The First Facility Management Blog

The first comprehensive study to explore the impact of project delivery methods and procurement procedures on achieving sustainable design and construction goals was released earlier this month. Sustainable, High Performance Projects and Project Delivery Methods: A State of Practice Report was commissioned by the Charles Pankow Foundation and the Design-Build Institute of America. This ongoing study is being conducted by a team of researchers from the University of Colorado, University of Oklahoma, Pennsylvania State University, and Michigan State University.

The first phase of the research aimed to determine the state of practice in green building project delivery and procurement. The full report of the first phase is available here. The initial findings show that integrated delivery methods (such as design-build and construction-manager-at-risk) are superior in achieving or exceeding Leadership in Energy and Environmental Design (LEED®) certification goals and that procurement procedure also have an impact on the level of sustainability achieved.

Researchers evaluated the three most common delivery methods: design-bid-build (DBB); construction manager-at-risk (CMR), and design-build (DB). Under the DBB delivery method, an owner contracts separately for the design and the construction phases, often awarding construction contracts to the lowest bidder. DB is a fully competitive project delivery system that awards contracts for both design and construction to a single entity composed of one or several firms. CMR is a delivery system in which the owner contracts separately but somewhat simultaneously with a designer and a contractor who not only performs construction management services but also has significant input during the design phase. The five procurement procedures sampled in this study were low bid, best value, competitive negotiation, qualifications-based selection, and sole source.

To understand the state of practice, the research team employed a three-tiered research approach encompassing:

1. industry survey;
2. content analysis; and
3. structured interviews

The industry survey elicited 230 responses from LEED Accredited Professionals (LEED APs) regarding the project delivery methods, procurement procedures, and certification level on specific LEED certified projects. The content analysis was based on solicitation documents from 92 public and private projects representing over $2.2 billion in building investment.

Structured interviews were conducted with members of the industry as well as with owners to help interpret the results. Responses were received from 47 of 50 states and the District of Columbia.

The study found that all project delivery methods had been used to achieve all levels of LEED certification (certified, silver, gold, and platinum). It also found that all procurement procedures (low bid, best value, competitive negotiation, qualifications based selection, and sole source) had been used to achieve all levels of LEED certification.

However, some delivery methods and procurement procedures were more successful than others. Success was assessed through the ratings by LEED APs who have completed LEED projects and by identifying those projects that met or exceeded their initial LEED rating goals. Two key facts relating to success are:

• Integrated delivery methods (DB and CMR) are used in 75% of the projects surveyed; and
• Qualifications-Based Selection (QBS) procurement was most successful procurement procedure.

The ability to integrate construction knowledge early in design is essential to maximizing sustainability; therefore, strong preferences among LEED APs for integrated delivery methods on LEED projects is not surprising. Integrated project delivery methods either eliminate price competition or include price as one of several factors that determine the contract award.

Sustainable, High Performance Projects and Project Delivery Methods: A State of Practice Report provides insights for owners seeking to achieve specific sustainability goals. While all project delivery methods are in use, integrated project delivery methods are most commonly applied to projects seeking LEED certification. If owners choose QBS procurement methods to select team members, they may increase their chances to meet or exceed their sustainability goals.

Last year, Satellier Inc., announced results from its survey exploring the mindset of the development community and uncovering emerging trends in real estate development in India. The survey revealed that 93% of respondents believe there is a significant gap between international design practices and onshore construction realities for large-scale developments in India, characterized by the many challenges facing the development community today: unprecedented demand for more and better buildings, in every category of use; shortage of local architects with international experience, project overruns, reported to be in excess of 62% in the government sector (Source: Airports Authority India), insufficient number of graduates to fill the growing need for skilled talent, consultant performance issues, and slow adoption of Building Information Modeling (BIM), among other pressures.

Moreover, 93% of respondents think that bridging this gap will lead to more successful projects. Significantly, 87% believe that BIM can be a key project delivery system for saving time and money during construction, and 83% believe that the appointment of a design coordinator for large-scale projects is one of the solutions that can bridge this gap.

The survey was conducted jointly with Infor-Media India, organizer of the recent Real Estate India 2008 International Conference, in New Delhi. The online survey polled developers, investors, construction personnel, architecture, and engineering firms.

Satellier CEO Michael Jansen hosted a panel at this conference to discuss the characteristics of the gap and practical remedies. The panel, comprised of leading figures from Jones Lang LaSalle Meghraj, Hines, Skidmore, Owings & Merrill, and Geodesic Techniques, discussed how design-to-construction in India works today, how they are addressing the gap, and how technology, namely BIM, can improve project delivery in India.

“Clearly the development community is feeling pain and seeking real solutions, and we’re committed to helping,” said Jansen. “However, it will take the involvement of others to lift all boats quickly,” Jansen continued. “Creating a BIM Commission can be one way to share knowledge and leverage lessons learned, fast-track technology adoption, and ultimately, build better buildings, much faster.”

