Construction Pricing Reviews: A Guide for Architects

In this episode of What The RFI, Matt Brennan dives deep into the intricacies of construction administration, focusing on the critical aspect of pricing. He shares personal anecdotes, particularly about his experience buying a vehicle, to illustrate the importance of understanding costs and reviewing pricing diligently. The conversation covers various topics, including change orders, pricing requests, the necessity of involving the right teams for pricing reviews, and the significance of comparing pricing across different projects. Matt emphasizes the need for due diligence, tracking outstanding requests, and the importance of building long-term relationships with clients through careful financial management.

Takeaways

• Understanding the pricing process is crucial in construction administration.
• Change orders can arise from various scenarios, including RFIs and site instructions.
• It's essential to track the days that pricing requests are outstanding.
• Involving the right teams is key to accurate pricing reviews.
• Comparing pricing across different projects can provide valuable insights.
• Due diligence in reviewing pricing can save owners significant costs.
• Cash allowances must be handled carefully to avoid overcharging.
• Finalizing change orders requires attention to detail and proper documentation.
• Building long-term relationships with owners is vital for future projects.
• Investing time in upfront planning can prevent costly changes later.

Chapters

• 00:00 - Introduction to Construction Administration and Pricing
• 02:02 - Understanding Change Orders and Pricing Requests
• 06:12 - Reviewing Pricing and Involving the Right Teams
• 09:47 - Comparing Pricing Across Projects
• 13:57 - Finalizing Change Orders and Cash Allowances
• 18:02 - Best Practices for Pricing and Project Management

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Transcript

0:00

Show me the money. Let's get into it. Welcome to What The RFI, I'm Matt Brennan and this is the podcast all about construction administration. So today, it's all about money. Show me the money, where it lies. And this is a typical process when you are doing a fixed-tendered, stip-sum type of project. If you're doing more of a construction management project, this may or may not apply. So, in respect to that, back in November, I purchased a new vehicle. It was really exciting. I got a brand new Bronco. It was end of the 2024 line. I had got a good trade value for my Mustang. It was a sad day, but it was very exciting at same time because I, you know, I'm an outdoors person. I'm always moving. I love being out back country. Not as much as I love the need for speed on my Mustang. Couldn't really do it. So when meeting with the dealership, you know, I already kind of had preliminary numbers going into it. And, you know, the buying process is really key. You know, when you go there, you want to look at everything, right? You want to look at all the fine details. Maybe you're a person that just goes in, puts the credit card down on the table and walks away and you're happy. Me on the other hand, I like to know I don't like that sticker shock. I like coming out of it feeling really, really good at the end of the day. So I already had my pre-order numbers in mind. But when we were meeting, going over the final numbers right there with the seller and myself and going through it, you know, I was checking everything. I was really in line by line. looking at it, looking at the additional items that they've started to kind of throw into the mix and start questioning that. I had my app for a calculator based on my trade in value. I had all my numbers in place and everything at the end of the day was adding up. So when it came to that final signature, I was happy. I knew what I was going into. I was happy with the price and the trade in value. And again, all the taxes and all those fun little things that they sneak in. I knew about it. I was aware of it. There wasn't any kind of regret afterwards. So when it comes to CA, what are we looking for when it comes to that type of pricing? What's required? And before we get into that, let's look at the process. How did we even get there? And kind of in previous episodes, you can go back and we kind of dive into the exact process and line by line and how we create a proposed change and all that. You can go back to those episodes and so on. Again, kind of a recap, know, there is typically a change on site. know, it's maybe it's the owner, you know, again, maybe it's error on the drawings, this was created from an RFI. You know, there's lots of different scenarios of why there is a change on site and that's gonna start to trigger the pricing, okay? So of course, typically you're gonna get pricing when you issue that proposed change, right? That goes without saying. Sometimes you might issue an SI. And you know, typically an SI, Supplemental Instruction, Site Instruction, it's more just saying, hey, move this outlet from here to here. And you know, assuming that, of course, it hasn't been built and therefore there's no cost associated to it. And that makes sense in that they would just proceed that there's no change to the contract in terms of contract value. But sometimes that change, which you might feel as an SI, actually it is, there is a lot of cost to it. It's not as simple as you think it is given the circumstance. And, you know, at that point, the contractor may provide a request for extra on it, right? And that, you know, goes without saying it. Sometimes you'll be just