Standardization: a flawed strategy to save costs on government construction?

By Rich Purtell 

Webster defines standardize: “to change (things) so that they are similar and consistent and agree with rules about what is proper and acceptable.” The process can certainly be used to help reduce costs for construction projects. Whereas the private sector often uses this process effectively, in my experience here in working in construction in New York for 30 years, public project costs go UP because of standardization.

To compare/contrast different aspects of the construction process:

Design development: To reduce costs for architectural and engineering design, private sector construction relies heavily upon design templates. This is especially true of big box and retail stores, where a “cookie cutter” approach is used and their buildings are nearly identical throughout the USA, with minor local variations to adapt to climate and local building codes. In contrast the public sector here in New York uses far too much “from scratch” design development for buildings such as K-12 schools, college campus structures (perhaps dormitories are an exception), state/county/local office buildings, etc. Standardization and repetition could help to reduce costs considerably.

Material selection: Private sector chain stores often use national account approaches for equipment purchase. A central procurement division solicits incremental pricing for various types of specialty equipment to be used to construct a building (HVAC, building controls, lighting systems, fire alarm systems, security systems, camera systems, etc.). The local store may pre-buy the equipment when a building is constructed, or else strict price controls are put upon the local representative to use “national account” pricing so as to prevent single-source price gouging.

Contrarily, in New York public construction the architects/engineers write far too many restrictive specifications that are blatantly or latently (more than one brand allowed in theory, but in reality only one brand meets all specification “zinger” requirements) proprietary. Sometimes these specifications are developed in a proper and legal manner using a “standardization resolution”, but such resolutions often do not take into account whether a product is available through multiple sources, so as to enable competition, or will be tendered from only one source, whereby price gouging can readily happen.

Other approaches such as “state contract purchasing” might be used, but those approaches also have limited controls on pricing and invite loss leader scenarios, whereby some items might be discounted but others hyper-inflated in price.

Installation labor: The private sector recognizes that if a particular type of material/equipment is mandated, there is vulnerability to price gouging for labor costs if said material/equipment is supported locally by a territorially protected vendor. For this reason, private sector entities will try to avoid using materials and equipment that are supported in such a manner. Open source, non-protected merchandise would be preferred. If this cannot be done, the private vendor will typically promulgate their national material/equipment agreement to include some sort of installation and labor price containment strategies also. Broad, easily controllable pricing metrics might be put into use (for example cost per square foot, cost per piece of equipment).

Looking at the New York public sector, controls here are once again weak. The territorially protected installing contractor who can name their price for a specialty is a common problem. SOME vendors are registered in New York with pre-set contract prices for labor and installation. But those schedules are extremely lengthy and complex, which not only tends to create market restriction and monopolization, but also the effort loses much effectiveness because excessively complex price control rules become very hard to enforce. Cheating in order to price gouge would be far too easy.

Stepping back to a 10,000 foot view of the problem in New York, one inevitably has to conclude that these “flaws” in the process are in fact deliberate, and that there is an attempt to build in many, many opportunities for cronyism into the system. Corporate welfare opportunities are present for the design firms, contractors, suppliers, and specialty subcontractors.

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