[Photo: Warehouse 727]

Reflecting the troubled U.S. economy and recessionary conditions, the national warehouse market struggled during Q4′08, according to the fourth quarter industrial report from Colliers International, a leading global real estate services firm. Industrial absorption was negative during the October through December period, with occupied space shrinking by 18.1 million square feet (msf). This marked the largest such decline since early 2002.

A confluence of factors - including an increase in delivery of new industrial construction and softened demand for warehouse space - led to a rise in industrial vacancies, which jumped from 8.67% at the end of Q3′08 to 9.06% at the end of Q4. Compared to one year ago, warehouse vacancies are up from 7.90% to the current 9.06%. Market polling results indicated 42 markets reported an increase in vacant industrial space, and only 12 markets showed declining vacancy in 2008.

In terms of new supply, 46.5 msf was completed during Q4 - which was the highest quarterly injection seen in 2008. This brought full year construction to 171.9 msf - compared to 181.2 msf in 2007.

As for Q4 rents, the average warehouse rental rate registered $5.51 per square foot (psf), which was down 1.5% from the third quarter average, and down 3.3% from the year-ago period. Notably, sizeable rent decreases were witnessed in nearly all California, Arizona, Nevada, and Florida markets.

With tightening lending conditions and the anticipation of further demand weakening, builders largely ceased new construction in Q4. Indeed, only 66 msf stood under construction as 2008 drew to a close, compared with 107 msf at the end of Q3′08. Construction activity is at its lowest level since Q2 2004.

This cessation of construction will lead to a much slower growth in industrial inventory in 2009. Only 75 msf is expected to come online for the whole of 2009 - a major drop-off from the 172 msf brought to market in 2008. Indeed, the January ISM (Institute for Supply Management) number coming in at 35.6 truly sets the tone for a grim year ahead for manufacturing.

“Clearly, we’re in the midst of a deepening recession, which continues to take its toll on the industrial sector,” remarked Ross Moore, executive vice president and director of market & economic research at Colliers International. “While the consumer has been in retreat for the past several quarters, the export sector - which up until recently had been a bright spot - is now experiencing the downward trajectory that’s been felt for quite some time in other areas of the economy. That said, the promise of a significant uptick in infrastructure spending, as mandated by the Obama administration, could provide a much needed jolt for the warehouse market.”

Business conditions at architecture firms continue to deteriorate, with the Architecture Billings Index (ABI) posting its lowest level since the survey began in 1995 for the second month in a row. As a leading economic indicator of construction activity, the ABI shows an approximate nine to 12 month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the November ABI rating was 34.7, down from the 36.2 mark in October (any score above 50 indicates an increase in billings). The inquiries for new projects score was 38.3, also a historic low point.

“With mounting job losses, declines in retail sales, and travel cut-backs, the need for new commercial facilities has dropped considerably recently,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “What’s just as troubling is that the institutional sector–schools, hospitals, and public buildings–is also beginning to react to tighter credit conditions and a weakening economy.”

Key November ABI highlights:
Regional averages: Northeast (39.5), South (36.8), West (33.5), Midwest (31.4)
Sector index breakdown: mixed practice (44.5), institutional (40.8), multi-family residential (30.0), commercial / industrial (26.7)
Project inquiries index: 38.3

On the heels of a six-point drop in September, the Architecture Billings Index (ABI) plummeted to its lowest level since the survey began in 1995. As a leading economic indicator of construction activity, the ABI shows an approximate nine to 12 month lag time between architecture billings and construction spending.

The American Institute of Architects (AIA) reported the October ABI rating was 36.2, down significantly from the 41.4 mark in September (any score above 50 indicates an increase in billings). The inquiries for new projects score was 39.9, also a historic low point.

“Until recently, the institutional sector had been somewhat insulated from the deteriorating conditions affecting the commercial and residential markets,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “Now we are seeing that governments and nonprofit agencies are having difficulties getting bonds approved to finance large scale education and healthcare facilities, furthering the weak conditions across the construction industry.”

Key October ABI highlights:
Regional averages: Northeast (44.3), South (40.0), Midwest (37.4), West (34.9)
Sector index breakdown: mixed practice (45.1), institutional (42.1), commercial / industrial (33.6), multi-family residential (34.2)
Project inquiries index: 39.9

The Architecture Billings Index is derived from a monthly “Work-on-the-Boards” survey and produced by the AIA Economics Market Research Group. Based on a comparison of data compiled since the survey’s inception in 1995 with figures from the Department of Commerce on Construction Put in Place, the findings amount to a leading economic indicator that provides an approximately nine to twelve month glimpse into the future of nonresidential construction activity. The diffusion indexes contained in the full report are derived from a monthly survey sent to a panel of AIA member-owned firms. Participants are asked whether their billings increased, decreased, or stayed the same in the month that just ended. According to the proportion of respondents choosing each option, a score is generated, which represents an index value for each month.

