chris voros construction management april 25, 2007 cancer institute hershey, pa cancer institute...

Chris VorosConstruction Management

April 25, 2007Cancer InstituteHershey, PA

Cancer InstitutePenn State Milton S. Hershey

Medical CenterHershey, Pennsylvania


April 25, 2007



Project Overview Building summary, existing conditions, construction

sequence, cost analysis

Structural Breadth-Foundation Redesign Intermediate, Geopier-reinforced Mat Slab vs. Micropile

Foundation System Avoid subsurface issues encountered at nearby Parking

Garage project Conclusions- $500,000 Cost Increase with new system;

Children’s Hospital Option

Electrical Breadth- Utility Redesign and Energy Impact Utility rerouting plan & energy loss study for PSHMC’s East

Campus Phase HV utility installation in one activity for PG, CI, &

Children’s projects Conclusions- $55,000 construction savings, $225/yr energy

savings

Depth Study- Industry Influences on Subcontractor Markups Identify factors that impact a subcontractor’s “multiplier”

value

Thesis Content



Building Respect:

Industry Influences on Subcontractor Markups



Goal Improve Construction Manager and General Contractor

Relationships with their Subcontractors

Approach Identify factors that go into a subcontractor’s “multiplier”-

the value added above allowable bid package markup

Methodology Two surveys, one tailored to CM/GC professionals and one

to Subcontractors Create a “Multiplier Matrix” that predicts a BP multiplier

based on a given set of conditions Compare and Contrast results from both surveys with

respect to perceived markup determinants



Survey ContentsCM/GC

• Anonymous• Mailed Packet• Qualitative/ Written

Responses• Question Base:

– 10 Questions– Bid Package vs.

Contract Markups– Determinants of a BP

Markup– Company Self-

Assessment

Subcontractors• Anonymous• Online Survey• Quantitative & Qualitative• Question Base:

– Part 1-• 10 Questions/Scenarios• Select impact on multiplier

based on a scale from -3 (decrease) to +3 (increase)

– Part 2-• 3 Case Study Analyses• Assign a markup/multiplier

and provide reasoning



CM/GC Survey Results• Contract Markups:

– 10% to 20% (incl. OH&P)– Dependent upon trade

• Bid Package Markups:– -2% to 8%– Multiplier factor

• CO Negotiations– “Fair but Firm”– Extensive in-house review

• Self- Assessment:– Reputable companies– 90-100% Returning Subs– 70-90% Repeat Clients

• Markup Determinants– Majority are objective/quantifiable



Subcontractor Survey Results- Part 1Relationship-oriented Factors:

• Past successes with CM/GC, incl. some of team personnel

• Bad history with company, but none of personnel

• Bad history with CM/GC personnel



Subcontractor Survey Results- Part 1Business-related Factors:

• AIA Contract is vague with respect to markup procedures (for subs and subs’ subs)

• CM/GC bid-shops on a regular basis to trim overall bid to owner

• CM/GC uses “nickel-and-diming” practices on CO negotiations

• CM/GC keeps to scheduleand meets all milestone dates(Not pictured - Avg. = -0.28)



Subcontractor Survey Results- Part 1Regional Factors:

• CM/GC is a start-up company

• CM/GC is national firm, but new to region

• Project at bid is a “target of opportunity” (one-shot deal)



• Apply to Part 2 case studies to test validity of Part 1 responses

Subcontractor Survey Results- Multiplier Matrix

Using the Matrix:

1. Choose which scenarios apply and calculate an overall average.

2. Use the Markup Impact Scale to determine the magnitude of the expected markup.



Subcontractor Survey Results- Part 2Case Study #1: Alpha Construction Company-Dominant CM/GC moving into region-Generally negative scenario for subs due tobusiness practices and CM personnel onProject (superintendent)

Case Study #2: Beta Contractors-Start-up company of experienced principals-Good and bad factors- personal versuscompany experience; largest job to date

Case Study #3: Choice Management-Respected CM, by owners and subs alike-Overall desired scenario- good people and reputable company

Alpha Survey Average = 3.31%

Beta Survey Average = 1.6%

Choice Survey Average = 0.1%



Survey Comparison:

• Key deciding factor is Regional Economics (supply vs. demand, work availability, competition)

• CM/GC professionals take an objective view, placing less emphasis on business relationships

• Subcontractors value reputations of CM/GC/A/E above other factors, contradicting CM/GC survey responses

• CM/GC companies need to value & actively maintain their sub relationships in order to minimize BP markups



• There are simply too many factors (many subjective) influencing a sub’s markup that a prediction matrix is not feasible

• Subcontractors place great value in a CM or GC’s reputation

• Maintain positive business relationships to build respect among subcontractors

• Positive relationships result in favorable markups

Closing Remarks



-AE and Construction Management Faculty:Dr. David R. RileyDr. Michael J. HormanDr. John I. MessnerProfessor ParfittProfessor Holland

-The Penn State Milton S. Hershey Medical Center:Dick AradineMike LekeyDonna Martin

-Gilbane Building Company, Hershey Project Team:Dennis VanceDon HergenrederPatrick HardisterTom GuthermanAndrew NotarfrancescoMarianne Jones-PichlerJohn VicanovickDan Munn

-Chris Leyenberger, Centerline Associates-Mike Connor, Array Healthcare Facilities Solutions

Acknowledgements

Questions?

-Dick Harris, PSU Office of Physical Plant-Shad Hoover, CMT Labs-John Masland, ARM Group, Inc.-Kord Wissman, Geopier Foundation Company, Inc.-GeoStructures, Inc: Mike Perlow Eric Hilberath Ed O’Malley-James G. Davis Construction Corporation: Bill Moyer David Argentieri-All the survey participants

…and to My Family and Friends- Thank you all!

chris voros construction management april 25, 2007 cancer institute hershey, pa cancer institute...

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