JOURNAL OF

NOVEMBER/ DECEMBER 1995 VOLUME 11 NUMBER 6

FEATURES

THINK VALUE ENGINEERING By Prakash Acharya,

Charles Pfrommer and Charles Zirbel .....................................................13

GROWING PAINS By James L. Krug................................................. 18

DON ' T BURN THAT BRIDGE! By Hassan Al-Qudsi ..................................22

PEER-REVIEWED PAPERS

MEASURING EFFECTIVENESS OF MATERIALS

MANAGEMENT PROCESS
By James K. Plemmons and Lansford C. Bell....26

USE OF DESIGN/BUILD IN E/C INDUSTRY

By J. K. Yates...........................................................33

FACILITATING CULTURAL DIVERSITY

By James C. Porter ................................................ 39

BEYOND ADR: WORKING TOWARD SYNERGISTIC

STRATEGIC PARTNERSHIP
By S. David Ellison and David W. Miller ......... 44

AMERICAN SOCIETY OF CIVIL ENGINEERS / ENGINEERING MANAGEMENT DIVISION

 JOURNAL OF
MANAGEMENT IN ENGINEERING
NOVEMBER/DECEMBER 1995 VOLUME 11 NUMBER 6
FEATURES
THINK VALUE ENGINEERING Depending on how it is exe-
cuted, value engineering has the potential to be the first
step to success—or disaster.
By Prakash Acharya, Charles Pfrommer
and Charles Zirbel ............................................................13
GROWING PAINS A study of a group of 26 engineers, with
a combined experience of 708 years, over a six-day meet-
ing shows the developmental sequences through which
members must move to become a highly functional team.
By James L. Krug .......................................................... 18
'
DON T BURN THAT BRIDGE! Team effort by all parties
to a contract—owner, architect, construction manager,
contractor and subcontractors—is a crucial ingredient for
the successful completion of a project.
By Hassan Al-Qudsi .................................................... 22
PEER-REVIEWED PAPERS
MEASURING EFFECTIVENESS OF MATERIALS MANAGEMENT
PROCESS A recently completed research project has
identified key measures of materials-management
effectiveness for industrial construction.
............
By James K. Plemmons and Lansford C. Bell 2 6
USE OF DESIGN/BUILD IN E/C INDUSTRY How will
design-build affect the competitiveness of the U.S.
engineering and construction industry in the next
decade?
By J. K. Yates.................................................................33
FACILITATING CULTURAL DIVERSITY Though often unrec-
ognized as a need and rarely practiced consciously,
it is up to managers to facilitate assimilation of
members into the organization's culture.
By James C. Porter .......................................................39
BEYOND ADR : WORKING TOWARD SYNERGISTIC STRATEGIC
PARTNERSHIP Alternate dispute resolution comes into play
only after disputes have arisen. One key to project success
is establishing relationships among parties to resolve
issues before they become disputes.
By S. David Ellison and David W. Miller ...................44
DEPARTMENTS
EDITOR ' S LETTER .......................................................................................3
FORUM..................................................................................................... 3
MANAGEMENT DIGEST........................................................................10
END OF YEAR INDEX ........................................................................... 55
FEATURE
Don't Burn that Bridge!
Hassan Al-Qudsi, P.E., Associate Member, ASCE
The construction industry is becoming,
more and more, a repeat business. Owners pre-
fer dealing with the same organizations, provid-
ed that previous experiences were pleasant.
These days the biggest bridge burners among
contract parties are claims and lawsuits.
Team effort by all parties to a contract—
owner, architect, construction manager, con-
tractor and subcontractors—is a crucial ingre-
dient for the successful completion of a project.
There is no need to antagonize any of the other
parties; the old saying that "you can attract
more bees with honey than woth vinegar" still
holds. Moreover, it is important to keep in
mind that failure of any party is failure of all.
Since an engineer plays a number of roles in
a project, he or she should look for ways to re-
duce, if not eliminate, misunderstandings and
subsequent lawsuits from the jobsite. This may
not always be possible, but these guidelines
should help parties anticipate disagreements
and find ways to resolve such disputes.
Design stage
Designers and/or architects are key players
in projects, especially in the case of an in-house
design-build project. Some things designers
should do to fully orchestrate a team are:
• Visualize the project, planning for complicat-
ed details and unique requirements.
• Visit the project during construction. Visits
can be scheduled to coincide with construction
stages or installation activities associated with
items pertinent to each professional's particular
trade.
• Ask about methods and techniques for con-
structing certain items and whether alternate
or simpler methods can sometimes be adopted.
• Accept for use typical manufacturer's details,
which are available in catalogs. They need not
be redrawn. The recommended manufacturer's
name and material particulars should be clearly
