Construction Industry Leaders Share Insights
BUILDING DIALOGUE / JUNE 2015
CEO, Saunders Construction Inc.
Vice President and
Recently, an esteemed group of construction industry leaders presented a panel discussion during CREJ’s Development & Construction conference. Topics ranged from taking care of the client to doing things “better, faster, cheaper” (and the new construction and technology solutions that enable it), from collaborative efforts to the labor shortage, and from funding to how a midsize company can grow and compete against the big and the small companies.
How does your company take care of the client? What specifics can you share? Why do you think it makes a difference?
JB: At Saunders, we work hard to define the success of the project through our customers eyes. In fact, not only our customer, but the entire team. By understanding what that success looks like and what unique obstacles we need to overcome on each project, customer care happens as a natural outcome.
EH: For over 40 years, Haselden Construction’s purpose is and has always been to “fulfill our customers needs completely” Every one of our team members recognizes the importance of doing the right thing and is empowered to make decisions, which ultimately results in a better project outcome for our customers. At the end of the day, we do what we say we’re going to do. It makes all the difference in the world and in a highly competitive marketplace, commitment is king.
DN: In an industry where reputation is everything, you need to make darn sure that everyone in your company is putting the client first. If you satisfy 50 clients but upset one, you are back to rebuilding your reputation.
Early in a project, we engage clients in our Collaborative Design Process to listen to their needs – and help them make good decisions. As projects progress, we complete three client satisfaction surveys – to learn how we are doing and what we could do more effectively. This is how we learn. We gather actionable feedback through a robust in-person interview rather than employing a digital survey or push-poll.
The Neenan Company has designed and built numerous successful projects. We don’t point fingers; we take responsibility, meaning we are also accountable to our clients. This is in sharp contrast to our wasteful, litigious industry.
MR: Our goal is to be more than a builder – we strive to be a business partner. We have made significant strides in bringing more value to our customers, from the ability to offer broad development and financing solutions to real estate and building assessment or looking at overall organizational and facility operations on an energy-efficiency and operational cost basis through Mortenson’s Center for Sustainable Energy.
Our highest goal is achieving our customers success factors. The initial efforts in setting up the team and creating a collaborative environment are crucial to a successful project. It makes a huge difference because not only is there a lot of financial impacts, but also impacts on both individual and corporate reputations as well as overall impacts on the community as a whole.
How can the industry do projects “better, faster, cheaper?” (How does technology fit into that equation? What elements contribute to this outcome? Where does collaboration fit in? Self-performance?)
JB: Innovation has been a key strategic driver for Saunders for some time now and we firmly believe in the advantages and efficiencies it brings to design and build processes. However, bringing teams together and developing high-functioning collaboration among all team members has the highest impact to building better, faster and cheaper. The most state-of-the-art technology or innovation can fail if the project team is functioning poorly and communication is breaking down. Project success is brought about by first building a strong and highly functioning team and then implementing the best strategies with the most effective tools and techniques available. While it might be a bit “old school,” it still works.
Alongside high-functioning teams utilizing innovative tools and techniques is the integration of the design and construction process. Streamlining design and incorporating modeling techniques to flush out inefficiencies and conflicts earlier lead to a quicker design cycle, fewer delays in construction, and lower overall costs.
EH: When Haselden built the University of Colorado Hospital’s new tower and critical care wing, we utilized multitrade pre-fabrication and modularization to build the project better, faster and cheaper. In fact, our competitors said it couldn’t be done and we beat both the schedule and the cost. We had the big national contractors touring our project to learn from us. Technology has changed how we build Virtual design and construction reduces errors and issues before we’re placing a shovel in the ground. That eliminates rework and waste, and substantially increases the quality. Haselden also has a large self-perform crew that allows us to drive the schedule. As the old adage goes, “If you want something done right, do it yourself” We truly believe our ability to self-perform certain trades gives our customers a better building.
You can learn more about that project on our website: www haselden.com/portfolio-items/project-4/
DN: Most people think it’s the technology that helps us work better I think it’s a combination of technology and humanities. After a failed project in 1976, we learned that the ontology is as much or more important than the technology. Ontology is a “way of being” in the marketplace. Technology can give us tools to improve client satisfaction, but we cannot forget the tool users. Technology plus carelessness equals trouble. Good character, concern for humanity; positive attitude and strong work habits are vital attributes that allow us to meet our clients’ conditions of satisfaction. Leadership focused on philosophy; psychology and ethics help us to retain clients and employees.
Cheaper is not the solution. You want better and faster, but you want the buildings to perform. For us, it is not the building but how the building performs for the client and the building occupants. When a CEO needs and asks for a building, his/her concern is usually much deeper (ie., what the building will enable in the company’s future).
