Break out of the bid-build business

The Nichols Team works differently than other general contractors. Instead of bid-build, it works as a team with its customers, trade contractors and associates to create quality projects on time and on budget.

Privately owned contractors often have offices that are real showplaces. They showcase the company and help project an image of a successful, progressive contractor that’s on the grow.

At The Nichols Team, based in Rochester, New York, the office is a real showplace, and that’s by design.

The office is built with a multitude of building materials and design options to help customers understand what they are selecting for their new building and why it’s the best choice for the application. It’s also designed to facilitate the planning process of a project.

The 10,000-sq. ft. showroom/office complex is only one of the things that sets The Nichols team apart from its conventional bid-build competitors.

That’s because John Nichols and his brother, Brad, run things differently. They negotiate virtually every job they do, and it’s helped the company grow from a $1.5 million contractor in 1983 to a $21.5 million group in 2000.

In the beginning
John, who is partner with his brother, recounts the firm’s humble beginning.

“My father worked with mason contractors in the area who were excellent at their craft but were not good at selling. My father is a born salesman, and his job was to get them work. That’s how he got started in construction, then went into business for himself in the ’70s.

“In 1983, my father, my brother and I became equal partners in a new firm. I was 30 and Brad was 22. Our company was called Nichols(3),” he says.

The company went head-to-head with other contractors for jobs in the Rochester area. The company had a strong reputation as a quality builder of commercial and manufacturing facilities.

“We had established a good reputation for quality, but we continued to get beat up on price under the conventional contractor bid process. Also, we didn’t think the bid/build delivery method provided the best value to the customer. In 1991, we decided if we had to continue to take on low-bid work, we were going to get out of the business. We decided to change how we did business and changed our name to The Nichols Team to project our style of business,” says John.

The new style of business threw out the rule book that sets up adversarial relationships between the architect, contractors and the customer. Today, The Nichols Team has carved a niche by starting with land, then working with customers to tailor buildings for their specific needs.

The customer works closely with the design team, approves the job, then the team builds it. Once the building is completed, The Nichols Team has a division that can provide comprehensive maintenance services.

“In bid-build jobs, you can count on at least 10 percent cost overruns during the project and often run into scheduling problems that delay the project,” says John. With the Nichols’ proprietary Facilitek program, it cuts the chances of cost overruns and missed schedules to almost nil.

The Facilitek way
The Nichols started developing the Facilitek process in 1994. Brad Nichols led the development and documentation of this best-practice way to work with customers, architects, engineers and trade contractors.

Today, the process encourages teamwork and communication throughout the planning, specification, and building process.

The pro­cess allows for open planning and organization on the front end so there are fewer expensive change orders as the project progresses. It involves the customer, architect, engineers, trade contractors, estimators and project superintendents and managers in the very first stages of the project.

“We offer customers a turnkey package that has a guaranteed maximum cost and a guaranteed completion date. We offer the land, work with financing even to the point of working with state and local agencies for business development funds, then work closely with the customer to develop the building they need.

“Our customers are very busy running companies, and can’t always put a person full-time on a building project. We do all of that for them,” he says.

At first, one would think a turnkey approach would increase costs. However, Nichols’ staff has audited its costs and finds that its design fees represent four to seven percent of the total project cost, where bid-build processes typically incur five to 10 percent of a building’s cost. Plus, the process guarantees maximum project costs and finish dates.

“We often come in under our proposed costs,” says John. For example, when ABB-Kent-Taylor came to The Nichols Team to build a 231,000 sq. ft. plant, projections pegged completion in 18 months using conventional bid-build processes. The Nichols Team plan promised the building delivered in 12 months and delivered it in 11 months, which added 30 days of unexpected productivity for the company.

Similarly, when the Saturn of Rochester dealership planned a $1.25 million expansion, The Nichols Team approach met the design and construction requirements for $860,000, saving the dealership nearly $400,000.

First step: Needs assessment
The first step of the process involves needs assessment. Here, The Nichols Team has the customer fill out a customized 20-page questionnaire followed up by meetings to define the project and its critical needs, says Ric Carley, vice-president of operations.

“The Facilitek process makes the customer think through all of the practical matters of the building, from how many parking spots will be needed to special communication and data equipment needed to make the facility operational.” he says.