given on the drawings.
• Leave out special design items for the spe-
cialized trade contractor to design. This may
not necessarily be true in case of safety-related
Hassan Al-Qudsi is project
manager for Baker Mellon
components.
Stuart Inc., Pittsburgh. • Make contractors aware of hidden, nonstan
2 2 / JOURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 1995
dard details for retrofit projects. They may not
realize an architect's intentions for the project.
• Get specialists involved early on in the de-
sign stage and before going out for tendering.
Certain areas of specifications (hardware, spe-
cialties and other items) typically get modified
during the construction phase.
• Consider performing value engineering for
projects at certain intervals of the design stages
(50%, 75% and 100%). Such a service could be
instrumental in reducing cost and preempting
construction problems.
• Perform constructability reviews of projects
at completion of design to eliminate any gray
areas that would otherwise result in change or-
ders and claims.
• Watch out for architects and contractors with
large egos, which should be left aside as much
as possible.
Bidding stage
It is safe to assume that misinterpretations
of the scope of work start at the point of incep-
tion—the bidding stage—and get carried
through the rest of the project. Some items to
keep in mind are:
• To clarify ambiguities in scope of work to the
fullest possible extent.
• To remember that landing the right job is
more important than landing just any job. The
bottom line is profit realized at the end of the
projects and not the total value of projects be-
ing executed.
• To understand that the contractor's scope of
the work needs to be communicated to the own-
er as soon as practical after signing the contract
A memo to the owner/architect, using assertive
request for information (RFI) formats is highly
recommended. Judges look favorably at docu-
mented facts outlining contractual obligations
that have been established in the early stages of
the construction phase.
• To define the sCOP e of the work during the
bidding stage of retrofit jobs. This may be ac-
complished by asking general and specific ques-
tions concerning perceived hidden conditions.
• To ask the owner and/or architect, on retro-
fit jobs, who has as-built drawings. Note if the
architect has shown all concealed items on the
drawings.
• To ask the owner/architect to clarify general
statements such as "work necessary for the in-
stallation of' and "whether or not shown on
drawings." Clarifying such statements will de-
fine the sCOP e of work better, make the owner
more comfortable and remove gray areas. In
case the owner and/or architect fails to reply,
the contractor will still be in a better position to
demonstrate in a court of law that he did at-
tempt to clarify ambiguities.
• To allow for adequate staff ing of the job. Un-
derstaffed organizations cannot produce the re-
sults they are expected to, nor can they properly
safeguard the contractor's own interest.
• To keep a copy of a project ' s estimate with
the project 's site staff during the construction
stage. This helps them determine what kinds of
assumptions were made and improves their
ability to anticipate the project's direction.
• To update and review the subcontractors'
prequalification statements every so often. Sub-
contractors' financial status and their level of
services might be affected by their own in-
house workload. Consequently, the construc-
tion department needs to send periodical evalu-
ation of subcontractor and vendor performance
to the estimating department, who in turn
should take such information into considera-
tion during pricing of future jobs.
Construction stage
At this point every team member has en-
tered the game, so extra care should be taken
to maintain those fragile relationships among
all parties of the contract. Remember that:
• Owners appreciate a chance to reduce some
of the construction cost. Accordingly, if at all
possible, contractors should consider perform-
ing value engineering for the project to allow
the owner to reduce out-of-pocket cost. This
has the added advantage of giving the contrac-
tor a chance to come up with simpler and more
efficient ways to execute the same work. Own-
ers will, most probably, remember this service
when considering change-orders implications.
This service likely will also be considered when
choosing team players for future work.
• A mobilization period is an excellent opportu-
nity to send RFIs concerning items that, through
review and actual preparation of shop drawings,
are considered deficient or unclear. Again, it is a
good idea to ask positive questions and suggest
possible solutions.
• You should always try to reach a win-win situ-
ation with owners. The site staff needs to give
alternative solutions to the owner/architect
that would satisfy the perceived intent of de-
sign. This is true even if there is nothing wrong
with the design. The bottom line is if the con-
tractor's staff can save the owner money, they
should do it.
JOURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 1995 / 2 3
• Site staff has an obligation to anticipate prob- tween these two groups. There is a difference
