ILLINOIS MECHANICS LIENS / COVID-19

This Is a Great Time for Design and Construction!

Written by Jeremy S. Baker

Chicago River facing West

I was floored by Steve Burrows’ absolutely brilliant keynote at Digital Build Week 2019.

I first heard it as a podcast, at the gym. I stopped my workout and furiously scrambled to take notes.

Steve Burrows is a visionary engineer with a long career. He is someone you should know. His speech This is the Greatest Time in History to be in Construction” was moderated by Devon Tilly of the Art of Construction Podcast. You can watch the video or listen to the podcast.

Burrows’ ideas, and those of similar big thinkers, are worth spreading. He argues, essentially, that new technology and clarity of purpose make the design and construction industry – which has gone backward in the United States in recent decades – ripe for disruption and positive change. Incentives can be better aligned. Efficiency can be maximized. There is a HUGE role and opportunity for architects and engineers.

His points hit home with me. I believe lawyers have a role to play, with smarter contracts and an emphasis on dispute avoidance. The constant threat of litigation is like a gravitational field – it warps the industry. It keeps design professionals from thinking about construction techniques, means, methods, and other common-sense things which could benefit everyone in design and construction.

The overall thrust of Steve Burrows’ comments is that now is a great time for design and construction industry because it is so ripe for change, so ready for disruption! I hope to be an agent for positive change in the next decades, so I muse about some of his points below.

And, I do think this is a great time for design and construction!

BIM… And the Crazy Way Owners Buy Buildings

How we use, transmit, and rely on digital data fascinates me. As an attorney who negotiates contracts, helps manage projects, and resolves disputes, I found Burrows’ BIM-related comments to be spot-on.

Some address the odd ways designers and contractors interact on a BIM project, and its impact on project owners and claims. I am paraphrasing, but Burrows observes that on many projects:

  • the lead designer breaks the entire project down into 30 subcontract packages, and designs the project with corresponding BIM Model elements
  • the lead designer does not give the Model to the prime contractor, which creates its own version of the Model, split into 30 corresponding pieces
  • subcontractors do their own work, and come back with their respective contributions
  • the prime contractor tries to integrate all this work, and then sends it to the lead designer for approval
  • by now, the lead designer has run out of money in its contract…so it does not know whether the Model is okay and suitable for construction, or not
  • due to inertia, and lacking other options, the contractors build the project on the site
  • when the project elements do not fit together during the construction phase as intended, the contractors and designers exchange questions and answers
  • AND THEIR CLIENT PAYS THE COST OF MAKING IT WORK!

In Steve Burrow’s words: “Stupid, right? So we have to say no.”

I agree. We must say “no.”

This thinking, and these processes, breed claims and disputes. And while lawyers are not entirely to blame, the culture of design and construction claims is part of the problem.

Take for example design-bid-build projects in the United States, where the design and construction functions are effectively siloed. There is too little collaboration in real time. Too little alignment of incentives. Contracts are not structured so designers and contractors are incentivized to proactively predict, and solve, each other’s problems so they can all profit. This benefits the project owner.

This hazard is less pervasive in other project delivery methods, yes. But design-bid-build need not be stuck in this rut. Part of the problem is a lack of creativity. There is room for things like incentive sharing. Design professionals and contractors could, for example, more effectively value engineer the project if they both shared in the savings. Together, they could better balance design quality and cost.

Yet, much of the way we do business is driven by fear of claims, and a desire to shed liability exposures to other project participants. Designers and contractors are often set up as adversaries.

Sometimes this is intentional, like when designers report construction problems to owners after site observations. Designers can help protect owners in this way. That is not a bad thing. Other times, creation of adversarial relationships is unintentional – like when owners pick contractors with bids so low, the constructors have no choice but to find fault with the design, and seek change orders, to make any profit.

There are less clear examples of unintentional adversarial relationships and misaligned incentives.