David Fisher, architect of the Dynamic Tower to be constructed first in Dubai, has been honored as the worldwide Architect of the Year 2008, out of a record number of 2325 nominees, by The Developer & Builders Alliance (DBA), a worldwide real estate and construction organization. Fisher’s firm, Dynamic Architecture, is based in the Bedfordshire, UK.


The other five finalists to the award were Foster & Partners, Jean Nouvel, Santiago Calatrava, Pelli Clarke Pelli Architects, and Zaha Hadid.


The 80 story building is to be built in Dubai.

“I am honored to receive this award from the Developers & Builders Alliance, as I believe strongly in the group’s stated goal of improving our global economy by fostering prosperous worldwide business relationships through successful projects and innovation,” Fisher stated.

The first of Fisher’s Dynamic Tower–which TFM covered here in June 2008–will be built in Dubai. The structure challenges the development of architecture, as it defies the static to embrace the dynamic, enabling its shape to change according to meteorological factors, changing needs and desires. In line with David Fisher’s slogan “Designed by life, shaped by time”, his Dynamic Tower is the first building to feature the fourth dimension: Time.

The construction process starts with the top floor (80th), as the prefabricated units are assembled around the concrete core floor by floor, spiralling downward, until the ground floor is completed. 
Living in a dynamic tower, you will be able to park your car right next to your entrance door, and while you relax in your swimming pool you will be able to enjoy the eve-changing view onto a rotating world, as you express your preferences to the voice-activated speed control. 



Fisher, the inventor of the “Dynamic Architecture” graduated from the University of Florence, Italy, practiced architecture and explored the development of methods, construction and real estate in a number of countries. 
He believes  that “The Dynamic Tower will radically change not only the concept of design but also construction and real estate, bringing a new dimension to architecture and to our way of living.” His fir

Four years ago, Fisher was inspired by the view onto the ocean in a North Miami, FL beach apartment. There the idea of a rotating floor emerged for the first time. He is currently meeting with top developers to discuss a possible Dynamic Tower in Miami. 

Following three consecutive months of signs of greater stability in design activity, the Architecture Billings Index (ABI) fell precipitously, dropping more than six points. As a leading economic indicator of construction activity, the ABI shows an approximate nine to 12 month lag time between architecture billings and construction spending.

The American Institute of Architects (AIA) reported the September ABI rating was 41.4, down sharply from the 47.6 mark in August (any score above 50 indicates an increase in billings). The inquiries for new projects score was 51.0. This is also the first time in 2008 that the institutional sector has fallen below the 50 mark.

“With all of the anxiety and uncertainty in the credit market, the conditions are likely to get worse before they get better,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “Many architects are reporting that clients are delaying or canceling projects as a result of problems with project financing.”

Key September ABI highlights:
Regional averages: Midwest (45.2), West (45.0), Northeast (44.2), South (44.1)
Sector index breakdown: mixed practice (45.9), institutional (45.6), commercial / industrial (42.1), multi-family residential (40.3)
Project inquiries index: 51.0

Robert A. Murray, vice president of economic affairs at McGraw-Hill Construction Research and Analytics Group in New York City, issued a statement about the expected impact on construction activity. The text of his commentary:

Recent Financial Market Events—the Broad Impact on Construction

The upheaval in the financial markets during September has altered the financial landscape, which will affect funding for construction projects and, in turn, construction activity.

The situation with the financial markets continues to be fluid, particularly regarding the shape of the $700 billion mortgage buyout proposal. Given the sense of urgency coming from Treasury Secretary Paulson and Fed Chairman Bernanke, Congress is anticipated to pass some measure with revisions to the Treasury proposal, including oversight of the process by which the distressed mortgage securities are purchased. The expectation is that the purchased securities will increase in value as the housing market begins to improve in 2009 and beyond, which would allow them to be resold and decrease the potential cost of the bailout from $700 billion to something less. The key, of course, is that the decline in home prices comes to an end, and we don’t expect to see that until 2009 at the earliest.

The steps taken to provide stability to the financial markets will require time. The lending environment for commercial projects will probably grow even more difficult in the near term, before some credit easing begins to take hold, perhaps in the latter half of 2009. This means that the downturn in construction starts shown by commercial building in 2008, particularly for stores and warehouses, will grow more widespread in 2009, dampening offices and hotels as well. This had been our expectation prior to this September’s events; if these steps are successful, a rebound in commercial construction could occur earlier than expected, perhaps as soon as 2010 or 2011.

The institutional structure types, such as schools and hospitals, respond in a lagged manner to shifts in the economy and lending conditions. We expect to see a loss of momentum for 2009, given the deterioration in state and local fiscal health, although funding already raised through the bond market should help the initial stage of a construction slowdown remain gradual. In other words, the response to September’s financial turmoil is expected to be delayed and diffused. The same applies for public works, and a near-term plus for that sector is that Congress recently transferred $8 billion from the general fund to shore up the Highway Trust Fund. As for single-family housing, the steps to stabilize the financial markets, if successful, should help to stabilize homebuilding in 2009, although at a very, very low level.