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Buyout

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BUYOUT  

Overview

Buyout is a cornerstone and critical step for a project.  Clearly understanding, organizing, and awarding scopes of work on time is crucial to the success of any project!

Current Documents and Tools

  • Sub Bid Analysis
    • Buyout tracker tab is included in analysis
  • Sub Bid Proposal Forms
  • Buyout Forms
  • Prequalification Forms
  • Buyout Log
  • Checksets

Subcontractor Preparation

  • Meet with the estimating and decision maker
  • Have the contractor bring take-offs
  • Bring highlighted plans

Sub Bid Analysis

  • Further details on the Sub Bid Analysis process is found below.
  • Normalizing bids or getting bids "apples to apples" is crucial to successfully awarding the best contractor.

Preparation is Key

  • First step is to complete a thorough check set. You must understand what and why you are buying out certain scopes of work.
  • Understand the owner specific requirements.
  • Understand the project timeline. When will this scope occur and how does it affect the critical path.
  • Logistics plans are finalized and understood.
  • Review the standard Buyout Forms for the scope of work and update to project specific needs.
    • Note the Buyout Forms will require updating for each job. These forms are there to help jog your memory and confirm typical scope gaps.
      • (If you have revisions to Buyout Form masters - please provide that information to Miranda Hill.)
  • Develop detailed Bid Proposal Forms to help confirm scope of work coverages and costs.

 

THE BUYOUT PROCESS  

Execution

  • Buyout Meetings
  • Review the Scope
  • Prepare Buyout Notes
  • Set up meetings with multiple subcontractors
  • Meet with the highest subcontractor first
  • Obtain pricing for complete scope
  • Don't shop bids and no last looks. It is unethical.
  • Award to low qualified subcontractor
  • Call, not email, the #2 sub first
  • Use meetings as a learning tool

 

Buyout Meetings

  • After selecting / shortlisting bidders through the Sub Bid Analysis process, set up buyout meetings with bidders.
    • Note: some scopes may require detailed buyout meetings with multiple subcontractors to ensure bids are accurately reviewed. Others may be a quick phone call. (Know the project risks)
    • Make sure the estimator and operations side for the bidding party are in attendance at this meeting.
    • Bidder should bring any sequencing plans, detailed schedules, take-offs, assumptions, questions, RFI's, etc.
    • Ensure the bidding party has received and reviewed the standard Terms and Conditions prior to the meeting.  Go over the Terms and Conditions during the meeting again.
  • Get the bidders talking. Don't be the one doing all the talking!
  • Take detailed meeting minutes, including action items, and issue within 24-hours.

 

Finalizing Bidder Pricing and Awarding Scopes of Work

  • Once all updated bidder pricing has been received, reviewed, and agreed upon, subcontractors and purchase orders should be issued.

The Scope - Buy Our Subcontract and the Language

  • Provide blank subcontract for them to review and clarify that it is non-negotiable if they would like the project.
  • Confirm insurance requirements
  • Payment Terms - Discuss Joint Check and GC Pay
  • A sample Subcontract, Purchase Order, Insurance Certificate, and Sub Memo was included as part of the standard bidding documents on SmartBid when sent out to bid
  • Buy hourly rates but know the market and negotiate
  • If discussed, it goes into the subcontract
    • Do NOT sneak in verbiage if you didn't discuss it
  • Sub Qual Forms and Bonding Capacity

 

Schedule

  • Clarify the schedule that we need. Don't ask how how long it will take to complete.
  • Confirm submittals and procurement timeframes meet our schedule
  • May need to buy multiple crews
  • Buy durations, not dates
  • Be careful buying number of workers

 

Quality and Safety

  • Any specific requirements that need to be met for their scope of work?
  • Mock-Up, Always!
  • How are you buying clean-up?
  • Make sure all OSHA regulations and requirements are acknowledged and met
  • 6' Fall Protection is Brinkmann standard - not an industry standard
  • Silica Standard
CURRENT DOCUMENTS AND TOOLS  
Master templates of all the forms shown below can be found in the Documents Tool of your project.