Consider a so-called “design build” project in which the contractor leads the team. There, the quality of design is often devalued. The owner and contractor make value engineering decisions without the input of designers, who lack a seat at the table. Decisions are made to lower construction costs, without regard to big picture issues like lifecycle costs. The owner and constructor split the savings. And when the chiller is found to be undersized, who gets blamed? The engineer! So the owner sues the architect, which must sue the engineer. Not only have we lost the potential for great outcomes, we devolve into terrible ones.

The industry is obviously moving farther from paper drawings and two-dimensional design. This is an opportunity. We can re-think everything. The little-used AIA Digital Practice Documents are no panacea or complete solution, but they are a step in the right direction. They provide “rules of the road” for use, transmission, and reliance upon digital data. They contain innovative liability allocation schemes. They are an alternative to typical design and construction contracts, which too-closely resemble relic agreements from the bygone era of wood-encased pencils, T-squares, and stamped paper drawings.

Look, incentives matter. We can have smarter contracts and more thoughtful project delivery methods. We can align the parties’ incentives to benefit everyone. We can say “no” to the design and construction vices that have snuck up like bad habits in recent decades. We do not have to accept grueling – and often unnecessary – litigation as the ‘cost of doing business.’ We can do better.

This is a great time for design and construction, but it could be better…if we do better.

Should Designers Run from the ‘Means and Methods’ of Construction?

In his speech, Steve Burrows gives some fascinating and common-sense examples of how the design and construction industry, particularly in the United States, has gone backward in recent decades.

Consider for example Egypt’s oldest pyramid – the “bent” pyramid – built some 4,600 years ago. It has several miles of underground tunnels. Yet, the tunnels do not clash! Burrows questions, how did they accomplish that feat? And how did they feed, house, and instruct tens of thousands of workers on a daily basis? There was no Procore or similar software. Nobody had iPhones. It was the world’s first modular building. How is it possible you cannot fit a credit card between the joints of thousands of huge stones carved, with great effort and precision, offsite? That craftsmanship is a far cry from what we accept in modern times, when a little caulk can hide a multitude of sins, like tolerance problems.

Burrows seems to conclude that only a Master Builder – someone who is responsible for both design and construction, and who can offer what he calls “design continuity” – can achieve these results.

In another example, Burrows reminds us that the Sears Catalogue, last century, offered homebuilding kits which everyday people could use to build a home out of thousands of parts in around 90 days. There, the designer had to consider the ‘means and methods’ of construction. The kits needed explicit assembly instructions. Sears could not have just shipped thousands of parts to the buyer. It wouldn’t have worked.

Yet, that is more-or-less the way owners buy buildings today.

Burrows offered an interesting hypothetical about Tesla selling an electronic car kit:

“If you ordered a Tesla, and Tesla said: I am going to deliver the car to your home in 10,000 parts, with no instructions, and you are going to build it in the rain in your backyard, you’d think they were crazy. But that is how we do buildings. We just send all these pieces to a construction site, and we don’t tell the builders how to build it. Because the designers now say, they’ve been told by their lawyers ‘we should not determine means and methods.’”

-Steve Burrows

That hits home for me. I am one lawyer who helps architects and engineers disclaim, by contract, responsibility for means and methods. Yet I am not alone, and we lawyers have little choice. The way modern litigation and professional liability insurance works, this is the only smart approach; at least in the more common project delivery methods where design and construction functions are siloed.

However, I am also an attorney who advocates for Designer-Led Design Build, a delivery method in which the designer leads the team – and involves itself in ‘means and methods’ type issues. There is a way to do this thoughtfully, and without undue risks to the architect or engineer. They can lead the design-build team, earn more profit, and take on less risk than they would on a traditional ‘design only’ project, using certain protections that would make any professional liability insurance carrier smile.

In fact, I was honored to present “Engineer-Led Design Build: Simple, Safe, and Profitable” at the American Council of Engineering Companies (ACEC) Fall Conference in Orlando, Florida, in 2017. This is not theoretical. As I write this post, I am helping architect and engineer clients structure their business operations and contracts so they can safely realize the benefits of leading the design build team.

Relatedly, Steve Burrows also discussed how other countries are getting ahead of the United States on the concept of “design continuity” or “digital continuity,” which boils down to architects and engineers thinking about construction means and methods in the design phase. He cites China as one example.

