Many budding entrepreneurs and existing small business owners aspire to create their own dream work space. The process is both exciting and chaotic, but the right team of professionals can make the journey smoother and more successful.
Contractor & Subcontractor Selection
The processes of choosing contractors and subcontractors can be daunting to business owners embarking on a new commercial construction project. Wes Oestreich, President of Cheever Construction Company, described the three processes of selecting contractors and subcontractors. He explained, “There are basically three ‘delivery methods’ utilized in commercial construction:
D-B-B, D-B, or CM. The most common is Design-Bid-Build (D-B-B, sometimes called ‘hard-bid’), which is the traditional methodology whereby the owner selects an architect, who then designs and engineers the building desired and creates ‘bid documents’ of floor plans and specifications which show what the owner wants. Then, the plans/specs are put out to ‘bid’ for contractors to price. The general contractor is responsible for gathering all necessary ‘sub-contractor’ and ‘supplier’ bids to put a total price together for the project. All respective general contractors submit their total bids to the owner, who usually opens them publically and then the ‘lowest responsible bidder’ is generally awarded the project.
“Another method is Design-Build (D-B) whereby the owner puts out a Request for Proposal (RFP) seeking a design-build entity to provide just what the name implies: both design and building services for a ‘turn-key’ project. In this format, generally the contractor takes the lead position because they can provide the surety bonding that most owners require (This means an insurance policy that assures this contractor group will complete the project. If not, the Bond will provide someone to finish the project at no further cost to the Owner). Under D-B, a full design plan and construction cost are submitted by the D-B group for owner approval and then construction proceeds.
“Under a Construction Management (CM) method, the owner selects a design team, usually through an RFP process or a firm they have past relationship with, and also issues and RFP for a CM with similar past experience. This is a ‘qualification based’ selection process; CM’s are selected not on cost as much as on qualification in similar types of buildings. The CM is then involved early with the design team and owner to provide input on construction methods and budget estimating that enable the full project team to make the best decisions during the design process, keeping material selections and project size under review to meet the budget limitations. Once agreed to a plan, budget and schedule, the CM then becomes the contractor and manages the whole process on behalf of the owner.”
Although some contractors may specialize in particular projects, Wes explained, “The majority of our area general contractors are capable and have past experience on a variety of projects. Potential owners should always explore a general contractors’ past project list and the level of satisfaction those clients had with a particular general contractor.” Principle of Buckbee Decorative Concrete Inc. Tyler Buckbee expanded on Wes’s sentiments and said, “Make sure the contractor has a good reputation and does quality work. Ask for past references and projects to look at so you know the contractor is capable of completing your project. Also, always getting more than one bid two or three bids is ideal so you have something to compare with. The bottom line is you need a contractor you can feel comfortable with.”
General contractors often have an idea of which subcontractors they work well with and trust. However, as the business owner, you have the option to select your subcontractor regardless of what your contractor suggests. Dawn with Innovative Installations advised, “Don’t be afraid to ask questions and request multiple bids for services.” If you choose to be directly involved in the selection of subcontractors, you should communicate your agenda with the general contractor. Working with them to evaluate and choose potential subcontractors is essential to create a team you will both look forward to working with. Experience is a valuable indicator of a subcontractor’s skill.
Jean Petsch, Executive Director of the Associated General Contractors-Nebraska (AGC-NE) Building Chapter, recommends choosing members of the organization for contractors. She said, “The place to start is our membership list at www.agcnebuilders.com, and start the selection process from there.” Jean Petsch explained, “The AGC-NE Building Chapter is a professional association of commercial building contractors in Nebraska. We are affiliated with AGC of America at the national level. Our membership spans from very large construction firms to small family-owned firms all across the state. The Chapter is the only organization devoted exclusively to the business and advocacy interest of the commercial prime contractor.” Membership in AGC-NE is an indicator of a contractor’s legitimacy and experience. Jean said, “Members are approved for membership based on the firm’s ability and track record of promoting a better industry through skill, integrity and responsibility for those that build in Nebraska and beyond.”
