Justifications – Revisions – Modifications – Value Engineering

June 7, 2012

These four things can bog down a schedule more than anything when trying to secure a design-build or negotiated project. Our members are reporting more and more often that end users are going through every aspect of a proposal with a fine tooth comb looking for cost savings.

Justifications often are directed at your margins or labor rates. Too often the integrators are being questioned about $125 plus technical services rates for a security or AV project. You need not apologize, but do be prepared. The question will be why only $75 (example) for install rates but $125 (example) for service when we had the same tech on the project. The answer is easy if you take time to explain how productivity ratios factors into the equation. Margin justification can be made simple as well if cost breakouts are mandated. Don’t apologize for needing to make a profit on equipment sales.

Revisions are a pretty good sign that you aren’t the only bidder on the project. After the first or second round you need to stop and figure out where the questions are stemming from. As mentioned last week, turning over detailed drawings (without the proper disclaimer) while still in the revisions phase is a bad idea. It only allows for more scrutiny by the owner and possibly other vendors.

Modifications to your proposal once your best and final price has been established can be a trap. Modifications once the customer signs off on the proposal can be to your benefit. Documentation is the key. If you deviate from the original design you take on additional risk. If it is your proprietary design, modifications to save costs simply need a reduction in a performance statement agreed upon by the customer.

Value engineering to match a budget is fine when expectations are managed and well documented. Don’t ever downgrade a system in the design phase without substantiating the logic behind the changes. On a consultant-led project keep the design professional in the communication loop every step of the way. Remember that one little change could switch the professional liability for performance from them to you.

In the end, never ever accept a contract for a project if you are given a “conditional substitution”. It’s either an approved substitution, or it’s not. Try as hard as you can to avoid contracts with arbitrary performance criteria if any revisions from the original design are made. It’s just not worth the risk. CW

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