The life sciences industry is in the middle of a significant construction boom, partly fueled by research and manufacturing of vaccines and therapies to fight the COVID-19 virus and its variants. There are hundreds of new projects under construction, in various stages of planning or just completed. The developments run the gamut from production facilities to office space to laboratories for clinical research. Some of these projects will face headwinds and see budget overruns or significant delays caused by many factors ranging from supply chain issues to labor shortages. While it is impossible to prevent all disruptions on a construction site, companies that can plan ahead will be able to mitigate these risks.
Typically, a life sciences company will approve a budget for a new project and then hire an architect to design the facility. Engineers and a construction company are brought on to help work out the construction sequence and methods to complete the project on time and within budget. They will then start ordering construction materials, booking the heavy machinery, and hiring subcontractors. Depending on the project, this might not be the most efficient method.
These types of projects can use several construction project delivery methods. All have their pros and cons, and some are better suited for certain types of projects. But choosing the wrong method can cause headaches for the life sciences company as deadlines are missed, or costs soar. Let’s briefly examine some of them:
This is the most common delivery project method, accounting for about 40% of all projects. It is where the design and construction services are contracted by one company. While not necessarily cheaper, it is easier to budget. It tends to have shorter timelines from design to shovels in the ground. However, because there is no bidding for services, the cost can be higher. DB methodology can accelerate the groundbreaking activities and early on-site Works. The most common mistake that is seen in the industry is that the subcontractors are left to finalize design instead of the A/E companies. This can benefit the project if it is procured in such manner, meaning the subcontractors should have engineering capacity, BIM interface and this practice can accelerate spooling of material faster. This should be implemented in the DB strategy early on and bring on trade partners with the capacities, labor sources. When this implementation becomes an afterthought and or push down to the subs from the design team, this causes clashes in design, coordination issues, equipment order delays and overall project delays. Bringing the Structural, façade and MEP trade partners early on the project and procure them with design capacity can accelerate the project execution. One of the downsides of DB delivery is not receiving the program and/ or product you were hoping to receive. A good DB project will have bridging documents and stringent requirements for design and program. Once all that is in place, the collaboration between Design, procurement and construction makes this a very favorable execution method.
Integrated Project Delivery (IPD)
As the name implies, this method brings together all stakeholders (design, construction vendors) to collaborate on a project, from design to finished construction. IPD helps increase productivity, reduce waste, cut overruns, and produce better structures. However, it requires all participants to work together for peak efficiency. It also requires an upfront investment, and potential savings might not be realized on a complex project. But IPD does allow the construction of very specialized buildings. And, because equipment vendors are part of the process, they can give insight into how much lead time is required to get a viral vector or bioreactor. The construction industry has practiced many IPD light projects, executed as a GMP, Preconstruction agreement with critical trades signing early on. The contracts with subcontractors and vendors are still Lumps um agreements with open book GC’s and GR’s. The incentive program is not managed as a true IPD delivery project. A true ID project requires all the partners to be responsible and accountable for the project. They have similar risks and gains for the project. For complicated process projects, having your process engineer and installation become integrated and accountable partners do add value to the project. These types of projects take time to set up and get working. You are involving many partners into the program, from all end user stake holders to the pipe fitters. However, when they are set up and team members understand each other’s roles and significance in the process, the decisions are most accurate and changes later in the process diminished.
Engineering, Procurement, and Construction Management (EPCM)
This method, also called a “turnkey” contract, is similar to Design-Build, but the project has a guaranteed cost and a fixed date where the company can use the facility. The benefits are quicker projects and more precise procurement of materials. However, there are cost management difficulties, and it can appear more expensive since there is no bidding process at the upfront cause. As a client, you get to lock in your design, cost and long lead items at the very early stages of the project. EPCM projects can be cost efficient if they are managed well. As the end user, you still own the design and can lead the design process, a bit different than a traditional DB process. It is also essential that the right company is chosen to manage the EPCM project. The biggest industry mistakes that take place for the EPCM, for companies to sign up for the project without committing their SME’s, lack of local resources, lack of relationships with local subcontractor and vendor community, lack of engineers that are familiar to the local codes and industry. EPCM with the right partner is a very efficient, fast paced project delivery. It is also geared towards Life Sciences companies that are quick to make decisions and execute. If the company is slow to make decisions and wants to continue to change them culturally, it is not a good culture to execute EPCM Projects.