Bid Proposal Forms

  • The purpose of a Bid Proposal form is to help organize bidders' costs to accurately review and ensure full scope coverage.
    • A bid proposal form may not be required for all scopes of work due to size and/or complexity of the scope of work. This should be determined by the project manager for accurate bid reviews.
  • Bid Proposal Forms should be sent out with, or quickly after, the initial invitation is sent on SmartBid.
  • Be sure to update and add special notes, bidding instructions, requirements, etc. on the forms to help guide the bidders.
  • Below is an example of a Retaining Wall bid form.

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Buyout Forms

  • Must complete in detail for every scope
  • Buyout is the opportunity to eliminate scope gap and avoid profit fade
  • Comes from check set/scope take-off
    • Add custom questions
  • Used as a template to draft the subcontract

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Sub Bid Analysis

  • This is not a buyout form, but rather a tool to organize and look over multiple bids to ensure accurate bid comparison.
    • Many GMP and Cost of Work prime contracts will require a sub bid analysis completed and recommendations sent to the owner for approval.  Know your Prime Contract so we can be prepared.
  • Each scope of work, purchase orders and subcontract, should be reviewed utilizing the Sub Bid Analysis Form.
    • If done properly, you can clearly see scope gaps by different bidders, and it will help you accurately update project estimates.
    • Best Practices/Tip:
      • If you create a detailed Bid Proposal Form, it will help you organize your bidders costs accurately.
  • Understanding how bidder's breakdown bids is important, and what the project/owner will require. This will help you fill out the bid section of the overall estimate.
    • Do you need to breakout the building into phases/sections?
    • Do you need to separate finishes from shell and core?
    • Does the owner need to know specific costs about certain items?
  • Below is an example of a Countertop Bid Analysis:

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  • Base Bid Scope of Work: Itemized Detail/Breakdown for specific scope items.
  • Brinkmann Budgets: Current Brinkmann budget for the specific scope of work. (Think the phase code budget).
  • Bidders (Yellow Bars): Input all bidder information
    • Best Practice - As soon as we receive the bid, we should add them to the sub bid analysis sheet, and then the bid book.
  • Review the bid and update the specific line-item cost and determine the following:
    • Specific price for scope item (best option)
    • Y: Included in overall price or elsewhere within the breakdown
    • N: Not included in the overall price or elsewhere within the breakdown
      • To normalize the bid, we need to get another bidders price to fill in the gap, or provide an estimated cost to complete the specific line item.
    • C: Contingency. May be applied if we have a risky subcontractor, some vague drawings, or other project risks.
    • The goal is to accurately review the estimated costs for each bidder performing the work and select the best subcontractor to perform the work.
BEST PRACTICES  

Buyout Strategy

  • Buy Hard. Firm but fair
  • Get all included up front - No change orders later. Touch it once - Field and Office.
  • All leverage is lost once awarded
  • Spend the most time on high risk and large scopes
  • Critical items first
  • Unit costs and bid breakdown helps understand scope gap and overlap
  • Gut feeling when you sit down
    • Sit down with as many as you can
    • Weigh risks and size of subcontract scope
  • Art of "Buying the Grey" and Missing information
    • How are they going to perform their work?
    • What do you need them to include that is not specifically shown on the drawings?
  • What CO's came up on past projects?
  • Review all exclusions and don't gloss over them
  • Understand who will be 1099 or piecemeal workers
  • Get them talking

Risky Subcontractors: What to Look For and Require

  • Prequalification Form
  • Right size for the job
    • Some projects may be too large for the sub. Look for past experience and compare.
  • Manpower Availability
    • Brokered Work
  • Financial Stability
    • How much can they bond for?
    • How much backlog do they have?
    • What is their current cashflow?
    • Discuss payment terms
  • 2nd Tier Subcontractors and Suppliers
    • How much of the work are they subbing out? See if those subs can attend the buyout meetings
  • Director involvement with risky contractors
    • Review risk concerns and considerations with directors prior to award
  • Get references and call them to see what the other GC's have to say

Timeline Expectations

  • Don't buy as needed. Get the scopes of work bought out as quickly as possible
    • Especially with a volatile market, conditions and material prices change quickly!
    • Typically, 90% of the work is bought out within 2-4 weeks (depending on project size)
  • A quick buyout will help with submittal and procurement constraints
  • Do as much buyout and prep work as you can early. (Best before actual project operations begin)
  • Prioritize and focus on critical packages first (know the schedule)