working, nothing happens, and then you'll get out of the blue a request for extra, something, you know, this is what the contract wants for an extra. And again, that's where you got to go through this review process and justify if we even are entertaining this as an extra or not, right? And... You know, the hot topic right now is a tariff, right? Tariffs are on the rise between Canada and the US, and maybe that has come into effect, and that's prompt a request for extra as well, right? So there's a bunch of ways where we are going to see this pricing come into our lap and go from there. And the other thing is too, maybe you issued a change directive. Again, there was a full episode about that, how those all work, but you know, also known as a CD. But the reality is you've issued a change directive, they're... do immediately going ahead on site, doing all the work in that respect, and then they come up and they give you the finalized pricing once the work is done. Again, we don't issue change directors very often. Again, it's an open checkbook. There's a lot of dangers to it, but again, sometimes it is required given the circumstance. But like the proposed change, basically we'll issue a proposed change to the contractor. He's gonna come back to us. And then at that point, we're going to get pricing review. So pricing has been received. And before we get into that, one thing I would really encourage you is to track the days that you, when you issue a proposed change, track the days that it's outstanding with the contractor. He's always coming to us with an RFI, hey, this RFI has been outstanding for X amount of days. Well, put the ball back in court and start tracking the contractor. you know, the software I use, part three, it does that, it does track the amount of days and I've used it. I said, hey, contractor, this has been outstanding with you for 60 days. I need to get pricing because we're getting to the point where the job site window's closing for this item to be completed because you're gonna be boarding it up, right? We need to get pricing, we need time to review it, especially if it's very complex, you know. So put the owners back onto the contractor, track the amount of days that it's with them, all right? So pricing's in. What do we do? Right? Where the first thing? Well, I would log it. File it into your system, throw it on your Windows server, whatever the case is. Program I use part three takes care of that. It handles all the methods and everything, logs it for you, keeps it all well organized with the PCO, with the pricing, everything's all coordinated in respect to that. And at this point, you got to kind of look at what is the pricing for it. This always goes back to the original proposed change. So if it was an electrical item, you're gonna need to get electrical involved. If it was adding a brand new rooftop unit, you know, if you wanted to provide additional cooling to a zone, well, now we've got quite a bit into that. So again, if that was a rooftop unit, we've of course got the mechanical engineer wanting to review the price of the mechanical unit, electrical reviewing any electrical work to it, structural reviewing any of additional seismic requirements, the structural loads that are gonna be taken from this. Us as the architect, because in just general, we're the CRP, we want to just make sure that all the additional miscellaneous labor is taking place. And the list goes on. So per item, it won't be just you as the CRP, as the architect, you are going to need to get others involved with it. And it's really, really important with that. And as a team, you're going to review it. I might be fine from the architectural side, but... Electrical may have some disagreements going, we were literally just moving some conduit from this place to this place and really we're just pulling off. This should be an hour's work. Doesn't change the panel size. They're going to put their comments into it. And of course, does the pricing even align to what you're doing? And that goes back to electrical saying, this doesn't matter in that respect. So these are all the little things that you're going to check. And getting into the details of this in terms of respect of the checking of this is even quantities correct. That's a big key one. For example, I had a contractor come up and they wanted a shim placement because the way the parapet detail was done, had our angle bracket with the cue deck coming in. And because of that angle bracket, yeah, it's like a quarter, three-eighths. half inch thick and the way the parapet was drawn in detail we needed a shim at top. Makes sense, we missed in the details. I've never had a contractor come for request extra on any other job and the same details been always applied. But they wanted that little strip and they wanted an extra. And the extra was pretty aggressive. It was a very high extra and it was something we, know, right off the sticker shock it just didn't make sense. This was just scrap material just to basically shim it up. So the quantities that they gave were they were out to lunch. you in that particular case, you know, having the 360 model Revit BIM model, I ran around and measured all the parapets, said we wanted a, you know, a three inch, you know, two inch strip there. And I basically took a four-byte sheet and measured all out and did all the math. In the end, it was two pieces of plywood, right? It was simple, didn't need to be pressure treated because again, it was all going to be membrane around. And then in the end, I said, look, you know, we pushed back on that change, that