New methods of project delivery are changing the face of project procurement. But what is the role of small or medium-size regional contractors in alternative project delivery (APD)? While the newer methods were initially used primarily on large projects, more and more owners are seeing the value of APD on smaller projects as well. APD allows owners more flexibility to accelerate the project time line, identify and mitigate risks, incorporate greater innovation and receive the overall best value.
APD is a growing industry trend. Yet some small and medium-size contractors are resisting the movement, which will likely prove a short-sighted approach. Just like any other new industry trend or technology, you can ignore it, fight it or embrace it. APD may offer an excellent opportunity to expand or diversify a construction business.
Contractors should consider APD as they would a new business development opportunity: carefully and strategically. APD has advantages and disadvantages, risks and rewards. A formal evaluation will help identify what those are and how they should be addressed. A few of the barriers inherent in APD include: increased investment in resources, the need to develop relationships with design firms and the higher cost of project pursuit.
The most important resource for success in APD is finding the right people with the right skills. These people need to understand the alternative procurement process, be skilled in communication (particularly proposal writing) and understand how to work well with designers. They also should have the ability to identify project risks and develop innovative design and construction solutions that can mitigate those risks. In general, this requires a different mind-set and capabilities than for traditional low-price bidding. Finding or developing such people will require commitment and investment.
It is essential to develop relationships with design firms that also understand how to succeed in APD projects. Just as the contractor's people need to be good at working with design engineers, the engineers need to be good at working with contractors. Successful APD teams develop collaborative relationships and pool their talents to prepare proposals that communicate the detailed solutions the contractor offers for reducing cost, mitigating risk and providing best value.
APD projects are typically more expensive to pursue than traditional design-bid-build jobs. This is especially true with design-build. Contractors need to be prepared for the costs of hiring a design firm and spending several months on a pursuit.
While many owners offer financial stipends to help offset project development costs, the stipends often cover only a small portion of the expense. Consequently, contractors should carefully evaluate which projects make sense to pursue. It is a question of risk versus reward.
Small to medium-size regional contractors can find success in APD projects. Some larger contractors may not be as competitive on smaller projects, and some smaller competitors who traditionally excel in bid-build may not be willing or able to develop the skill sets for APD.
Regional contractors are also attractive joint venture partners for large companies looking for a local firm to pursue large APD projects. Teaming with an experienced APD contractor may be a good way to overcome some of the barriers and gain experience before pursuing alternative project delivery alone.