Flooring
Customizing a business workspace lends itself to the needs of different industries. Dawn Andersen with Innovative Installation spoke to this advantage and said, “The primary advantage is the business owner can customize based upon the service or industry they provide or represent. Different businesses have different needs when it comes to the best flooring product for their workspace.” Dawn recommends that business owners consider the maintenance requirements of a flooring selection, because different products require different types of maintenance. Innovative Installation focuses on the process of installing flooring material. The staff works closely with Lincoln retailers to provide the flooring products and work closely with clients to maintain streamlined communication.
Contractors and business owners choose Innovative Installation due to their extensive experience in the Lincoln area as well as their exceptional technical and mechanical skills that make them capable of working with most any flooring product. Dawn said, “Innovative Installations brings more than 25 years of experience related to commercial flooring installation and the knowledge to properly inform the business owner of the best products to suit their needs, especially with durability, maintenance and most importantly, cost effectiveness.”
Another option for flooring that is sometimes overlooked is concrete. Tyler Buckbee, Principal of Buckbee Decorative Concrete Inc., explained, “Take your time to choose what look fits your business best. Use the resources that are in your space already. For example, the concrete floor is already there. Instead of covering it up with floor coverings you can save time and money by using the natural beauty of the concrete and add a stain to create a nice warm feeling.”
In addition to flooring, Buckbee Decorative Concrete provides concrete solutions for other aspects of a construction project. Tyler said, “Concrete countertops, coffee tables, end tables and stained concrete are all popular applications for your business space. Colors, patterns and designs are endless. Looks range from contemporary to very rustic. If you like decorative concrete, we have a product to fit your needs.” He explained the general contractors and business owners choose to work with Buckbee Decorative Concrete because, “The owner works hand in hand with the customer to provide great customer service. The owner is also on the job all times to ensure great workmanship and quality control.” Tyler added, “We are not married to one product line. We use the proper product that fits and is compatible with your unique project.”
Electric
President of ABC Electric Company, Inc. John Whitmer explained the role of an electric company in a commercial project. He said, “We typically like to have input at the design stage of a project. Our other primary roles include producing cost estimates, procurement of building materials in a timely fashion, providing the labor workforce and project management teams, scheduling and cost accounting of our portion of the work. We can perform all facets of the electrical construction process including voice, data, and video wiring, fiber optic cabling, control wiring, power and lighting requirements, underground and overhead high voltage installations and termination, parking lot and site lighting, traffic signal wiring and street lighting.”
The heavy involvement and dependence on an electric company requires that it become involved in a project shortly following its conception. John added, “Our wish is to be involved as early as possible to help in the building design and accurate cost estimates for the electrical portion of the project. This also helps in making sure the specific electrical requirements of the owner are being filled with the most economical options available. We are typically a subcontractor to the general contractor performing the overall scope of work for the job.” John warns business owners against simply choosing the least expensive subcontractor available and instead urges them to consider quality and experience of company. He said, “We believe our experience and attention to details will ultimately give the owner more bang for the buck over the long term. We want to be judged by our finished product and the quality of our work force and management team.”
In addition to looking at experience and a subcontractor’s track record, owners should also look at how a company is continuing to grow and learn. ABC Electric Company, Inc. employees are constantly furthering themselves and the company by obtaining a minimum of 12 hours of training every two years while keeping all required licenses and certifications current and updated. Business owners choose ABC Electric to join them on commercial construction projects due to their emphasis on experience, continued improvement and customer service. John said, “ABC Electric is a family owned local business with more than 80 years of continuous service to the community, spanning four generations. We are qualified to perform any and all electrical service you may require, and we are responsive and conscientious. We are the first ever winner of the Better Business Bureau’s Integrity award, an honor we are very proud to have achieved. Our success is measured by that of our customers.”
