Selecting a general contractor: Data center construction runbook, Chapter 3
When you're building a new data center, it pays to bring the general contractor onboard early, rather than bidding out the process and ending up with unqualified subcontractors on your project.
This is the third chapter in our data center construction runbook. Each chapter will outline a specific aspect of data center design, walking you through the step-by-step process of a data center build-out. Chapter 1 focuses on data center site selection, and Chapter 2 is on selecting a data center design team.
It's probably not a smart move for you to finish designing your data center without selecting the general contractor (GC) who's going to build it for you. True enough, the design-bid-build process has worked for many organizations, and it's easy to understand: put the design documents into a request for proposal (RFP), collect bids from GCs, evaluate, and sign the dotted line. States, counties, and municipalities still use this method quite often. So what's the problem?
It's partially a problem of human nature -- GCs will bid out subcontracting work for the lowest bid, and then you never know who you're going to get, according Larry Smith, president and owner of ABR Consulting Group, Inc. based in Elk Grove, CA.
"I've seen some people on jobs for the state of California that have been horribly qualified," Smith said. "General Contractors will bid these jobs for the state at cost. And as soon as they win the job, they back to their suppliers and to the cabling contractors and beat them up some more -- they've got to make some money."
"Beating up" the subcontractors for more money means that the wrong people may get put on the job. Smith recalls when, acting as network cabling consultant to such a project, he wasn't able to get a straight answer from anyone on who the cabling subcontractor was -- even three months after the data center construction contract was signed. When the cabling subcontractor did finally arrive, he wasn't qualified to do the job, but it was too late to stop a project in motion.
A data center consultant who wishes to remain anonymous confirms that "Subcontractors have every incentive to lie to the general contractor. First of all, they can get more money, more time, and they can blame problems on other people. Obviously, you want to pick good subcontractors. But even good subcontractors get into binds, and are looking for ways out."
Bringing the general contractor onboard early So how can you avoid being tempted by the lowest price -- and having a GC bid your project at cost just so he can do a substandard job? One solution is to have a very experienced project manager to help you review the bids. A more modern solution, and one that is increasingly accepted by GCs and recommended by data center facility project managers, is to bring your GC onboard early -- during the design phase.
That means the GC needs to use an "open book" process, in which you see his cost for (and profit on) everything, including the bids he receives for subcontracting work.
"What's common in a place like New York City, is for every project you'll use the same general contractor, but your general contractor has an open book, and he shares the biggest base bids with you," says Pete Sacco, president of PTS Data Center Solutions, based in Franklin Lakes, NJ. "You have a pre-contract [with the GC] that says 'Hey, I'm going to just pay you to manage this, but I want to see the electrical bid and the mechanical bid.' … [Those are] the two biggest bids that you're going to see. So oftentimes the general contractor will work with you consultatively, to say 'Okay I leveled all the bids, here's the guys that I would recommend.'"
That approach works well for a company that opens new data centers on a regular basis, but even those companies building a single facility can benefit from the open book approach. The process recommended by experts is called "CM-at-risk," meaning the construction management firm (a.k.a., the GC) joins your design team and provides continual cost updates as your design evolves. The GC takes the risk of delivering services at the price promised.
You lose the ability to have GCs bid against one another, but you gain the knowledge that you'll be able to make sure the GC is picking good subcontractors. Even more valuable is being able to make a design decision and quickly seeing how that decision will affect total cost. That's because the GC gets a seat at the design table along with your company's representatives (including the IT department), the mechanical-electrical-plumbing (MEP) firm you've chosen to design your data center, any project manager from outside the MEP firm, and if needed, the architect.
In fact, there is still a bidding process at work with CM-at-risk. Instead of submitting bids with a firm price tag based on a completed data center design, GCs submit bids with their general terms, conditions, and profit margins. Terms and conditions include things like how many trailers the GC will use, how many people they'll need to hire, and the amount of time in which to complete the build. Profit margins are typically stated as a percentage of construction costs, but can also be a fixed dollar amount above cost -- you as the facility owner have more leverage in dictating this preference.
You'll base your GC decision not on total cost to build, but on his qualifications, terms and conditions, and profit. As far as evaluating qualifications, the same rules that apply to selecting a data center design firm apply here: investigate the GCs resume, and especially look for successful projects that are as similar to yours as possible. Your project manager will help you with these evaluations.
James S. Coe, PE, RCDD, a senior vice president of the Syska Hennessy Group and operations director for its Critical Facilities Group, adds another dimension by which to examine the suitability of a GC for your project: Find out who the GC's MEP coordinator is.
"GCs that build data centers employ a specialist that not every general contractor has -- it's called an MEP coordinator," says Coe. During the construction period, this specialist position will become best friends with the design team from the MEP firm you hired. "[In an MEP coordinator], you're looking for a very experienced mechanical-electrical-plumbing supervisor who can understand what the issues are, and be thinking ahead for the mechanical contractor, the electrical contractor, and be very familiar with the MEP design drawings. … [You need] someone that can go outside there, look at it, and say 'No! That's wrong, you need to dig that up and do it right before you cover it up with concrete.'"
Creating a data center design and construction budget
Your overall budget for designing and building your data center is dependent on a huge number of factors, of course, but Coe offers some general guidelines on what to expect on a greenfield (brand new, on undeveloped land) data center project, assuming the main function of the building is to house a data center. Plan on spending 65% to 75% of your budget on data center MEP infrastructure: generators, copper wires, UPS units, batteries, chillers, pumps, piping, etc., and all labor associated with installing such. The fees to design the data center will only come to 3% to 5% of the total project cost. The GC will take 6% to 8% of the project budget to pay for his general conditions and profits. The remainder of your budget (12% to 26%) will go toward basic construction costs -- the concrete, steel, excavation, and labor.
There are other approaches available, such as design-build (where a single firm is your sole point of contact, giving you design and construction for an up-front price). Experts interviewed for this article agree that design-build, despite the temptation of its simplicity and speed, is an approach best suited for companies that are very sure of what they're doing when building a data center. The risk is that handing over so much control can leave you with a result you were not expecting. Design-build tends to work well for companies that build data centers often, and use the same firm repeatedly to do the work.
Above all, your success relies on your ability to choose the right people for the job. "In the data center/mission critical world, the list of players -- qualified players -- both engineers, architects, and contractors, is not a long list," says Pete Marin, president of Atlanta, GA-based T5 Partners, LLC, a development, project management, and financial solutions firm focused on data center facilities. (That list is longer if you're only building a non-critical computer room, and shorter if you're building a stand-alone data center certified to The Uptime Institute's Tier IV designation for reliability.) "And if you do get the wrong group, yeah it is going to be difficult. If you've got the right group, and you've got the right project manager/developer managing this for you, you're going to have a successful project."
ABOUT THE AUTHOR:Karim Khan is former Editor-in-Chief of Business Facilities magazine.