request of extra because it just didn't make sense. We started joking with the contractor saying, we'll bring the two sheets of plywood next time we come to site, we'll throw in the back of the truck and we'll even pre-rip it for you so you can just add it and tack it on and away you go. But that's again, when these requests for extras, when this pricing comes in, do your due diligence, confirm it. And I think this even goes into like the bigger ones where you've got site fill and stuff like that. Like that's where money can get really thrown away. Money's in the dirt, they say, right? And that's where like, and we'll do a segment on this by itself, but drone technology can measure the cut and fills and actually see, and then you've got your civil engineer doing it. Do your quantity takeoff because that... small investment of time spending that few hours of checking those things. Maybe it might even be just, you know, 20 minutes. You know, the parapets took me no time at all. You're saving your owner thousands of dollars and they appreciate that. All that really come, you know, really in the end has a bigger impact in the long run. It shows that you care about the project. You're not just blindsiding, signing the check off. It's not your money. You're right. It's not. It's public tendered money in this case, or it's an owner's money. by you putting the investment back into it and reinvesting into the job, you're investing into the owner and that's going to invest into your long-term relationship with them. do your due diligence, check it out, absolutely. And on that, how does this compare to other pricing, right? You are receiving pricing on other jobs that you're working on. You're not just working on one job, at least I hope you're not. You would be starting to see these change orders throughout different projects in respect to that. I worked on a number of daycares at a single time. They're all tendered individually because they're all on different locations. Same style of daycare, but it's just dropped in six locations. So when our mechanical engineer, you know, made a mistake and they issued, you know, a new fire damper in one location, we knew once we got one or two prices, we kind of had a general idea. We would get pricing for these other daycares because there was six of them throughout the community there. and they were all different contractors. So when we got all the pricing, we had apples to apples to compare. And sometimes we had reasonable apples and we had very high priced apples. And we could, you know, we never shared the data because that's just not ethical, but we would push back and say, we're getting pricing on other jobs. How does it compare? And that goes with anything. How is this compared to other changes throughout it? And even too, when we've gone through all these high level items, like these are, you know, know, right electrical, you know, again, like, you know, this change, this equipment, all that. But when you get into the fine details where it comes to the administration costs, you know, is your overhead and profit the right amount? Per your contract and your CCDC2 contract or the actual formal contract that you've made, you know, the contractor is entitled to overhead and profit on this and along with their subs and I believe it's five and 10 and it all depends on what that states. But do those numbers match up? Okay, and speaking of overhead and profit, where it does play in a role, if it's a change, then it's fair enough. If it's a cash allowance that you're using, again, so you've made a budget of a cash allowance for blinds, well, they can't put overhead and profit because they've already put overhead and profit when that was part of the tender. So all these things, you just gotta be really due diligent and look into all these details, okay? And at the end of the day, all through this, is it too high? If it is, if this pricing is not fair and reasonable, reject it. It's that simple. Push back to the contractor. You're going to send it back. It's going to go back to the contractor. He's going to go back and fight with the subs. And then hopefully he's going to come back and he's going to provide you revised pricing. You're going to see the differences. And then hopefully at that point we can approve it and then we can wrap this up. And sometimes you won't get into that. It all depends, you know, with today's labor shortage, COVID delays, you know, there were still have here in that supply thing. It's definitely getting better, but at the same time, and some things it's still not like there is still a long lead items and they have the market, they have the control of the monopoly and they can push back. it is very frustrating when you're stuck in that relationship with the GC and they've got a sub that they just, they... They can't get rid of, they need them for the job and they're pushing back and sometimes you'll have to eat it. You're just going to have to pick your battles. Where do you want your mountain, your molehill kind of scenario? Is this the fight to push back on? And it's tough, it really is. unfortunately, I have, there is no guidebook to that. I think it's kind of case by case, who's your owner and look at that. But there is a point when you are pushing back on this pricing, how much more time are you going to invest in this? How much more time is your mechanical and your electrical? And especially if you guys got to come together on a meeting, that one hour is, you know, that's a thousand dollar meeting. How much are we talking out of that pricing difference? A thousand