Cancer Institute
Penn State Milton S. Hershey
Medical Center
Hershey, Pennsylvania
Chris Voros
Construction Management
April 25, 2007
Cancer Institute
Hershey, PA
April 25, 2007
Chris Voros
Construction Management
Thesis Content
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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
Cancer Institute
Hershey, PA
April 25, 2007
Chris Voros
Construction Management
Building Respect:
Industry Influences
on Subcontractor Markups
Cancer Institute
Hershey, PA
April 25, 2007
Chris Voros
Construction Management

Goal
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
Approach
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Improve Construction Manager and General Contractor Relationships with
their Subcontractors
Identify factors that go into a subcontractor’s “multiplier”- the value added
above allowable bid package markup
Methodology
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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
Cancer Institute
Hershey, PA
April 25, 2007
Chris Voros
Construction Management
Survey Contents
CM/GC
Subcontractors
• Anonymous
• Mailed Packet
• Qualitative/ Written
Responses
• Question Base:
•
•
•
•
Anonymous
Online Survey
Quantitative & Qualitative
Question Base:
– 10 Questions
– Bid Package vs.
Contract Markups
– Determinants of a BP
Markup
– Company SelfAssessment
Cancer Institute
Hershey, PA
April 25, 2007
– 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
Chris Voros
Construction Management
CM/GC Survey Results
•
Contract Markups:
–
–
•
-2% to 8%
– Multiplier factor
Self- Assessment:
–
Reputable companies
– 90-100% Returning Subs
– 70-90% Repeat Clients
Bid Package Markups:
–
•
•
10% to 20% (incl. OH&P)
Dependent upon trade
•
Markup Determinants
– Majority are objective/quantifiable
CO Negotiations
–
“Fair but Firm”
– Extensive in-house review
Cancer Institute
Hershey, PA
April 25, 2007
Chris Voros
Construction Management
Subcontractor Survey Results- Part 1
Relationship-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
Cancer Institute
Hershey, PA
April 25, 2007
Chris Voros
Construction Management
Subcontractor Survey Results- Part 1
Business-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 schedule
and meets all milestone dates
(Not pictured - Avg. = -0.28)
Cancer Institute
Hershey, PA
April 25, 2007
Chris Voros
Construction Management
Subcontractor Survey Results- Part 1
Regional 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)
Cancer Institute
Hershey, PA
April 25, 2007
Chris Voros
Construction Management
Subcontractor Survey Results- Multiplier Matrix
•
Apply to Part 2 case studies to test validity of Part 1 responses
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.
Cancer Institute
Hershey, PA
April 25, 2007
Chris Voros
Construction Management
Subcontractor Survey Results- Part 2
Case Study #1: Alpha Construction Company
-Dominant CM/GC moving into region
-Generally negative scenario for subs due to
business practices and CM personnel on
Project (superintendent)
Alpha Survey Average = 3.31%
Case Study #2: Beta Contractors
-Start-up company of experienced principals
-Good and bad factors- personal versus
company experience; largest job to date
Beta Survey Average = 1.6%
Case Study #3: Choice Management
-Respected CM, by owners and subs alike
-Overall desired scenario- good people
and reputable company
Cancer Institute
Hershey, PA
Choice Survey Average = 0.1%
April 25, 2007
Chris Voros
Construction Management
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
Cancer Institute
Hershey, PA
April 25, 2007
Chris Voros
Construction Management
Closing Remarks
• 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
Cancer Institute
Hershey, PA
April 25, 2007
Chris Voros
Construction Management
Acknowledgements
-AE and Construction Management Faculty:
Dr. David R. Riley
Dr. Michael J. Horman
Dr. John I. Messner
Professor Parfitt
Professor Holland
-The Penn State Milton S. Hershey Medical Center:
Dick Aradine
Mike Lekey
Donna Martin
-Gilbane Building Company, Hershey Project Team:
Dennis Vance
Don Hergenreder
Patrick Hardister
Tom Gutherman
Andrew Notarfrancesco
Marianne Jones-Pichler
John Vicanovick
Dan Munn
-Chris Leyenberger, Centerline Associates
-Mike Connor, Array Healthcare Facilities Solutions
Cancer Institute
Hershey, PA
-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!
April 25, 2007
Questions?
Chris Voros
Construction Management