Project Structure Secrets

How to reduce costs or lessen responsibility to the customer
By Luke Geiver | May 23, 2012

The hierarchy of a biomass project structure matters. Richard Bellefleur, general manager for biomass boiler and equipment provider Wellons FEI Corp., knows all about it.

Bellefleur and his team are installing biomass boilers for the U.S. Veteran’s Affairs in Chillicothe, Ohio, and in Canadaigua, N.Y. Both are scheduled to come online in 2012, and each has a different project structure varied by contractor responsibility, duties and financial wiggle room. The structures, dubbed the design-build and piecemeal models, have their own advantages and disadvantages.

The design-build model was used in Canadaigua at a VA hospital. The VA, which was the top of the hierarchy, was tasked with completing a biomass project and enlisted the help of a general contractor, the next rung in the hierarchy. The responsibility of the general contractor is completing the project’s execution from one end to the other, Bellefleur says. The general contractor selects other subcontractors, equipment suppliers, takes care of permitting issues, coordinates the project and project schedule, presents materials to VA for approval of standards ranging from cement selection to building design, manages project risk and controls cost.

“He (the general contractor) can’t go back to the VA and ask for money because he has the contractual obligation to present the VA with a finished product,” Bellefleur explains. The general contractor’s work will be verified by a third-party commissioning agent. The design-build model offers a great advantage to the end user paying for the project because that end user has limited responsibilities. And there is a reduced possibility of a cost overrun because the general contractor is brought on after the price of the project is set. But in this model, the overall cost of using a general contractor will be more, as the general contractor will include contingency plans because he doesn’t have all of the details of the project prior to construction.

In the piecemeal model, an approach Bellefleur worked under in Ohio, a general contractor’s role is different and comes in on the third tier of the hierarchy, under an entity that will act as the final decision maker in place of the VA. In this case, it was the Army Corps of Engineers. The model utilizes the input of more parties. Prior to bringing on the general contractor, the boiler provider, the architecture and engineering firm and even the commissioning agent will all work together to clarify and describe the main details of the project. The second tier of the hierarchy will then pass that along to the general contractor, allowing him to reduce the cost of services based on access to more upfront information.

The model also utilizes a single decision maker for the mechanical, piping and electrical needs of the project, which Bellefleur says makes for a pretty smooth process. “You didn’t have the different trades pitching the ball to themselves.” The advantages of this project structure are simple. Although the project can be done for a smaller price tag, it puts more responsibility on the buyer.

In the Ohio project, the piecemeal model was used based on the VA’s ability to completely relinquish responsibility to the Army Corps. But in New York, the VA opted for the design-build model, choosing to pay more for a general contractor and reduce its responsibility in the project.

—Luke Geiver