dollars, I think we just need to call it a day. If it's a hundred thousand, then fair enough. Pull out the time and effort, push back, because it really does make an effort at the end of the day. And you know, for tips and everything, kind of things that you can do to get honest pricing is you can delete something from the drawing and then, you know, add it in a different location later. So here's an example. This is something we were toying in the office and playing around with it. I think there's some value to it is if you're doing a steel structure building, put a piece of steel in there, put a good size beam, you know, a decent size, you know, has some length and weight to it and put it in a spot and your first change order, delete it. Take it out of the contract. That pricing is what they're gonna give. Review it and go, okay, that sets the stage. Look at it. And later down the road, when you add another piece of steel, you know your values. You know your weight in steel and everything and it should be a simple, from one figure to another. And there was a scenario where we did that where we actually deleted a whole sodded area on a playing field in one school. And you know, it was just an order, just didn't want it. He wanted to kind of change it and go asphalt in this area. And it sounds great. We issued the change and that was done. And then later down the road, you know, a few months later, there was a totally different area. We thought, oh, let's add some more sod in this location. Well, we had this value. And again, it didn't come back as fair and reasonable. We were going, pushing back like, this is double the cost. You gave us a credit on this sod that we deleted. And now... We're re-adding sawdust in this area. It's almost the same quantities, but yet we're paying a premium price for this. And it is tough. And again, it's one of those scenarios, how long do you want to keep pushing back for that extra few thousand dollars? Or again, if it's 10,000, maybe it is. So we ended up wearing them down and bringing them down to the appropriate price. Again, just being fair and reasonable that we got a credit for this area and therefore we were just applying it to a different zone. In that case, if you know about that stuff, that's where it's good to do it at the same time because now we're just doing quantity to quantity, we can get wrapped in. I think that's where you can forward think with that. That's where it really does help on the matter. So, and I think at the end of the day, you don't like doing, reviewing this pricing, then just... get it right in the start from the drawings. Now I know that's a hard thing, that's, you you can't do that because you got owners wanting to change stuff. But the more you can put upfront in the drawings at the beginning, meeting with the user groups, meeting with all the people that, you know, have the owner changes. If we can avoid those owner changes, then this is just one thing that comes out of CA and you don't burn your money on CA because we can't predict what's going to happen in CA. We really can't. We know how many shop drawings we're going to do. That goes without saying we can budget for that. RFIs, hey, you could have an amazing drawing set and get a ton of RFIs and then you could still have a good drawing set and then get no RFIs. It depends on the contract. That's an unfortunate one. But when it comes to owners and all those last things, if you can put the investment in that, then go for it. It's the same thing with dimensions. I always told my team, guys, dimension everything. Don't be afraid, right? It is good what it is because if... It takes you literally two seconds of dimension from here to here on this one detail or this plan or provide this odd dimension, give them more dimensions as needed. Because every time they have to ask us when it goes into CA, that takes half an hour to provide that one simple measurement. Click, click, put it on the drawing, take it, formulate it, put it on the RFI that they asked about it, send it back and away you go. So those are things, the more you can do upfront, spend the extra time on the drawings, spend it through going through the specs, because that also ties into this as well for extras, all these things, put it up at the front, the moment that gets tendered, you're locking into that price, so you better be on board with it. So we've gone through the pricing, we've gone through this, we're at the end of the tail, we're worn down, the contract's worn down, but I think we're good with it. And sometimes pricing is just quick, in and out looks good, great, fire it away. So basically at this point, you're gonna finally approve that pricing, lock it down, get it done. You're go back to the original proposed change. You're gonna convert that now into a change order. You're gonna attach that pricing to that change order. And when it comes to change orders, you can attach multiple pricing to it. And again, personally, when we issued a change for additional electrical furring or adding that rooftop, like I said, or adding that sod, we would issue the CO and attach that single price to it and call it a day. Now, maybe in terms of efficiency and depends on how much staff you have and how you want to do it and how the owner wants to do it, you could issue that change order and then combine that electrical furring, rooftop and the sod into the one CO. So those are things to consider in doing it. We mentioned cash allowances earlier. Is this change a cash allowance? And again, you would have already checked that with, know, does it have the