We are in an industry where integrity is often broken. Some builders have been known to take the low bid even when they know the bid is missing scope. I think most anyone can build a cheap building, and that’s not what we want to do. An apples-to-apples comparison is a misnomer. Buildings are not commodities. At the end of the design-build process, clients typically find little value in the delivery of cheap buildings. Our reason for existence is to create an experience that is designed to add value for our clients. The odds of that happening are much improved by engaging all parties upfront in a spirit of collaboration.
MR: It’s not about being the cheapest, though cost is certainly a critical factor in any major commercial project – it’s about focusing on the highest value we can bring to our customers by being “smarter’’ as well as better and faster. We all know being “cheaper” in one area might not end up being the most cost-effective solution in the long run. For many of our customers, time is money and collaboration is key to having the right product at the right price at the right time.
Collaboration is key and setting the right tone and getting buy-in from all parties at the beginning is what helps us best leverage our expertise in technology. For instance, the use of Bluebeam Studio facilitates collaboration virtually; regardless of whether the team is local or remote.
Our self-performed capability enhances our ability to control the pace of the project and deliver the highest possible quality. We have more than 400 craft workers in Colorado and they are known for their adaptability; exceptionally high quality of workmanship, and attention to detail.
How is the industry combating the labor shortage stemming from the exodus during the Great Recession?
JB: Certainly the growing lack of skilled labor is driving innovation in the areas of prefabrication and other solutions that allow for more efficient use of labor on the jobsite. In the long run, however, this challenge will only be solved by doing a better job of messaging and recruiting young people into our industry. This is a serious long-term issue that requires changes in how our industry is perceived and understood by young people considering their career options. AGC Colorado and other organizations supporting our industry in the state have been collaborating on, legislative solutions such as HB. 15-1170, Postsecondary Workforce Readiness, currently under consideration. More importantly; tools have been created to assist job sourcing and provide a one-stop shop of industry opportunities. www.BuildColorado gives job seekers a place to quickly find the opportunities and develop a sense of the types of careers available in construction. Finally; through these same organizations and as individual companies, our industry is reaching out to middle and high schools, community colleges, and trade schools to promote the crafts and educate young people on the opportunities that exist in the field.
EH: Finding and retaining talented team members is a challenge for all firms. The market is extremely flush with activity; which in turn drives (some) people to consider a job change. Thankfully; Haselden hasn’t really experienced that type of attrition. We’re proud of the fact that Haselden is taking the opportunity to mentor young professionals and grow our workforce, especially in the trades we self-perform. We also have a robust training program, Haselden University; which gives our team members the ability to learn new skills. Giving people the opportunity to create their own destiny and not pigeon-hole them, so to speak, in to one particular path has proven successful.
With the uncertainties of the oil and gas industry at present, new workers are entering the construction workforce, which is helping with the labor shortage as well.
DN: When the industry cycle gets hot, everybody has to scramble to find qualified subcontractors, material suppliers, and others essential to the process of designing and building a successful project. As an integrated design-builder, we enroll our subcontractors and others as partners earlier in the process to get a jump-start on project information. Through this involvement, the team can make cost and schedule commitments to our projects well in advance. Trust is a big issue, and we do our best to build trust with our partners. In return, they find the talent necessary to get the job done. Without trust, the only way to get people to work together is by power and obedience. This is distrust, and it is a very expensive way to coordinate action.
MR: I think the interest in careers in the construction industry can be cyclical. We are currently see the gas and oil industry in a counter cycle and there may be opportunities to tap labor markets there, especially as Mortenson broadens its reach into the civil and horizontal markets. Throughout our 34-year history in Colorado, we have developed and consistently maintained organized outreach and internships with our educational institutions, from K-12 through college. We engage with the Construction Industry Training Council and Architecture, Engineering and Construction Mentorship programs to ensure a strong talent pipeline understands the opportunities in our industry.
What are the funding options for commercial real estate projects? PPP, joint venture, private development – please elaborate.
JB: At Saunders, we see innovation and change not just in process and techniques but in project delivery as well. Similar to the design and build processes, blurring of lines between developer, institutional owner, public agencies, designer and builder continue.
Public-private partnerships are continuing to move beyond just large transportation (horizontal) projects and toward vertical building and relatively smaller endeavors to achieve the most viable and efficient options to fund projects. New and different partnerships at all levels of the delivery stream are becoming more and more common as collaboration between all parties takes on unique and creative forms.
