How Can Construction Project Owners Protect Themselves?
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As a subscriber you can listen to articles at work, in the car, or while you work out. Subscribe NowThe construction industry in Central Indiana is booming. Everywhere you go, there are new projects underway as business expands, municipalities invest in modern infrastructure, and our area becomes a better place to work and to live. With so much activity, how can the owners of these projects—and the taxpayers funding them— ensure they’re getting the quality they need at a fair market value? The answer: Qualified Owner Representation.
What is Owner Representation?
I’m not talking about legal representation here, but “Owner’s Representation” (as it has come to be known), for construction projects. If implemented correctly, having an “Owner Rep” is very similar to having an attorney. The Owner Rep offers an informed service for delivery with zero conflict of interest. Impossible? Not at all. There are companies who do this successfully without conflict of interest. My company has done this for over 20 years.
When I say “zero” conflict of interest, I mean it’s critical for an Owner Rep to keep politics at a minimum and maintain relationships with designers and contractors strictly on a business-only basis. Owner Reps have no associations or institutes of their own, and they shouldn’t be participating in any architectural, engineering, or construction associations; to do so would be a conflict of interest.
The Owner Rep’s Role in Projects
When I started my business 20 years ago, the term “Owner Rep” was just being introduced to the industry. The first two decades of my over 40-year career revealed industry-wide abuse at every level and at a scale that boggles the mind. It revealed to me that the “Owner” really needed unbiased owner representation. Fast forward to 2019, and it’s now a fast-and-loose term that can easily get lost amidst other industry terms that can make it difficult for an owner to understand the various roles there are to play on any project. The industry was ripe for me to use what I had discovered to make a significant impact on the industry.
It’s not obvious but trust me when I say the industry is taking notice and it’s cutting deep into their hidden and overinflated margins. To see how, consider this: On a construction job, you’ll run into the following primary service providers:
- Architect / Engineer: This person obviously plays an important role in the design phase, and until lately, they have had a firm grasp on acting as the “Owner Rep”. This is a critical phase and where most of the damage is done if unsupervised by a qualified Owner Rep.
- Contractor: Moving into the build phase, your contractor is the person responsible for turning the design into a tangible deliverable for the Owner. It is critical for the Owner Rep to ensure seamless transition from design to construction.
- Construction Manager (CM): The CM came on the scene many years ago and made claims of a better way to deliver a project and that it would save the Owner money. They have their place on very large projects (+$50MM), however they still need to be supervised. The flaws in this delivery method are easy to flush out and that has forced these companies to modify the service to Construction Manager “at Risk”. My studies reveal that the only person “at Risk” under this delivery method is the Owner.
- Design/Build: This project delivery method came on the scene in more recent history. In short, this method is akin to placing the fox right inside the henhouse. Not a good idea, right? This arrangement enables the Designer and the Builder to control the direction of the project with the primary objective being to protect their profit margins. For the Owner, this means cost premiums and sacrifice to quality–in most cases never detected by the Owner, or detected too late (outside of warranty period).
- Design-Bid-Build: This project delivery method is the oldest, tried and tested process known within the industry. It is also the best way for an Owner to ensure that there are at least some controls in place to protect themselves. This is achieved because this method allows for the designer to call out the builder and the builder to call out the designer, however not to the degree that they damage an ongoing relationship. Remember Design/Build above–that was the solution of the designer and builder not having to call each other out. Yes, that puts you, the Owner, at #2, not #1, on the scale of priority. This delivery method also needs supervised closely to maximize the Owner receivable and at a fair cost.
Do you notice a trend here? All these project delivery methods put their own best interests ahead of the Owner’s best interests. They are all heavily reliant on preexisting, ongoing, and future relationships. The one thing missing within these project delivery methods is truly independent representation for the Owner and taxpayer from the rest of the industry.
But independence is not enough. Now that we have identified the key players and their roles in a project, we must turn our focus to qualifications. The industry has clearly identified and documented what makes all of these professionals I’ve written about “qualified”—all except one. There is no industry standard for qualifying Owner Reps, and the reason is clear: If the industry were to allow the qualified Owner Rep to be acknowledged as an equal player in the project delivery process, it could cut deeply into the margins they’ve collaborated on for centuries.
That means it’s on you to protect yourself. When you find an independent Owner Rep, ask these key questions to make sure your interests, and not the profit margins of your vendors, are the top consideration for any decision made on your project.