Roofing
Roofing is another consideration in all commercial construction projects. Debbie Ocken, office manager of Sprague Roofing Company, said, “For what we do, I am extremely optimistic about Lincoln’s commercial construction outlook. Everyone needs roofs. And if not new roofs, they’re needing roof replacements. With all of the new technology coming out on roofing materials and techniques, the industry is becoming more and more efficient.” Sprague Roofing Company has acted as a leader for Lincoln’s roofing business for more than 50 years. Debbie said, “I believe the immense amount of experience and the level of professionalism are key to what has made this company a success today. They get the job done right the first time.” As a reliable participant in the construction process, Debbie said, “My best piece of advice is to not over-think things. Go with what feels natural and what meets your needs.”
Building Controls
Pat Killeen, President of Engineered Controls, Inc. explained, “Integrating complex building control technologies is getting more cost effective every year. Business owners need to become educated in what technology will do for them (and their employees) as it relates to optimizing the mechanical and electrical systems in their buildings. Engineered Controls can assist them to control the right amount of everything (air, water, electricity and natural gas) to create a comfortable building environment and, at the same time, optimize cost. System integration with other intelligent building networks is where the technology is going.” This system integration will enable businesses to monitor and control all aspects of heating, ventilating and air conditioning, security, card access, video systems and even control parking access to a facility.
Engineered Controls, Inc. is leading the installation of these capabilities from their branch offices in Lincoln, Omaha and Des Moines. Pat added, “Engineered Controls provides customers with products and services to create efficient, safe and comfortable building environments. As a leading Honeywell building control technologies contractor, Engineered Controls offers control solutions for commercial HVAC and security systems, including video surveillance and access control, parking systems, lighting control systems and building indoor air quality.”
Asphalt Paving and Lot Maintenance
“Asphalt is a popular choice for many business and home owners in Lincoln,” states Todd Reinhardt with Reinhardt Contracting, Inc. “It costs a little less than concrete and is a lot easier to repair. For instance, instead of having an ugly seam in the pavement and patching, a seamless product can be achieved if done properly. The repair cost for asphalt is always less expensive than concrete. Parking lot maintenance is a part of everyday life for us and we have a crew running full time all summer. That’s all we do.”
“In Lincoln there are a lot of parking lots that need attention,” Todd continues, “and a lot of our customers just don’t know what they can do to save money and repair their lot at the same time. That’s where we come in, providing a professional evaluation of your lot in about an hour, and letting you know what it needs to be safe and trouble-free for years to come. I try to provide the customer with pavement solutions, not just another bid. Looking ahead at maintenance is something we strive to achieve, it’s something that a lot of property managers will procrastinate on or just not do until it is past the point of no return. Either way, we can handle it. Staying on top of your pavement maintenance can be a huge money saver over time and setting up a plan to service the lot with patch work and crack fill every year is the best way to get started.”
Scrap Metal
An important consideration for contractors is the handling of scrap metal throughout the building process. Sadoff Iron & Metal Company is a scrap metal processing operations and recycling center located in Lincoln. Vice President Jason Lasky said, “In the case of construction, we offer containers for their use to fill with scrap metals that are generated from the construction process. The value we provide in addition to our scrap waste stream services is that we provide economic benefit through our purchase of the materials as opposed to charging companies to haul their waste. Many of their waste products retain their value, so our business provides the economic benefit of paying them for their materials.”
He added, “Companies looking to build new facilities would be wise to consider the impact of their waste streams. Many times this can be overlooked in the construction process, but dealing with a company’s waste is something that requires consideration, especially if the waste they generate has value as opposed to cost. Companies that realize the value of their waste materials can take the advantage of creating additional revenue from it.”