EH: Funding options for development deals vary on the size and type of project. We are seeing everything in Denver from private equity; institutional equity; large funds, etc. Denver has become a very appealing market for development investment and, as a result, a variety of structures are available depending on the risk profile, desired returns and hold periods. Construction deals and development deals are very different and, thus, the risk is completely different. When managed correctly; the can be very profitable and complimentary to both the development arm of the company and the construction arm of the company.
DN: The LEED Platinum Powerhouse Energy Campus at Colorado State University was a public-private partnership We developed a proforma to help our client understand the financing and other vital considerations necessary to make the project a reality. This project was a success. ENR Mountain States awarded this the top green project and one of the top three regional projects for 2014. Concerning funding, banks have new limitations on lending and despite low rates, financing is far more difficult to secure today The Dodd Frank Act has not helped.
MR: We believe there is a bright future for PPPs in Colorado. We are exploring several options related to PPPs. Certainly; the PPP structure is more conducive to governmental work higher education and infrastructure but we are exploring how it may work on other product types like hospitality and health care.
Mortenson is excited to be able to offer our clients a variety of options when it comes to financing their projects. We have augmented our presence in this area by adding staff who are solely responsible for finding the appropriate equity and debt partners
for our projects. We are able to offer related services of site analysis and selection and development cost-benefit analysis services to ensure our customers have a holistic real estate solution. Mortenson Development is also investing its own equity in certain opportunities, which allows us the flexibility and creativity to provide true alignment with our customers and partner’s needs.
Our platform allows us to work with existing land owners who want to remain in the deal or who want to keep the asset in the family for generations, providing flexibility and creativity. Combining construction and development allows us to guarantee price and schedule for these partners, thereby reducing their overall risk on the project.
Finally, how can general contractor firms grow and compete? Is there room for the midsize guy?
JB: At Saunders, we believe that we are better able to serve our customers and achieve success for our organization and its people through collaboration and partnerships. As a midsize regional contractor, it is often too easy to feel caught in the middle of the widening gap of large national and international firms and small “Mom and Pop” companies. We have formed partnerships at the project level that have allowed us to compete and grow into larger more complex projects and gain the experience and knowledge that come with performing on those projects.
Also, we have established long-lasting business relationships with peer companies in other major markets that allow us to deliver construction services on a national platform. Through our affiliation with the Citadel Group, we have the reach of a $25 billion work program in most major metropolitan areas around the country.
There is still a place for the midsize firm in our business but only to those that are willing to leverage their relationships and partnerships to compete at every level.
EH: Being nimble, listening and then responding to the market is the key to growth. Knowing what you excel at (and what you don’t) and sticking to your business plan also is crucial. Chasing “shiny objects” can be detrimental – if it looks too good to be true, it likely is. We pride ourselves on aligning our firm with customers who value what we have to offer. In turn, we strive to act as an extension of our customer’s business and truly offer them a superior experience to that of the competition.
We also do our own development, which creates opportunities for our construction company. This, too, has allowed Haselden to grow This has been primarily in senior living and multifamily; along with core office buildings.
DN: Smaller firms can leapfrog the traditional industry because they are nimble. We have always been a relatively small firm, and that has helped us focus on the client with our integrated design-build model. After nearly 50 years, we are still learning and having fun. It’s important to have happy clients and employees, but there are real challenges in any company.
Almost every industry is integrating except the construction industry. The construction industry needs innovative pioneers with courage to make the shift to design-build integration in the face of much criticism from those who represent the status quo.
Life occurs as a complex whole. When we can’t comprehend something in life, we break it into parts in an effort to understand what’s going on. In so doing, we tend to get lost in the parts. For example, if we want to know how a clock works, we break it down into the parts. This is called analysis. Our post-secondary education system specializes in teaching the parts. Most students are taught that their part in the building industry (design, engineering, field, etc.) is the most important.
As a result, when there is a breakdown, no single entity takes responsibility for the whole. The client gets stuck trying to understand what to do with the parts. Our challenge is to unite the diverse parts into a comprehensible whole for the benefit of the client. This is called synthesis. When our industry can do this effectively; it will be a new day.
MR: We encourage entrepreneurship and new ideas and support this culture with formalized internal training and mentorship programs as well as external mentoring efforts and outreach to minority; women, small and disadvantaged businesses. As one of the pioneers of BIM, Mortenson has a long ingrained history/culture of leveraging innovative technologies and we continue to do that into the 21st century. We are taking our expansive expertise with prefabrication and lean practices to deliver a higher-quality product to our customers, in a faster and safer environment.
This culture of innovation and “building what’s next” is made even more valuable when we look the ways we’ve been able to augment financing and development services, in addition to other programs such as energy use analysis and modeling. It’s about offering a complete and holistic solution and being a value-added partner.