lems and attempt to resolve them before they between acting as a filter and acting as a mes-
become crucial and expensive. Waiting until senger. Acting as a filter necessitates that site
problems get out of hand reflects badly on the staff screen all incoming mail, reply to relevant
site staff and the organization employing them. issues and direct subs/vendors to solutions
• It is part of the contractor's obligation to try that they might have overlooked. Sub/vendor
to mitigate damages to owners, even in cases claims and allegations need to be scrutinized
where owners are at fault. This has been rather than accepted at face value. It is not un-
learned from experience. common for a sub/vendor to underestimate a
• A good log of daily progress should be kept; certain part of the work and, accordingly, try to
it can be an admissible piece of evidence in a find an easy way out. Determining the validity
court of law. of arguments before they are submitted to own-
• Filing systems should be kept in order and a ers/architects is more prudent than having to
trail of records maintained. Copies of all docu- think of justifications later.
ments should be filed at a distant location to • By definition, a proposal request is only a
safeguard against mishaps. Do not depend on proposal. For the work to be executed on site,
memory, which is more prone to fading than ink. an order to proceed needs to follow. In certain
• A secure and safe filing system is essential. cases site staff , for time and cost reasons, may
The use of a secure trailer and fire-rated cabi- find it necessary to proceed with the work out-
nets at the jobsite is highly recommended. lined in a PR, provided the solution given in the
• Copies of all approved shop drawings should PR is the only viable alternative. Such action
be kept at the job trailer. By the same token, needs to be preceded by a confirmation letter
site staff should maintain copies of the latest re- to the owner/architect to that effect. The con-
visions to the contract drawings, which should firmation letter should describe whether or not
be clearly marked with dates received. Super- the PR has time and/or cost impacts associated
seded drawings need to be identified. A current with it. Contractors should not deprive own-
log of all drawings should be posted above the ers/architects the chance of finding other pos-
drawings' racks. sible answers to the problem at hand.
• Site staff need to keep the logs for RFIs , archi- • In pricing a proposed change order, the con-
tect's site instructions, proposal requests (PRs) tractors' site staff need to be as accurate as pos-
and submittals current at all times. For easy sible. This necessitates reviewing sub/vendor
reference, these logs can be organized based prices to ensure that they are reasonable and
on divisions and grouped under subcontrac- not inflated.
tors/vendors trades. Each subfile should con- • A COP should be concise, orderly and easy to
tain the full history and documents associated read. First impressions are rather difficult to
with a particular submittal. Keeping logs in or- change, so documents need to reflect the ideas
der helps identify problem areas, flag delayed and information in an appealing and enticing
items and facilitate quick retrieval of informa- way. Contractors are encouraged to use charts,
tion required for documentation. graphs and drawings when making presenta-
• The site staff is responsible for pushing ven- tions and submittals to owners/architects.
dors and subcontractors to make timely and ac- • For claims to be valid, contractual proce-
curate submittals for their material and work. dures have to be fully adhered to. This includes
Timely submittals help resolve coordination giving the owner/architect proper and timely
and design deficiencies long before they start notification of the intent to claim as well as the
to negatively affect both the project's schedule claim's financial and time implications. It is im-
and cost. portant to outline the contractual basis for the
• To expedite change-order—proposal (COP) ap- claim being initiated, and to give proper backup
provals, proper documentation needs to be at- and documentation.
tached to them. Proper documentation helps • Giving owners and/or their agents ample
owners better understand the issue and, there- chance to study COPs will curtail future misun-
fore, resolve their consequences promptly. derstanding and facilitate the timely receipt of
Proper documentation is especially necessary approval/rejection.
for public jobs. Government agencies, at all lev- • Owners should not develop the notion that
els, get audited. Accordingly, government em- contractors are trying to get rich through the
ployees need full backups and documentation change order process. Explain the facts and ad-
before they can approve COPs. vise of associated costs that might achieve the
• No direct communication should be allowed same results without the bigger price tag.
between subs/vendors and the owners/archi- • It may be necessary to explain to owners that
tects. The site staff should act as a filter be- including certain items in a particular COP does
not imply that the owner is paying twice for the