Sadoff Iron & Metal Company has a great reputation in the commercial construction industry for combating scrap metal theft. Lasky said, “Theft has been increasing over the years and the value of metals continues to rise. Many times, new construction projects are subject to break-ins from people that are looking for the value on the construction materials like copper and aluminum. Sadoff Iron & Metal does not purchase stolen materials so we try to prevent the materials from being stolen in the first place by not offering them a place to sell these stolen materials.”
Security
Security systems are an essential consideration for business owners planning their new commercial space. Security systems protect and insure a business investment by providing for the supervision of business operations. R.J. Lipert, President of AlarmLink USA, understands the importance of quality security systems. Alarm Link USA provides everything from door access and intrusion systems to video camera systems. New technology developed from Honeywell allows clients to control their systems remotely from their smartphones, tablets and computers. IP camera software is another technological advance in security systems which provides for high-definition cameras throughout a facility. R.J. explained, “Not only are [clients] able to see break-ins, but they are able to monitor operations and see how their staff is doing. If they see unsafe actions, then they can stop an accident before it happens.”
Thus, security systems can further provide safety and efficiency of a business. The AlarmLink USA team is chosen by developing businesses in Lincoln due to their ability to provide immediate local assistance and quality assurance during the installation process. R.J. said, “We believe in quality products and quality installation. We don’t have problems with our systems because we put them in right the first time.” He also recommends involving AlarmLink USA in the construction process early so they may be able to install their systems alongside the electrical work.
Market Outlook & Industry Trends
Executive Director of AGC-NE Building Chapter, Jean Petsch, commented on the strength of the commercial construction industry in the area. She said, “I would say that the current market outlook is somewhere between stable and cautiously optimistic for improvement. While Nebraska is better off economically than most other states, that is not really translating into massive hiring in the industry. From our membership’s perspective, things are more stable than they have been at least for the last three years. In my opinion, most firms probably are feeling comfortable they’re going to be able to support the workforce they currently have.” Jean also highlighted home trends in the industry:
• Continued emphasis on efficiency in energy and environmental means, methods and products
• Increased collaboration between designers, prime contractors and specialty contractors
• Building Information Modeling (BIM)
• Lean Construction techniques and methods incorporated into projects
• Increase in Public/Private Partnerships for building projects
President of Cheever Construction Company, Wes Oestreich, elaborated on these trends and described some of the recent changes that have been adapted in the commercial construction industry. The first change he described is how new technology enhances the design and building processes. He said, “There have been some technology and philosophy changes that may be utilized on ‘larger projects’ (greater than $25M). Architects and contractors can make use of Building Information Modeling, or BIM for short. This provides for a high degree of information and visualization to be included in project plan documents. Multi-dimensional ability to review plans can include ‘conflict analysis’ so designers can see potential interferences of piping or ductwork conflicting with a structural member before construction in the field progresses too far.” BIM software creates visual representations of construction products and manages the building plan by organizing costs and project timelines. This allows for much greater efficiency and productivity in the construction process.
Another trend in the industry has been toward the lean construction approach. Through this management process, contractors seek to reduce the waste of time, people and material resources and maximize value. Wes said, “Lean construction techniques seek to bring intentional efficiencies to the construction process through better planning and coordination between suppliers, trades and management.”
In addition to these internal improvements to the industry, commercial construction has been affected by the economy. Wes explained, “The most noticeable ‘change’ has really been dictated by the economic marketplace. The majority of projects in our region have been funded by or built for government-funded entities. The proportion of private-funded projects has been relatively low. The abundance of education projects and city/county projects has kept the local construction market busy. Many private projects are waiting or proceeding cautiously until the economy stabilizes and they can determine what future business expenses will be like with some certainty before they proceed with new facilities. That being the case, we see more projects coming out with only ‘selected bidders’ invited, or the RFP process utilized to make qualification-based selections rather than low-bid selections. Nebraska’s LB 889 provides that cities, villages, counties, state colleges, community colleges and school districts now have the option to utilize D-B or CM rather than just having D-B-B as their method to award contracts. You can check out www.ne.dcicouncil.com for a breakdown of these delivery methods.”
