump at the chance to, at least, get together and discuss your thoughts. We (contractors) all like the security of the ongoing, long-term deal. When coupled with an agreed-upon, assured, and fair (not a killing, but fair) profit - it's almost always a good deal. We get steady cash-flow and a little shelter against a major loss. Is There a Danger of Becoming Too Familiar?
Familiarity may indeed breed contempt - and construction is no different. There should still be a written legally binding contract delineating the legal responsibilities of all those involved with the project - just like before. The main difference now is that partnering establishes a positive, productive working relationship in writing. The "let's get along" covenant is no longer implied (like before). It now becomes a tangible agreement, able to be touched, filed, and referred to (if needed) - an actual working element of construction process. Breaking any part of this pact would be akin to leaving out a structural element in the building - simply not acceptable. At What Point Is Partnering Introduced?
The earlier the better. If it's a larger project, there may a meeting very early on to discuss the partnering concept itself - more of a "brain-storming" session. One of the main themes is to see right away if there's anything (or anyone) that poses a threat to the harmony and fellowship required by the partnering agreement. Anything and everything of concern is discussed - value engineering, personnel requirements, payment, conflict resolution ... you name it. From this initial encounter, more definitive ideas and methods are cultivated and the data formalized and transposed into a full-blown partnering scheme. What's the Role of the Mason Sub-Contractor in Partnering?
You're in it up to their eyeballs! By agreeing to be involved in the project, they've agreed to the pact. The general contractor will be sharing costs, markups, and invoices with the owner - and you're going to be expected to do the same. Granted, most communication will (and should) be done through the GC, but you'll still be obligated to be open, honest, and (yes) enthusiastic about the partnering plan. Everybody's a team now - and there's no place for individual agendas and attitudes. This may mean that, every now and then, you'll be asked to break out the cost of individual items or groups of items such as fixtures or separate labor numbers. Now, it's no secret that you don't like to do this - no one does. It's more work and there's a natural (and perhaps well-founded) tendency to feel "over-exposed" from a business and bargaining standpoint. You're concerned that with so many of your numbers hanging out there, it won't be long before they (the GC, owner, and architect) determine where your profit lies. If you've ever felt this way, there are a couple of things you need to know. First, most of the time, the reason we've asked you to break out a number is because the owner asked us to break out the number. Secondly (and please listen very carefully): "We don't care what your profit is!" I have never argued with a sub over their profit margin - other things, yes - but not the profit margin. As far as I'm concerned, if you've given us a professional, lump-sum quotation that includes complete scope of work and reasonable delivery of service, it's wonderful that you're making good profit ! As a matter of fact, even if your profit did turn out to be higher than I thought - the only thing I'd be is jealous.
So What's the Difference Between Partnering and Design/Build or Negotiated Deals?
The difference is the written moral agreement. Before partnering, the atmosphere of trust and goodwill was generally implied early - and left to whither on the vine as deadlines grew closer, mistakes appeared, and temperatures rose. With no written code, finger-pointing and "revisionist history" (that all-to-common malady where people mold the past to meet their present predicament) enjoyed a solid breeding ground. With partnering, and the written agreement, you have something tangible - a document that can be held up if needed - in case a party begins to stray from the pack.I know this doesn't sound like much - after all, it's just a piece of paper - but the human condition (and pride) is a peculiar thing. People don't like having themselves perceived as unethical or dishonorable. The "realness" of the partnering document re-enforces a person's natural inclination towards honesty (and, yes, I do believe it's natural). This tool that solidifies loyalty and commitment has no handle, switch, or motor, but is every bit as real and effective as a circular saw.
Conclusion
Partnering works - and not because it's the newest fad or because I tell you so. Partnering succeeds because it's a better approach to construction for all the participants - not just the builder, not just the architect, and not just the owner. Besides being logically sound, it also touches, addresses, and reinforces an aspect of the human condition that all too often goes untested in today's business world - honesty, integrity, and commitment.
About the Author
With over 25 years in construction, primarily as an estimator and project manager, Steve Saucerman now writes, speaks and consults for the construction industry. He also teaches part-time in the Building Construction Technology division for Rock Valley College in Rockford, Ill. He has published two books and over 350 articles to date and his writing is featured in construction periodicals all over the world.
