I have run a number of early contractor involvement (ECI) processes and I have to say that I really enjoy them as they bring out the best in the owner and contractor teams, and they are a lot of fun.
If you get it right the collaboration generates some awesome results and the teams involved become engaged and committed to the project. It does leave you vulnerable and there are some traps.
Here are some of my thoughts and lessons learnt after about five years of running ECI programs for major projects in one way or another.
Why use an ECI?
The more work that is done prior to locking in price, the less risk during the execution phase. This means fewer allowances for contingencies and a greater chance of project success.
Collaboration brings out the best in both the contractor and the owners’ teams. Both parties have good ideas and different experiences, which is why working together brings out the best of both, particularly in projects that require innovative solutions.
The owner’s team can make more of the value decisions. The additional collaboration and involvement allows the owner’s team to better understand the cost of ‘gold plating’ specifications and allows them to see the bottom line savings that are achieved when compromises are made. Conversely, the owner’s team can make better risk decisions by understanding the actual cost and risks of specific configurations and specifications, and choose to pay a little more to reduce a specific risk.
How do I know that I am getting a competitive price if competitive tension is lost?
- Lock in profitability drivers such as contractor’s margin and contingency before the ECI agreement is finalised.
- Use target prices and profit drivers, such as bonuses, that incentivise lower pricing.
- Insist on transparency with sub-contractor pricing, supplier pricing and self-perform estimates.
- Benchmark.
- Check everything.
- Collaborate and work with the contractor’s team in their environment.
- Work with contractors who are committed to the process, to transference and your success.
Why do contractors like it?
- More early work and collaboration means less delivery risk.
- Exclusivity means chance of proceeding to execution is greater.
- A better specification is developed.
- Contractor and owner team have a more aligned understanding of project requirements, meaning fewer disputes during delivery and greater customer satisfaction.
