Before I can say too much about Contractors, I need separate them into two groups, those that negotiate contracts for construction and those that compete for projects based on a low bid. Most contractors don’t do both. Public work generally requires the low bid approach while others are free to negotiate contracts for construction. I strongly favor the negotiated approach.
In my experience, in almost every project, there are one or two people, board members, donors, who lean heavily toward the competitive bid model. I created a detail comparison of the two options that I adapt for each project.
The typical memo
I have been asked to make a recommendation regarding the project delivery approach most appropriate for your project. To assist in that decision, I have prepared a comparison of the Low Bid approach and the Negotiated Contract approach, see attached.
While either approach is possible, I would recommend the Negotiated Contract approach for the following reasons:
- There is a strong advantage, in any project, to have the general contractor engaged in a close collaboration with the design team from the earliest stage of the project to provide technical, cost and scheduling expertise.
- This is particularly true with a project that involves complicated renovation with the high potential for unforeseen conditions or will have to be accomplished over a very tight schedule requiring highly controlled construction logistics.
- There is the need to arrive at a reliable budget as soon as possible
For these reasons, I believe that the Negotiated Contract approach holds the least risk, best accommodates changing conditions and could actually result in a lower final cost than the Low Bid approach
By negotiating a construction contract, you will receive many of the benefits of a competitively bid approach while minimizing the risk. You will receive competitive proposals from contractors with fixed overhead & profit. The subcontracts would all be competitively bid but under the negotiated contract with the general contractor, the project team can evaluate each subcontractor on a case by case basis to insure that they are well qualified. There is also the opportunity to negotiate certain subcontracts where the benefits of bringing them into the design process early outweigh the possible cost advantage of seeking the lowest initial price.
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