I am a small fish in a large pond; an architectural engineering consultant with a great deal of experience. As a result of long practice, I advocate for design-build organizational and contractual frameworks. With those frameworks, sound financial planning and management are always mandatory.

Within that subset, I have devised a change management system called “the Authorization System.”

It is an essential part of the administrative apparatus to avoid disputes that often arise from failed judgement and attention; in essence a lapse in the application of professional ethics.

This essay tells that story I as I see it.

Introduction and context

Throughout my career, I have been a design-builder and have believed that skilled application of the design-build process was a reliable path to project success. Success is defined in this case to mean all parties are satisfied with the outcomes whether it be scope, time, or cost.

I have written numerous article blog posts at wilkinsonadvisors.com and in turn on my account at LinkedIn. (see appendix 1 for an abbreviated list) These posts have dealt with many practice issues and can be found at  www.wilkinsonadvisors.com> blog. Thematic among these articles is the issue of cost planning and management as a critical core standard of practice.

Ethics and cost planning and management

In this writer’s view, project management has a fundamental “soft-side” aspect; soft-side being defined as how humans behave. Considering that project disputes and claims often involve contract sums, doing the right thing is often on the table and subject to human error frailty and judgement, thus an ethical consideration.

Project cost planning and management in and of itself has many subsets ranging from predesign planning, feasibility studies, development period budgeting, project design and construction execution, project close-out, and warranty period management. Amid all of these, the issue of change management, is a common flashpoint for disputes

Design-build platform for success

In this writers opinion, a well executed design-build project is far less dispute-prone than a design-bid-build project. I hold this opinion borne of experience for a variety of reasons:

1. Design and construction are a logical and inseparable whole
2. Separate silos of design and construction are a risky place to make business deals
3. A meeting of the minds as to scope, time, and money flow are more easily obtained when the project team has a single point of administrative authority; both design and construction
4. For the “Owner”(the party who pays the bills) a single point of contract authority lends efficiency and predictability to outcomes
5. The argument about “who is looking out for the Owner” has been debunked by business history

Cost management and change management

The design build forms of agreement all address change management. I define change management to mean any change to an executed contract; the changes may take any combination of scope, time, and contract sum often including all three. An all too common cause for disputes arising during the construction period is the untimely resolution of change. Apparent change can arise in a variety of ways including:

1. The Owner directs it
2. Unexpected field conditions are discovered
3. There are gaps in the contract documents
4. There are contradictions in the contract documents

Timely closeout of apparent change is essential to the successful project. However, the compression of interlocking field activities, the absence of project schedule float time, and project management burdens and inefficiencies all oppose timely close-out.

What now?

The three-legged stool

Before we go any farther, it is important to stipulate that change can take many forms and combinations. It can involve the scope of work, the contract sum, and the project schedule. Remember that a change in the work may NOT trigger a change in the price and schedule. Owners are warned however, this neither likely nor common. (As a related aside, some contract forms empower the Owner to issue Contact Change Directives before consensus in connection with schedule and contract sum. Discussion of this broad and contentious issue is outside of the scope of this essay.)

The Authorization System

As a standard of practice, Wilkinson Building Advisors uses and recommends an “authorization system” for change management and its administration. Here are the essential characteristics:

1. Any party to a contact can initiate a change request (scope, time, contract sum, or any combination)
2. The design-build manager and the Owner are obliged to respond promptly
3. Computerized project communication platforms are employed to hasten communication, resolution, and record keeping
4. Various paths for close-out are built into the system in connection with the change request situation

• An immediate determination (scope, time, and contract sum or any combination)
• An agree-to time for the determination
• A default in the case that the parties can not arrive at a determination

The Archilles heel

The common and root cause of a failed authorization is attempting to close change management at the time an invoice or application for payment is submitted, aka maladministration (in this writer’ opinion). This happens because changes were either not submitted or closed in a timely manner or both. This burden of fault may lie with any combination of 1) the Owner, 2) the subcontractor, or the 3) Project Manager with overall administrative authority.  It is common for subs to default to the Project Manager to initiate change management. This is a cardinal mistake.

This process is not as complex as it may first appear. While indeed compression of construction activities often challenges timely administration, timely action must be a bedrock principle. Reliance on forgiveness built on commercial friendships is no substitute for sound contract administration. In respect to the team consensus that underpins timely contract administration the reader is invited to review “Partnering for the Design and Construction Industry” by Ralph J. Stephenson, still timely today as when it was published in 1996; available on Amazon.

Amid this typical conflict lies an essential discipline that balances the interests of all involved parties

1. Only contract work is paid for
2. Parties are contract-bound to scope of work and schedule (in addition to contract sum)

The corollary to these rules is that

1. The Owner only gets what is agreed to
2. The design-builder and its subcontractors are paid only what is authorized

In the absence of agreement, there are no winners….

Improved administration and enhanced productivity

The McKinsey Global Institute (“MGI”) published a seminal document in February 2017: “Reinventing Construction: A Route to Higher Productivity.” MGI asserts that the construction industry is a relatively low productivity industry and slow to improve/change relative to other industries of similar scale.

Editorially, this writer offers a list of principle issues to highlight a few:

1. Fragmentation of skills and resources
2. Alliances of convenience to execute one-off projects
3. Misaligned contract and incentive structures
4. Paper contracts being substituted for a meeting of the minds

But…….

These are global and intractable issues not susceptible to quick or easy solutions. However, this author’s hands-on experience leads to a conclusion that well managed design-build teams avoid the “soft side issues” (i.e. ethical dilemmas) that are more common in design-bid-build project frameworks.

Within that design-build framework, change management built on the Authorization System described herein is recommend for the path to success.

Appendix 1, a short selection of recommendations and standards of practice found the Wilkinson Building Advisors blog (https://wilkinsonadvisors.com/blog)

1. Essay to Building Owners, get it right before spending money
2. SIPs are changing how we build
3. The choice to build with mass timber
4. Wood and heat pumps; old made new again
5. CLT will change construction in the Midwest
6. For investors, manage your risks, know your costs upfront
7. Don’t mix up the details in design problem solving