overhead and profit as we talked, but out of this, when I'm putting the CO together, am I pulling that pricing from a cash allowance? Was this issuing a cash allowance for blinds, right? Maybe you wanted to put a cash allowance. I started the project before you tendered it, you put a cash allowance for blinds. And I've seen that in a lot of schools where we don't have to specify any alternates or anything like that. We basically, put it out there, the contractor goes get it, he gets priced and we had a cash allowance for $10,000 and the blinds came at 8,500 bucks. So when at that point we would issue, we'd wrap up the cash allowance and then afterwards we would delete the remaining cash allowance back and then basically that. So the question is when you're putting these in, is this account cash allowance or is this just an extra the project? So little things just to consider and take into mind. Once we get to that point, we're pretty much wrapping up the seal. Of course, the architect and record, he's gonna seal it. You may be gonna sign it. You're gonna get the owner to sign it probably. Maybe the owner has a specific field cover page that he likes to kind of formulate and then, you know, with the school district or like their, you know, development core, whatever the case is, do they wanna add it? You're gonna put all that together. You're gonna attach the pricing. Basically this whole laundry package, put it together. PDF, flatten it and issue it out to the contractor and then it's done. And again, like I said, what I'm using my part three, it's managing all that in the background, which is really slick and just keeps it really, really streamlined. So kind of concluding in the summary of all this is just check every line. I'm going back to when I was in that car dealership buying that Bronco, I was just checking every item. And that's the same thing, the moral of this. You're gonna have to go through it. And this is something that comes with experience. This is where use mentorship as a key thing. Go back to your, know, kind of people that have the experience, talk about it, look at it, is this fair and reasonable, balance the ideas. And over time, you're gonna come into with this experience and start to see. And as you work on more and more projects, you can start referring it back to that. And I think that's really key. Like I said, comparing it to the pricing with other jobs, do your due diligence, absolutely. The more you're familiar with this, the better. Do your due diligence, look on Home Depot, go on their website, see what a piece of plywood, get familiar with prices. You know what, even better yet, go for a walk at Home Depot, get an idea of what these building materials kind of generally run for. And again, that's just, that's a retail market. We know the contracts are going to get a better one, but again, he's going to mark it up to that retail market. So get familiar with your pricing, get familiar with your materials, have an understanding of pricing. I think it's really valuable. So when this does come in, you already have an idea where some of these costs might line. Because the thing is, once you sign off on this pricing, like the CO, it's done. You can't go back and be like, we overpaid this. Like once you've signed that change, we're locked in, move on, and just keep moving forward with it. Okay? And one little bonus tip I wanna leave you on, and again, I think this is something that... We haven't done yet, but I think it's a good value is like when you're doing your field reviews and you've got all these COs on the side, put them in your field reports. So like again, that electrical furring, for example, that rooftop unit, put it in there just as a line them, have all your outstanding COs in that field report. And it's always going to just be an outstanding deficiency. You don't even need to put photos, just keep it in there, you know, just waiting for it to be complete. And then the rooftop unit shows up site, take some photos, hey, work is in progress. And then after it's all done, It is complete. The CO has been checked off and it's good because I've had owners walk around with it, know, near the end of the project saying, have you gone through, you know, these 50, these 100, these 200 COs that were issued for the project? Did they actually, did the work actually get complete? And some stuff's pretty straightforward. You'd like, oh, at the end of the project, oh yeah, we added some more extra lockers in this location. Great, we can see it. We can always add it if it was a thought. But what if it was behind drywall? What was a specific valve or something like that where they need to do by putting in your field reviews, your field reports and tracking that. There's a lot of value to that just to ensuring that nothing is being missed. Again, thinking of the owner's intention, looking out for them, again, completing the project in that way. Because again, even though we've invested so much at the beginning, we're still investing at the end. Keep running the race. You're not giving up. This is a marathon. Run to that very finish line hard and strong and the owner will see that they're going to... and they're gonna hire you for the next job. So really key about that. But at the end of the day, that kind of wraps up this episode. I hope we found it valuable in respect to all the pricing. But again, broken record here. Do your due diligence, check every line item, and you should be fine. So in the meantime, architects, keep designing, and contractors, making those blueprints reality. We'll see you on the next one.