Alumax Technical Center was a national metal company's research and development entity. Alumax, formerly a producer of specialized metal products, was a Fortune 500 company that was divested from a more widely known company a number of years ago. Alumax occupied part of an older research and development facility in Golden and needed to relocate when its former parent company decided to shut down the facility altogether.

Alumax required very specialized equipment in its facility, including a pilot plant for testing small batches of aluminum alloys. Due to its specialized use and a tight industrial market, Alumax needed a building developed specifically for its use.

Because Alumax thought it might want to own the facility rather than lease it, we put developer selection on hold. Instead, we began building a development team by selecting first an architect and then a general contractor. We selected both team members through a competitive bidding process, where respondents were judged both on the basis of qualifications and fees. The general contractor's cost competitiveness was based on its profit, overhead and contingency fees, rather than on the overall cost of a building, because at the time of the competition, the architect had not started any building plans.

This was by design, since we wanted the general contractor to be a member of the initial design team. Without a general contractor's input, the architect could not take into account the latest information on material availability and costs, which are usually in a state of flux. Consequently, a building designed by an architect alone will not be as cost efficient or as time efficient to build as it could be. This, however, was not the only reason to have the general contractor on the design team early in the process.

The most important reason is to have the general contractor take "ownership" in the design. Often general contractors are selected by having several firms bid the cost of a building based upon a set of completed plans. Regardless how detailed the plans, some items are typically overlooked and others are ambiguous enough for differing interpretations. To come in with a low bid, a general contractor must interpret the plans in the least expensive way possible. After the lowest bidder is awarded the contract, construction begins. Flaws in the plans then start coming to light and expensive, time consuming change orders usually result. In the end, the project comes in over budget and behind schedule.

This nightmare is avoided by having the general contractor take "ownership" in the building design phase. By starting early, the general contractor can not plead ignorance about the architect's intent. Also, with both parties involved from inception, they are much more likely to cooperate as a team.

The chemistry between the architect and general contractor is very important. In fact, we only considered general contractors that had previous experience working with Alumax's chosen architect. We also had the architect participate in the general contractor selection.

If the general contractor was selected without bidding on a set of building plans, you may wonder how we were assured of getting competitive bids on the "bricks and mortar" cost of the building. We required the general contractor to work with us on an open book basis. The general contractor, in turn, selected all of its subcontractors via competitive bids.

Simultaneous with choosing the development team, we conducted a detailed site search. The entire development team had input into the final site selection and participated in site due diligence. With the team working smoothly and with an open line of communication with the building department, we were able to get a permit 60 days ahead of schedule and avoid paying a $65,000 traffic impact fee.

In the end, Alumax Technical Center elected to own the building, so a developer was never hired. If they had decided to lease, though, a developer still would not have been required. With their strong financials, we easily found a number of institutional investors willing to buy the building and lease it to them. Without a developer being involved, there was no additional spread on the capitalization rate or financing to compensate the developer. So by eliminating developer fees and spread, we saved Alumax approximately $1,000,000 over a 15 year period.