“I’ve been with the UGL organization since 2007, and shortly after I joined the company, UGL purchased Unicco, a facilities-management company headquartered in Boston. Our US business had a strong occupier focus and encompassed brokerage, project management, facilities management, real estate consulting, portfolio management, and workplace integration. I supported all of those business lines except for facilities management.
About two years ago, UGL bought DTZ, which was an international real estate services firm. Now I’m part of an international company that can provide all of those services around the world. I support an increasing number of international transactions and projects, and I provide legal support for all service lines within the Americas. I specifically support both US brokerage services as well as the Global Occupier Services (GOS) team. GOS tends to handle larger accounts requiring multiple support-service lines; in addition to transaction services, which had been our strength, GOS also includes lease and data administration to help our clients keep track of all of their facilities.
I’ve supported project-management services in three different companies: at Jones Lang LaSalle, Grubb & Ellis, and here at DTZ. Different companies have a preference for different approaches, but there are two fundamental approaches for providing service. One is what I would call the construction-manager model. Really, it’s a species of general contractor where the project manager is in complete control of the project and essentially hands over a turnkey product to the customer. They sell the architectural services, the construction, and they deal with all of the trades. The only contract that the customer enters into is with the project manager. Everyone else involved with the project is a subcontractor of the project manager.
The other model isthat the project manager is more of a consultant and advisor to the customer. They guide the customer in selecting the design and construction teams. They offer advice and value engineering along the way, but the customer signs all of the contracts. The project manager oversees the process for them, chairs regular meetings, and advises the customer to ensure the customer’s team is finishing the project on time, on budget, and in accordance with the customer’s vision.
There are pros and cons to both approaches. I think that the customer is better off if their project manager is a consultant and doesn’t have any skin in the game. Some customers absolutely want you to be the general contractor so [that] if the project doesn’t go well, you’ll suffer financially as well. That’s probably a little prejudicial, but there is a sense that your provider has to have a financial stake in order to ensure accountability. From my view, if something goes wrong on the project, the customer and the project manager simply become antagonists and the focus changes to blame. Everything shifts from solving the issues in the customer’s best interest to solving the problem cheaply to protect each side’s own financial interest.
Customers are better served by having a neutral advisor who is not going to be impacted financially by the advice or the course taken. If the project manager doesn’t contract directly for construction or design services, they have a broader perspective, so they’re more inclined to guide the customer toward the best teams. The customer ultimately decides how they want to do the work. We have different risk exposures with each approach, and we have to evaluate each potential engagement to see in the context of a specific project what the exposures are, what the fee we’re proposing and they want to pay us is, and whether that’s exposure we want to take on or not. We emphasize in our bidding process the consulting advisor model, and I firmly believe it is win-win.
Customers sometimes only want one point of contact, with one person accountable for everything. They think there are cost savings to that approach, but what happens is contractors then build extra costs into their contracts to keep from going into the red. At DTZ, we might make an exception and propose under the project manager-as-construction manager model for a large, well-known customer that has a lot of work. When we take that approach, we have to build in different types of protections and controls, and the work must have enough scale to make it worthwhile.
One thing I’ve done to help evaluate exposures is put together a risk matrix, which gives our contract signers a way to quickly determine if they’re authorized to commit the company to a certain project. Who is the customer? What type of site is it? What kind of real estate? It’s not necessarily the case that if the score is low, we can never do the work, but the conversation has to be bumped up to the senior level and looked at with more scrutiny. As a company, we have to make a deliberate decision whether to proceed.
I manage risk all day long—that’s my principle focus. I make sure we’re getting paid appropriately for the risk that we take on. You have to balance risk and reward. It’s making sure the business teams I’m working with understand what their legal exposures would be and how that would impact their bottom line. It also means working with our risk-management department to ensure we have appropriate insurance in place.”
