A look at how building product and building material manufacturers can gain competitive advantage by getting involved with more design-build projects.
Picture this: A team of owners, architects, contractors, engineers, consultants and building product manufacturers sits together at the same table, communicating openly and collaborating frequently to get a project from the drawing board to completion. Focused on delivering results, this synchronized team helps minimize project costs, streamline schedules, improve outcomes and realize efficiencies that traditional construction methods can’t touch.
If the idea seems far-fetched, think again. In a business world where “silos” are a thing of the past and “collaboration” has become a central focus for top organizations, the construction field is getting in on the game, and manufacturers can be a vital part of it.
Using the design-build project delivery method, the design and construction phases are combined into a single contract, with the designer, contractor and other parties working together from the outset. This not only removes the need for multiple contracting efforts, but also promotes a culture of collaboration across the entire span of the project, resulting in true “value creation,” not value engineering.
All of this creates the opportunity for manufacturers to start competing less on price and more on value by having greater influence in the process. Rather than forcing manufacturers to compete on price (i.e., value engineering), design-build projects let them compete on value while truly creating better outcomes for owners. This, in turn, results in a deeper level of “stickiness” across the entirety of the project team and lower likelihood of specification loss or substitution.
No Longer a “Radical” Idea
A project delivery method that was considered “radical” just 25 years ago, design-build currently represents a substantial percentage of America’s nonresidential construction volume (and continues to grow). For manufacturers, design-build presents both opportunities and challenges, the latter of which may seem daunting at first; but none of them are insurmountable.
Used by both private and public sector project owners as a way to keep projects moving forward, on time and within budget, design-build is anticipated to experience total growth of 18% from 2018 to 2021 and reach over $320 billion of construction spending in 20211, according to FMI’s study, “The Growing World of Design-Build.” Manufacturing, highway/street and education are currently the biggest users of design-build, with accelerating growth in the health care, commercial and office markets.
These growth numbers present new opportunities for building product manufacturers that want to get involved with design-build projects. Largely “disconnected” from the general contractors and subcontractors who are on the job site, using their products on a daily basis, manufacturers are in a great position to be able to benefit from taking a more active role in the success of those projects.
Exhibit 1. Design-build construction spending in the assessed segments is anticipated to grow 18% from 2018 to 2021.
For example, rather than playing a perpetual game of “telephone” as information is transferred from one entity to the next (i.e., owner to architect to contractor to distributor to manufacturer), all would have a seat at the planning table from the beginning. The rules of engagement would be different, of course, and the manufacturer and its distributors would have to rethink their age-old processes for pursuing and servicing new business—both of which have been largely focused on design-bid-build. Rather than chasing architects and engineers, and then adhering to their specifications, manufacturers can literally help lay the foundation for those specifications during the project planning stages. Making that happen would require a greater degree of influence with contractors and a focus on how those contractors can support/push one specification (mainly yours) over another (that of your competitor).
This represents an almost 180-degree swing in mindset from the days when the vast majority of time was spent influencing architects and engineers (versus 20% for contractors). With design-build, the focus must be on the contractor community, which represents a different structure and a much different way of going to market.
Getting in on the Ground Floor
Many of our recent conversations with manufacturers gravitate around, “How do we play a bigger role in the design-build market?” or “How do we enable our top contractors to be successful on design-build projects?” Some are in the early stages of trying to figure out how to do it, but, for the most part, design-build represents an untapped opportunity for the companies that put the time and energy into it. Here are four good starting points that all manufacturers can use to start developing a business model that seizes on the design-build opportunity:
- Acknowledge that flexibility matters. Project stakeholders all need a seat at the design-build table, but they aren’t generally on the same page at the outset. For example, an owner may be determined to select suppliers based strictly on price, with no consideration of vendor quality, delivery times or ability to serve. Because of this, a relationship “pivot” is probably going to have to take place during the first or second meeting. Focus on creating a team environment that includes input from all points of the value chain—not just from the owner or contractor.
- Get to know the contractor’s mindset. If your company deals with more distributors than it does contractors, then it’s time to get to know the latter a bit better. Get to know the contractor’s business and what its drivers and pain points are. What keeps it up at night? And, how can your company help solve some of those challenges in a very collaborative, two-way-street format? For example, this could be as simple as understanding total installation costs (i.e., material, overhead and labor), and then better positioning your products as helping to lower that overall cost.
- Build preconstruction capabilities. It’s pretty typical for manufacturers to have the engineering and technical expertise needed to design and develop their building materials as well as drive specifications. Where many are lacking, however, is in the conceptual design and value creation capabilities that get the most traction at the design-build table. While engineering specifications are important, for example, a sales-focused individual who can get deeply involved in the preconstruction process will also win out in a design-build scenario. The manufacturer that understands this and that arms its sales team with the tools necessary for success in this realm will serve as a true partner in the process, and not just another technical resource or vendor.
- Show your value. Design-build works because project owners believe in and have experienced the benefits of working in a collaborative environment. These benefits include not only time and cost savings, but also more effective teams and the ability to deliver megaprojects in the most efficient manner possible. Have a clear message of how your products incorporate into the design-build process and be sure to create product messaging around return on investment (ROI), time savings, cost savings, labor efficiency and a better overall outcome. The manufacturers that can deliver added value to the design-build approach will be well positioned for growth as the delivery method proliferates over the next few years.
Ready, Set, Go!
We’re at a point in the construction industry where innovation, new ways of doing things and technology are all accelerating faster than they ever have. From integrated project delivery (IPD) to modular construction/prefab to the proliferation of technology, the next five years in the industry will look very different than the last five years did. With most of these shifts being driven by increased collaboration and innovation, the manufacturers that get involved with design-build early will be better positioned as the industry continues to evolve.
About the Authors
Paul Giovannoni leads FMI Consulting’s Building Products sector. His focus is on developing growth, value creation and new product strategies for organizations in the building products and materials industry and leveraging FMI’s extensive experience in design-build. He can be reached at firstname.lastname@example.org.