Now, I am certainly not advocating for state-controlled design and construction companies, as in China, which can do things that United States-based companies cannot. However, there is a lesson in the efficiencies which can be achieved when designers consider construction at every stage of design.

Take a recent example: to address COVID-19, China built a 645,000 sq/ft medical facility in ten days. Part of this feat was due to prefabrication of building units, something Burrows also discusses eloquently. His speech took place months earlier, and he did not address this hospital project directly. However, its quick completion would have been impossible without what he calls a “one mind” approach, i.e., designers thinking about how contractors will assemble what they design, with an eye toward efficiency.

Burrows also discussed real-life applications of “parametric design” technology, which uses algorithms to help architects and engineers pursue design goals while understanding, in real time, certain construction and cost-related impacts of the decisions they make. For example, it could help designers see how a change in geometry affects the tonnage of steel, and thus the construction cost and schedule.

Generations past, which designed and built without this technology, would probably agree that it is a great time for design and construction.

Recognizing Pervasive and Institutionalized Inefficiency In the Design and Construction Industry

In his speech, Steve Burrows addressed what he calls “value-based” contracts, and the current lack of aligned incentives in the design and construction industry.

I paraphrase, but Burrows made some rather obvious – and important – observations about how functions like construction procurement are structured for inefficiency.

For example, taking a cheaper product to a general contractor’s purchasing department might be of little use these days. The subcontractors and suppliers obviously make money on the margin of what they sell. They want to “sell high” to the general contractor. And if the general contractor could procure cheaper alternatives without going through the purchasing department, its employees would be out a job. So they have little incentive to stop buying institutionally overpriced materials.

Burrows anecdotally cited studies – admittedly, highly theoretical ones – about waste in the construction industry. For example, some apparently say that if the construction industry in the United States does not expand at all, and if there is no increased demand, some 30% fewer employees would be needed to satisfy the current level of work if all waste were magically eliminated.

Accepting this at face value, it means that 30% of people in the design and construction industry keep their jobs by maintaining this inefficiency. He observes that design and construction industry players could, at least in theory, realize the same revenue with some 30% fewer employees. He also observes the obvious: these employees will fight you if you try to change the inefficient systems upon which they depend. This is probably true even if they are unaware of the inefficiencies, which are institutional.

Anecdotally, I have no trouble believing that the 30% waste figure is not far from accurate.

Take, for example, the duplicative efforts we have institutionalized for RFIs and submittals and payment application review in the construction administration phase. Both sides of the equation – the design side, and the construction side – each have employees doing essentially the same thing:

  • a subcontractor submits something
  • the general contractor reviews it
  • then the lead designer, often an architect, reviews it again
  • if there are questions or problems, the process repeats

This is one reason design build projects can be delivered more quickly, and with less cost, compared to traditional tripartite projects where the owner contracts with the constructors and designers separately. In design build, these multi-later review functions can be unified, resulting in fewer rounds of review.

This creates opportunity for aligned incentives. An owner is likely willing to pay only X dollars for its project, regardless of its delivery method. If those dollars are inefficiently wasted on avoidable multi-later review (which raise internal ‘production’ costs), they cannot go to the bottom line (profit). These same dollars might be more efficiently and profitably allocated, were incentives aligned.

For example, say a contractor makes profit of $0.07 to buy $1.00 of steel. Its incentive is to spend more so it can profit more (although the profit percentage is slight). Think about what would happen if the contractor and architect instead found a way to avoid buying $1.00 of steel. Were the project structured optimally, with aligned incentives, they could share the savings and each pocket $0.50. Those savings would go straight to the bottom line – they are literally pure profit, as they require no direct cost spend.

The blinding flash of the obvious, right? It is one way to incentivize designers and constructors to work together, to anticipate and solve each other’s problems, and to avoid claims, which would benefit everyone. Yet, it is difficult to meaningfully put into practice with current contracts and mindsets.