Regardless of the selection process it is important to rely on the expertise of the trade contractors. Low price is still a vital component of contractor selection, but most all parties would agree that “best value” is a more important criteria. If the bidding process includes a “hard-bid” or pricing tied to firm specifications, it is wise for the owner to allow enough time for the contracting industry to propose innovative solutions to construction. Sometimes that is a substitution product or may even be an alternative system. Such is the case with geothermal exchange systems. Geothermal can provide significantly lower operating costs, with only modest increases in the upfront building components.
Tom Rogge, of K2 Construction, indicated that “most of the geothermal projects we have constructed recently have been for government or school buildings. This has been driven by their ability to finance the upfront capital costs. The administrators and designers are smart enough to see how the long term benefit of lower operating costs will only help the building operate efficiently. Every year there is inflation and higher energy costs, the lower operating costs become even more important. It just insures the building investment will improve over time.”
Design-Build, and CM (Construction Management), projects provide an opportunity to go out to the industry and select the correct building systems that can meet the owner’s objectives. The building owner in today’s market insists that all types of designs be considered, at least enough to be ruled out. Anything less is a disservice to the owner. Tom Rogge states “the move toward more projects utilizing CM allows the building owner options during the design phase. This is the least expensive time for the owner to evaluate which system meets their goals the best. There is a strong movement toward green building and LEED designations. Geothermal exchange systems are one of the few methods that actually pay for themselves and make sense.”
Financing
Financing a commercial construction project requires finding initial funding as well as managing costs and payments throughout the building process. Since these projects require the planning and maintenance of large budgets, choosing the right bank and lending officer is critical. Bob Panzer, Executive Vice President of Midwest Bank, shed some light on their involvement in commercial building projects. He explained, “Officers of Midwest Bank at Lincoln work closely with both the borrower and builder throughout the construction process to help ensure the project is financially successful. We employ prudent underwriting practices at application that evaluate financial capacity and repayment ability, as well as metrics specific to the project in the Lincoln market.
When needed, Midwest Bank at Lincoln will utilize available credit enhancements to help assist viable projects should the borrower need financial assistance. The lending officer remains actively involved with the borrower and builder during the construction process by performing routine inspections of the property and controlling the draw process to help ensure both timely and complete payment to all parties and maintains open lines of communication on the project’s status to completion.” Bob recommends that business owners and contractors prepare themselves before beginning a project. He said, “Commercial construction projects are comprehensive endeavors that require both managerial and financial strength.” Bob also advised, “Understand that the underwriting and administrative controls that are requested are only in place to help ensure a financially successful project.”
Midwest Bank may still be relatively new to the Lincoln area, but its employees have the experience and familiarity with the market necessary to serve the needs of builders and borrowers. Bob said, “We are a community bank and your financial relationship will be with a Midwest Bank at Lincoln loan officer. This provides us with the ability to be flexible and customize the financing package to accommodate the specific needs of each owner and builder without compromising the financial integrity of the project. Midwest Bank is a community bank large enough to meet most financing needs, yet small enough to provide personalized customer service. It is our exceptional customer service that builds lasting financial relationships.”
Current Local Projects
Cheever Construction-Wes Oestriech “Our company has completed and are currently working on several educational projects. We have completed several of the IAQ (Interior Air Quality) projects for Lincoln Public Schools. Most recently, we completed Zeman Elementary and Lakeview Elementary. We are currently working on McPhee Elementary. A couple years ago we constructed two new LPS elementary Schools, Paul Adams in southwest Lincoln and Ted Kooser in northwest Lincoln. We are currently building the Student Services and Classroom Addition to SCC-Lincoln campus, constructing additions and renovations to Lancaster Manor Care facility and building an addition onto Lincoln Surgical Hospital at 1710 S. 70th Street.”