Raising the Bar

As I was watching the Florida State/Auburn NCAA football title game Monday night I reflected upon the Bowl Championship Series (BCS) system of ranking the teams.  This system uses a combination of polls and computer simulations to determine team rankings and post-season matchups.  Many people have been highly critical of the system over the years and next year it will be replaced by a college football playoff.

This made me think about how the construction industry is in need of a better way to determine who gets to play in the marquee games.  When I say “marquee games,” I am referring to projects that demand highly unique products and skills, or are significant in size.  They are the types of projects that only a select group of architects, general contractors, subcontractors, and manufacturers have the experience and resources to effectively manage.  So here are my thoughts on how the industry can better determine who plays in the championship game.

There are several conditions that may dictate that a project requires a methodical selection process for the construction team.  Here is a list of a few that come to mind:

• The project is of monumental scope requiring the personnel, facilities, background, and financial resources to meet the demands
• A complicated technology is involved in some aspect of the project such as a new curtainwall system, rainscreen design, mechanical system, or unique structural conditions
• A specific skill set or craftsmanship required to perform the work such as finishing, masonry, or window restoration on preservation projects
• A challenging construction schedule that has no room for mistakes
• A very demanding owner that is overly involved in all aspects of the project

When a project contains one or more of the above conditions, it is important to establish a set of guidelines to prequalify who is going to have an opportunity to bid the job.  If no such restrictions exist, the team could be inviting a weak link to manage a critical function.  Instead of creating a computer simulation model to mimic the BCS to screen participants, I recommend that the construction team spend time drafting prequalification criteria for all those disciplines that are vital to the success of the project.  These criteria should consider the following elements:

1. Past Projects

One of the best determinations of future success is past performance.  A good prequalification form will have a list of past projects of the same scope of work and size of project.  The submissions should have a list of contacts so it can be verified that both the scope and magnitude of the work qualify the company.  For example, performing a window replacement scope on a historic project does not qualify a company for window restoration just as painting the exterior of a landmark building does not qualify a company to perform detailed fresco work.  The construction team must spend time to verify the validity of the submissions of past project experience.

2. Company Information

Basic background data on a company can be illuminating  in evaluating a company’s resources to manage a particular project.  The following items should be captured in the prequalification:

·         Number of employees by classification

·         Number of locations and size of locations

·         Legal name, date of incorporation, state of incorporation

·         Legal structure (corporation, S corp, LLC, partnership, sole proprietor)

·         Names, addresses and phone numbers of officers

·         Supplier references

·         Customer references

·         Number of contracts by contract size

·         Lawsuits and judgments against the company in the past five years

·         List of projects that company failed to complete

·         Website

·         SBA, WBE, DBE, MBE, Hubzone certifications

·         Certificate of Insurance from the insurance agent outlining coverage limits

3. Financial Information

The financial background of a company has become increasingly more important in the past decade given the economic challenges confronting the construction industry.  You don’t want a qualified player declaring bankruptcy in the middle of your project.  The following information can be helpful in securing information on the financial stability of a participant:

·         Income statement and balance sheet (preferably audited or reviewed)

·         Five year history of sales

·         Banking information including loans, lines of credit, and banking contacts to verify the information

·         Letter from the bonding company declaring overall and project-specific capacity, and the bonding agent contact information

·         Dun and Bradstreet number

4. Safety

The safety background of contractors and subcontractors is fundamental information for these players.  A well run project shouldn’t have to suffer the burden of lapses in safety.  The following information should be evaluated:

·         Workers Comp Experience Modification Rate (EMR) for the past three years.  Have these numbers submitted from the insurance agent to assure validity.

·         OSHA citations in the past five years

·         Copy of the company’s safety plan

·         Name and contact information of the Safety Officer

5. Project Backlog

A listing of the current projects with contract value, percent complete, and reference contacts can be very useful information in establishing the current condition of the company.  If the amount of current business is sparse, this information combined with the financial data can be a warning flag.  Conversely, an excessive backlog compared to the capacity of the business can indicate problematic conditions for this company in the near future.  It is important to invite balanced companies to the table.

6. Site Visit

I highly recommend visiting the company facilities as part of the selection process.  In this age of social media and electronic marketing, it is much easier to convey an image that doesn’t reflect the true nature of the business.  I have seen many a mom and pop organization look like the next IBM through their website.  There is no room for smoke and mirrors on a well managed project.  A site visit can do a great deal to validate all of the information provided above.

If the criteria outlined above are utilized in a formal prequalification process the construction team is much more likely to thrive.  I have found in the past that it doesn’t take many bad apples to spoil a good project.  Hopefully your prequalification efforts will be as successful as the BCS was this year and you have a result a thrilling as Florida State’s narrow victory over Auburn on Monday.