Compliments of ABC of Iowa

Photos taken by Dale Van Donselaar, Dale Photographics, Inc.

BUILDING IOWA

For many contractors to prosper in the changing world, they will need a paradigm shift in their thinking. Instead of the mentality of "it's us against them;" today's contractors must not only learn to collaborate with their clients, but they must learn to protect their clients. Often this means protecting the client from himself. Many owners complain that contractors aren't doing their job. Unfortunately, I agree ... but not for the same reasons. Of

From left: Dan Culp, Carl A. Nelson & Company, Steven Reutter, Johnson

& Johnson Crabtree Architects, John Albert, American Health Facilities Development, and Don Patterson, Washington County Hospital and Clinics, collaborate on the Washington County Hospital project.

course, there are a few contractors who perform shoddy work, but most work hard and try to deliver quality products or services to their clients. The problem is that quality is no longer enough. However, where I think today's contractors drop the ball is not adequately educating their clients about value.

How would you react if your lawyer, your CPA, your financial planner or your doctor didn't advise you and protect you? If you were like most people, you would find a new lawyer, CPA, financial planner or doctor. So why shouldn't the buyers of construction services demand the same from their contractors? If contractors want to be treated like professionals, then they need to act like professionals.

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The challenge is for everyone to understand his or her role in the construction process. Probably the number one reason projects fail is the lack of a clear project definition. Project management doctrine defines the initiator of a project, in our case the building owner, as the person responsible for defining the project. Unfortunately, in most cases the client is not qualified. Clients often have a reasonable idea of the end product they would like; however, they often find it difficult to articulate their definition, especially when they get to the technical aspects. Even worse, they often don't discuss or address many of their concerns or issues. This is not surprising. After all, we all go to professionals, such as lawyers, CPAs and doctors, for their professional opinions because we are not experts in their fields, yet we often avoid asking relevant questions. Buyers of construction services are no different.

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The trouble occurs when the client has a different vision of the end product than the contractor has. Even when most architects, engineers and contractors attempt to extract a clear definition, they focus on the technical aspects of the project. Unfortunately, a great many of the problems occur in the softer areas, such as how the contractor interacts with the client, how change orders are handled, etc. To solve this problem, better communication, collaboration and mutual respect are required because without them, the greatest opportunities for the contractor to add value for the client are eliminated or at least severely restricted.

The typical client-contractor vendor transactional relationship often leads to confrontation because of its adversarial nature. Instead, a relationship of mutual respect needs to be built upon a foundation of trust. In order to build trust, contractors must measure their performance and build the necessary trust through their actions. Since trust takes time to develop, repeat work with the same client is critical to the continued reinforcement of that trust.

Trust is critical because without it, true dialogue and collaboration are impossible.

Collaboration is the key to value

Effective collaboration starts with dialogue since the first objective of any project must be to define the project in its entirety. When you meet with your lawyer or your doctor,

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you discuss the issue, and the professional advises you on your various options. While the professional makes recommendations, the final decision is left to the client but only after he or she understands the situation and the ramifications of his or her choice.

In essence, what projects need is what I call a "strategic goal" - a project outcome that is mutually agreed upon and creates a win-win environment for all stakeholders. With a strategic goal in place, the contractor and the client can work together to achieve the best possible outcome for the project since both parties are working toward the same objective.

Collaboration works because it allows the contractor's experience and creative skills to produce innovative solutions. High-performing contractors have a lot to offer the client beyond just assembling the building. Collaboration allows this expertise to be used to its full advantage. Collaboration produces some outstanding benefits, including the following:

• Increased profitability for everyone

• Improved productivity

• Improved working relationships that result in reduced stress, making the project more enjoyable, which leads to better results

• Improved quality, which includes bricks and mortar, services and the relationship

• Improved communication

• Reduced paperwork so people can concentrate on constructing the building instead of covering their backsides

To make collaboration work, it requires measurement of performance. We don't want to get trapped in the black hole of assumptions. If you measure performance, what gets measured improves. Dr. Dean Kashiwagi and his Performance Based Studies Research Group have identified eight critical factors that high-performing contractors must measure on every project.