I learned how to think along these lines from Mark Friedlander, my brilliant former partner at Schiff Hardin LLP, a truly superb mentor. Aligned incentives drive Designer-Led Design Build: A Practical Business Plan, which Mark developed and I now champion. I have had wonderful experiences helping architects and engineers lead design build teams, and profit with their contractor teammates.

This is a great time for design and construction, including for entrepreneurial architects and engineers!

Why Start Design With a Blank Slate?

In another fascinating observation, Steve Burrows points out one more obvious inefficiency: continually re-designing building elements that have been designed millions of times previously.

Burrows argues that most building varieties – and any piece of infrastructure, really – are comprised by only two types of parts: “fixed” building aspects which are the same every time (“gravity is the same all over the planet”), and “unique” aspects which address variable elements like the site, geography, and climate. He argues it is wasteful and unnecessary to re-design the fixed aspects for each project: “So why should you ever have to design a gravity floor system ever again. It’s been designed a hundred million times,” he argues. His point? These kind of “fixed” elements could be efficiently mass produced.

Burrows also makes the argument that a building really involves only three elements: walls, floors, and a roof. And within those elements, there are only six things: something to carry electricity, water, air, and structural forces, plus a need to finish the outside (waterproofing, façade, etc.) and the inside (insulation, finishes, etc.). Yes, you need stairs and elevators, and other things, but the analogy does seem to hold.

Next, he argues, in broad terms, that most all buildings can be defined with that level of simplicity. Three elements, and six things. Few buildings are truly bespoke; yet, most are designed as if they were.

Burrows challenged the audience with a mind experiment: magically take the skin off every building in a major city, walk to the window, and see if you can identify the buildings using anything other than your memory. Burrows observes this would be very difficult, and that makes sense. The buildings would all largely look the same. Each building would have a grid of columns, floors, and a core. So why not think about modular construction, and mass production, and other opportunities for efficiency?

It is hard to disagree with Steve Burrows’ conclusion: there is a better, more efficient way to design and construct buildings. This is not necessarily “breaking news,” or something that Burrows deduced all by himself. In fact, I have been approached by several potential new clients – as recently as April 2020 – who want to take some kind of modular and prefabricated approach to the market. The benefits of greater efficiency in design and construction are, indeed, truly tantalizing. A great time for design and construction, indeed!

The Gig Economy…and What Is a “Job” Anyway?

Finally, I loved Steve Burrows’ comments on how to “install a change management process” in your own company, in an effort to break out of institutional inefficiencies:

“The way I [install a change management process is], stop defining “the job” and start defining “the work” that people do. The growth of the gig economy is for people like me. I just do work. I don’t have a job. I just do what I do for anybody who wants it. And you’ve got to start thinking about people like that.”

-Steve Burrows

This spoke to me for so many reasons.

On some level, it is why I started my own law firm. I just do work. I don’t have a job. I just do what I do for anybody who wants help in the design and construction industry.

Also, I believe lawyers – like me – should be paid for the value we deliver, not just the time we spend. It is a great time for design and construction, but we can make it better!

The Conclusion

This really is a great time for design and construction…if you are interested in new approaches to align incentives, realize greater efficiencies, and to disrupt and improve the industry.

From my standpoint, Steve Burrows is a visionary. He is someone you should know about. His speech This is the Greatest Time in History to be in Construction” is absolutely fascinating. You can watch the video or listen to the podcast, as I have done a half-dozen times, with those links.


This publication is prepared for the general information of friends of Baker Law Group LLC in Illinois. It is not legal advice for you, or legal advice regarding any specific matter. Jeremy S. Baker is licensed to practice law only in Illinois. Under rules applicable to the professional conduct of attorneys in various jurisdictions, it may be considered attorney advertising material. Prior results do not guarantee a similar outcome.

This Is a Great Time for Design and Construction!

This Is a Great Time for Design and Construction!

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Baker Law, Design & Construction Counsel

Jeremy S. Baker is an experienced Chicago-based attorney who provides transactional, dispute resolution, and general counsel services to the design and construction industry. He uses creative project structuring and intelligent contracts, plus dispute avoidance and early cost-efficient claim resolution techniques, to help his clients complete challenging projects.

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