Guaranteed Maximum Price (GMP or GMAX)
This is not a construction delivery method per se, it is a traditional Design/ Bid / Build methodology that allows the owners to bring the trade partners, contractors earlier on limited design assist capacity. GMP Max guarantees the maximum costs of the project with integrated contingencies. This is the most common method to be used to enhance the traditional Design Bid Build. Many companies have purchasing requirements to have a minimum of 3-5 vendors to bid everything. Although you can achieve that in DB/EPCM/IPD. This allows you multiple stages to bid and refresh the project costs. However, in this case, you must wait for the design process to be completed to kick off the project, depending on your permit packages. Locking in the subs, vendors, material becomes more problematic and has higher escalation issues on this type of delivery. These escalations, unknowns in design and porgram are managed through pool of funds, called contingency.
It is not fair to say one method is cheaper or more expensive to execute than the other. No project has good data to back it up. You have to build the same project twice at the same location with the same partners at the same time to see the comparison. However, there are good and bad executions of projects. Spending time in the beginning to understand your company culture, your program, how well you are determined with your program, the buy-in from all the key stake holders and reviewing different methods for delivery is key to success. There is no right or wrong in choosing how you want to deliver your project. However, reviewing your options in the beginning and making informative decisions around that will help you deliver a successful project. It is really important to understand the fabric of the vendors as well, are they busy? Do they have good relationships with the local construction community? Are they committing their resources? During One of my EPCM delivery journey, I had to work with 3 Mechanical Engineers, 5 electrical engineers. The packages that had the most unreliability were Mechanical and Electrical Packages. At some point we stopped the designers and allowed the subcontractors to take on the remaining design and procurement. We were able to stabilize the project at that time. It is important to pay attention to the red flags and issues along the way. During a Cost + fee delivery project, we realized the second third tier subs were all lump sum, and it was not really a cost against units anymore, more of time and material. We were able to lock in the subs and contract lump sums agreements with them to own their own risk.
It is important that life sciences companies keep in mind that these delivery methods may not be suitable for all projects, or that they will work on a new one just because they were successful on a previous project.
THE NEED FOR EARLY PROJECT MANAGEMENT
Due to the increased complexity of these projects, especially with supply chain issues, many life sciences companies are seeing the benefit of bringing in a third-party project manager earlier in the process. These professionals can review the proposed project and conduct a feasibility analysis to ensure the best delivery method is used. This becomes even more crucial when these projects are done in other countries or areas where the company has not operated before.
The project manager can provide insights into the market, including a review of the contractors, subcontractors, trades, and other vendors. This review would look at the construction company’s capacity and what type of historical project deliveries they have accomplished. Were these projects completed on time and within budget? In many cases, choosing the right delivery and procurement method and selecting the right partners are the keys to success. Because, when the wrong decision is made, things can go downhill quickly.
Choosing the wrong partner on an EPCM project with challenges can be disastrous. For example, if the project has multiple design changes, cost adjustments, or the schedule keeps being adjusted. With all the downtime, the contractor might not have an incentive to finish the job. They might get pulled into another project with better returns or a better chance of completing a job on time, allowing them to pad their portfolio. This would obviously set back the original project, possibly leaving it dead in the water.
Experienced project managers will have extensive benchmarks from previous projects. When brought on early in the process, they can conduct a study that gives the life sciences company a breakdown of what the proposed budget can cover. This can save significant time during the design phase because it will cut out superfluous add-ons and reduce the time required for revisions. The project manager will also have benchmarks for procurement, helping to create a schedule to ensure items can arrive on time in sufficient quantities.
The importance of bringing in a project manager early in the process is something new to the life sciences industry. But considering all the potential challenges and pitfalls these projects face, having an experienced professional to guide things along can be invaluable. They can plan out the project in minute detail, factor in disruptions, and help ensure things come in on time and within budget. This will become the standard operating procedure for these types of projects going forward.