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1. The ability to manage the project cost and minimize change orders

2. The ability to maintain the project schedule and complete it on time or early

3. Quality of workmanship

4. Exhibit professionalism and the ability to manage, including responses and prompt payment to suppliers and subcontractors

5. An effective close-out process, meaning no punch list upon turnover and warranties, as-builts, operating manuals and tax clearance are all submitted in a timely manner

6. Communication, explanation of risk and documentation of construction interface with the client are completed on time

7. The ability to follow the users rules, regulations and requirement, such as housekeeping and safety

8. And finally, obtain an overall client satisfaction where the client desires to rehire the contractor based on performance

Yet collaboration isn't an end in itself; it's a tool used to obtain the desired true benefit - increased value delivered to the client.

Increase the value delivered to the cI ient

It is essential for the successful contractor to focus on delivering greater value to the client. The reason is simple. When clients perceive a contractor's services as an expense, they tend to purchase the service based on the lowest cost. This is common for all purchases; after all, we have been trained to minimize expenses.

However, when clients focus on value, the transaction is considered an investment. When people look at an investment, they focus on the value or the return on their investment. Therefore, it's in the contractor's best interest to focus

FALL 2007 I BUILDING IOWA

Photos taken by Dale Van Donselaar, Dale Photographics, Inc.

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the dialogue on value, not price. When a client says, "Your price is a higher than your competitor's. What can you do?" Instead, of lowering your price or trying to justify your price based on construction costs, ask the following question:

"When you buy a stock, do you purchase the lowest-priced stock or the one that is most likely to appreciate?" Then add, "So Mr. Client, are you interested in the contractor that is

project faster. When these cost savings are applied over the life of the building, they can exceed the total costs of the contractor's services, therefore converting the construction cost into a sound investment.

Thomas Winninger in his book Full Price states that 17 percent of consumers focus exclusively on value. Another 56 percent will buy value when they understand the product's or the service's value. This means that potentially 73 percent of your clients will buy based on value when you sufficiently educate the client on the value delivered. This is also true in the public works sector, I've heard several public owners say they selected a contractor because the contractor could deliver the project faster or because the contractor offered a better solution to their problems than the conventional design - bid - build process would have delivered.

the cheapest or the one that delivers the greatest value?"

The best opportunity to deliver greater value to the client is by either reducing the client's expenses, increasing its revenue, delivering the project sooner or a combination of all three. So why is this the best opportunity?

The construction cost of a building represents only about 10 percent of the total lifetime cost of a building. Therefore, instead of attempting to reduce only construction costs, the value-driven contractor also focuses on improving the remaining 90 percent because it offers greater potential. In essence, the value-driven contractor is converting the cost related to the contractor's services from an expense to an investment.

For example, the value-driven contractor must demonstrate how the use of the right materials and/or equipment can reduce the client's maintenance costs, lower the client's energy costs, extend the life of the building or complete the

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Of course, 27 percent of potential clients care only about price. But if you want to sell value, then avoid that group. It's that simple. Wattle and Daub, a roofing contractor in Wyoming and Colorado is awarded more than 90 percent of its bids, and it is certainly not the cheapest roofing contractor in the area. The reason this works is because when the return on the client's investment is sufficient, the client stops worrying about how much profit the contractor is making. In essence, creating a win-win solution starts with delivering outstanding value to the client. T

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Ted Garrison, president of Garrison Associates, is a catalyst for change. As a consultant, author and speaker he provides breakthrough strategies for the construction industry by focusing on critical issues in leadership, project management, strategic thinking, strategic alliances and marketing. He can be reached at (800) 861-0874 or by email at Growing@TedGarrison.com. For further information see his web page at www. TedGarrison. com.