Conventional Lump Sum

Conventional Lump Sum

Lump sum competitive bidding is regarded by many as being the customary contracting method which yields the best competitive price for the job.  In this method, the project owner or developer hire an architectural firm to design the project and administrate the construction.  The architect must be accessible and available to the builders, preferably on the project site, to clarify the documents and advise on problems once discovered.  The architect has prime responsibility of reporting budget and schedule information to the owner in a timely manner so that adequate funds are available to complete construction.  The architect typically administers the changes to the project and must therefore have adequate skills to negotiate price and schedule effects.  Many times an adversarial relationship can develop, since typically the architect and contractor position early for later claims.  The responsibilities for issues are foremost in the discussions and often much time and energy is spent on building cases rather than resolving conflicts.
There are many factors which determine if this method is suited to a project.  They include:
  1. Is there a requirement to have lump sum competitive bidding due to public or internal policy concerns?  Do these policies preclude other contracting methods?
  2. Have plans and specifications been developed by an architect and related consultants that exactly depict the project requirements?  With the competitive nature of the architectural industry, many architects and designers have come to rely on previously generated details and "canned" specifications, without thoroughly modifying them to depict the current project. 
  3. Has sufficient time and resources been allocated to produce and final design prior to the start of construction? 
  4. Does the owner or architect possess the expertise to issue partial documents and coordinate the design and construction process to allow concurrency of design and construction activities by the issuance of bid packages?
  5. Have the budgets and financing allowed consideration for the expected amount of scope and non-scope changes?  Scope changes are ones regarded as different from the bidding documents due to any number of issues, including:
    • Unexpected or non-depicted site conditions:
      • Changes to the building's characteristics due to program changes or user requirements.  
      • Changes in technology from the design phase to building turn over. 
    • Non-scope changes could include:
      • Claims for delay due to lack of design coordination, inadequate or nondescript documents. 
      • Ambiguity regarding sub-system design responsibility.
      • Interference with other contractors or public agencies.
      • Interference with existing tenants or occupants.

Major Advantages

  1. This is the traditional approach, which is the most understood contracting method consistent with free competition.
  2. Construction costs become fixed once the project is bid and awarded, except for changes to the project or to the documents.  Inflationary or availability costs are no longer a concern of the owner. 
  3. Once costs become fixed, cost for changes to the project become more easily identifiable so that appropriate budget categories can be more easily adjusted.  
  4. Given the completeness of the project documents, overall construction costs could be lower.  The competitiveness of the industry at the time of bidding will have a substantial influence on the bids, however.  
  5. Responsibility and liability for design and construction issues are more easily identified. 

Major Disadvantages

  1. Often, roles of owner, architect, and contractor become adversarial, as responsibility for issues polarize the problem solving process. Contractors become less likely to offer suggestions to solve the complex problems, which are inherent in the process. 
  2. The owner looses much control over the quality of building components.  Sole source specifications of building components dramatically raise building costs and are usually against public policy tenants of free and open competition.  
  3. The project viability is uncertain until project is bid and under a construction contract.  Overall construction costs are estimated through the design phase, but remain uncertain until bidding occurs.  Architects and cost consultants cannot estimate the competitive climate at bid time, nor the availability of materials and labor, resulting in cost uncertainty.  The risk that the project will be too expensive remains wholly that of the owner or developer.  
  4. Overall construction time is lengthened, as lump sum competitive bidding is inappropriate for issuance of the documents in partial releases or bid packages.  Design must be finalized before the documents are released unless and extensive bid package coordination effort is undertaken. 
  5. Pre-selection of contractors and other building team members is difficult, as pre-selection of these entities limits competition, reducing a major advantage of the lump sum bidding process.  If pre-selection of subcontractors is undertaken, administration of the process adds to he pre-construction costs and is difficult to enforce.  
  6. A large segment of industry expertise is left untapped during the design phase.  Formal inclusion of subcontractors and supplies is replaced with informal consultations, with liability and risk remaining that of the architect and/or owner.  
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