Don’t Let Your Emotions Trump Good Business
A Case Study on Capital Project Management for Central DuPage Hospital
I’m compassionate enough to believe that good business decisions consider a human and an environmental bottom line as well as a balance sheet. Yet there are times when we shouldn’t let emotion get in the way of good business sense.
We saw this happening when we provided owner representation for Central DuPage Hospital for their expansion during the housing boom of 2006. At the time, it was popular for capital projects to choose an “at-risk construction management” approach, which entails bringing in a contractor early on to guarantee a maximum project cost. While it’s understandable that project managers might feel more at ease knowing they wouldn’t go over budget, we thought this strategy made more emotional than business sense.
Our recommendation was to use a “design, bid, build” approach with pre-qualified bidders for delivering the most competitive price for the best work. From a business perspective, the value and potential savings of this strategy far outweighed the perceived security of ensuring that the project wouldn’t exceed the proposed maximum cost. While it took a little more due diligence, we worked with our client to pre-qualify each contractor and bid. And by pre-qualifying the potential contractors, Central DuPage Hospital was able to secure a quality builder at a competitive price.
As luck would have it, the economy shifted during the pre-bid process, flipping the market from a seller’s to a buyer’s. Our client was able to achieve a 25% savings, equaling $25 million, while projects that had brought in a contractor and delivery system early on only realized a 10% savings.
As consultants, we know that any recommendation that bucks conventional wisdom will have to pass additional scrutiny. But offering a fresh perspective is what we do best.
Written by Ian Parr
Ian Parr is President of CCS International, Inc. Working in the industry since 1965, he has authored numerous articles on the topics of project and cost management.