same item. This step could make the difference
between approving and rejecting a COP on the
owner's part.
• Loss of productivity is, in some cases, worth
more than the change-order value itself. In
those special cases it is worth it to forgo a spe-
cific COP financial return to buy some time.
However, the owner must be kept informed of
the score.
• Second-guessing owners' and architects' de-
cisions should be avoided. Even in cases where
their decisions seem irrational, making such in-
terpretations and accusations in writing (even
to subs and vendors) will only aggravate the
situation. Written statements of such nature
can be interpreted as bad faith on the contrac-
tor's part. Remember: Lawyers can subpoena
all records.
• Change orders should be resolved during the
construction phase as soon as they arise. The
longer COPs linger, the harder it will be to re-
solve them. Early resolution of COPs serves two
purposes: In the case of an add COP , the contrac-
tor needs to be paid as soon as possible for work
already in place; and in the case when the COP is
an owner's credit, resolving its implications will
give the owner peace of mind and predispose
the owner to approve future add COPs . questions: How much will a lawsuit cost in le-
Settling COPs early during the construction
stage leaves owners and contractors with less-
er amounts to disagree over at project comple-
tion. The smaller the value of outstanding
claims, the easier it is to bridge the gap be-
tween owner and contractor. Disagreements
over large figures tend to make people more
rigid, and give rise to expensive lawsuits.
• It is counterproductive to submit COPs that
are not fully studied or do not include all affect-
ed items; it will only generate additional paper-
work. COPs need to allow for all add and deduct
items. This helps establish credibility with the
owner and expedite approval thereof.
• Contractors are highly discouraged from un-
derestimating owners/architects/construction
managers' abilities during COP valuation. Unre-
alistic pricing only leads to contractors and
subs losing credibility and makes other parties
suspicious of future COP valuations. If the con-
tractor cannot substantiate and defend a partic-
ular COP while looking the owner in the eyes, it
may not be worth submitting.
• There is no law that says contractors and
owners or their agents cannot be friends or at-
tend social activities together. After all, projects
are built by people.
• Once COPs are approved, the owner needs to
be reminded, every so often, to expedite is-
suance of finalized change orders.
• Because base time schedules can evaluate
the impact change orders have on overall job
cost, time schedules should be approved early
in the project. Comparative analysis between
the as-built time schedule and the approved
base schedule can be a powerful tool in docu-
menting damages sustained and cost overruns.
• Contractors are in a better position to negoti-
ate COPs and claims during the construction
phase than at the end of the job. At project's
completion, the owner will have possession of
the project and is not motivated to approve or
issue a COP, nor to settle claims.
• Signing a certain change order, without any
reservations, implies that the contractor agreed
to terms and is relinquishing future rights to
claim for other damages associated with that par-
ticular change order. Thus, the time to address
time and cost implications associated with a cer-
tain change order is prior to final acceptance.
• If claims start to pile up or a project's site
staff feels the project's perceived profits may
not be realized, upper management should be
involved early in the game. This gives manage-
ment the chance to choose an alternate course
of action before options become limited.
• Before rejecting a proposed settlement, both
the owner and contractor need to ask some
gal fees? What is the cost of money? How long
will it take before entitlements are collected?
How will this case affect the company's reputa-
tion? What does the company's cash flow look
like? Is the lawsuit worth jeopardizing a long-
term relationship with the other party?
• At the end of the construction phase, it is a
good idea to advise the estimating department
of the final results. This will help in pricing fu-
ture jobs and in avoiding pitfalls encountered
during construction.
• An interactive relationship needs to exist be-
tween all concerned parties on the contractor's
side including management, accounting, com
puter support and human resources.
• Incentive systems, based on profit as well as
owners' satisfaction with the end product, can
be useful driving tools.
The COP and claim negotiation process is
long and tedious one. The people involved
must possess certain criteria: positive attitudes
a grasp of the subject particulars, contract ad
ministration skills, knowledge of the industry's
particulars (methods, means and techniques)
's and a full awareness of upper management
red lines. The team involved in the negotiation
process needs to conduct this exercise with the
sole interest of reaching a satisfactory
drresolutin, ather than personal- and/or ego-relate
desires.
J OURNAL OF MANAGEMENT IN ENGINEERING / NOVEMBER/DECEMBER 1995 / 25