Second step: “Imagineering”
Once needs are assessed, members of the team work with the customer to “imagineer” the facility. That’s where Nichols’ office/showroom pays huge dividends.

The facility is a continuum of different building methods, components and materials. From sheet metal construction to various types of flat roofs, the building displays all types of building materials so customers understand the components and architects, trade contractors and mechanical engineers can effectively communicate the pros, cons and costs of various building methods and materials.

These types of construction surround the meeting areas, which are built around circular conference tables. “This is a team, and we structure everything to encourage team work,” John says.

The imagineering process helps team members develop a menu of costs for the customer. It’s a critical step in developing the guaranteed maximum cost and completion date. Architects and engineers use CADD software to design the building, which is accessible to all team members through the company’s CyberLab, an Internet-accessible project management system based on e-Room software.

“Our field superintendents, project managers and trade contractors all have access to the job through CyberLab. We use it to keep on top of the job plus communicate any problems or needs so other team members can act upon them,” says Carley. “We post pictures of the jobsite weekly so everyone can see the progress. We have had customers based in Europe able to monitor job progress.”

Third step: Final design and construction
While The Nichols Team has an established work force, it also relies on specialty contractors to complete critical-path parts of the job. It works with local contractors whose standards match the Nichols’.

“We call them chartered Facilitek team members,” says John. “These people are treated as equals in the whole process.”

Architectura, Inc. handles all architectural tasks, Volland Engineering manages the HVAC and Electrical engineering tasks, Landmark Electric completes the electrical work, Leo J. Roth does the HVAC work and Ramar Steel Erectors handles steel erection. “We have about 50 tradespeople on our payroll that complete other parts of the job,” John says.

The chartered members have signed on the dotted line to provide services to The Nichols Team. The agreement lays down the vision, working philosophy and customer commitment that the team will offer its customers.

On-site empowerment
On the jobsite, the superintendent and project manager have complete empowerment to get the job done.

“There is no need for them to come back to us for routine approvals for equipment or supplies. They have direct working relationships with suppliers and they have the authority to order what they need. That’s most efficient. We don’t want them sending requests to the office for us to process. They can handle it there,” says Carley. All tools and supplies are charged to the job.

As with the chartered team members, The Nichols Team is choosy about suppliers. It prefers to work with suppliers that have a similar customer care philosophy.

“I am a tool nut,” says John. “I love tools. I have looked for tools over the Internet, and time and again, I have found that the price for tools found there isn’t much different than what I can get from my local tool supplier, Cook Iron Store. And if I have a problem, how am I going to get the support I need over the Internet? The local supplier arrangement is the most efficient. We call them and they deliver. If we have any questions or training issues, they are right there to help us,” he says.

Fourth step: Facility 
management and maintenance
Once The Nichols Team hands the keys to a new facility over to the new owners, the relationship doesn’t stop there. Its Facilicare property maintenance and management service provides complete facility management.

“Most companies use maintenance services, and we are very familiar with the building and the customers’ needs because of the Facilitek process,” says John. “It’s a good fit and it keeps us in touch with the owners. As their needs change or they consider expanding the facility, they think of us first for the job,” John says.

Growing the business
John estimates the company captures about 20 percent of the manufacturing/warehouse and research and development construction work in the area. “We could continue to chip away at business here, or we could identify other areas to establish this concept.

“We looked at many areas of the country and decided to set up a facility in the Greenville, South Carolina area. Brad is heading up that division, and we have acquired land to develop and have established relationships with trade development groups and chartered team members to duplicate what we’ve done here,” he says.

“When we first started the Facilitek process, owning the land was the entree for us to meet customers. Today, the land is just one part of the whole process that attracts customers. They are busy people. They are strapped for time. They don’t even know which questions to ask when it comes to designing and building a facility. They are grateful we can offer all those services, from front to back, at a guaranteed maximum price and a completion date they can live with,” says John.

The Nichols Team continues to fine-tune the Facilitek formula. It plows back nearly two percent of its annual revenue into research and development. Every year, it invests in emerging technology and adapts it to best fit the work.

“We were the first in the area to use laser-guided equipment for site preparation 10 years ago. Today, everyone uses laser-guided transits. Last summer, we poured over 60,000 sq. ft. in a day for a tilt-up construction project. We used two laser-controlled screeds and 48 men to get the job done. Applying this technology is just one of the ways we add value for our customers,” John says.

In 2001, it will continue to implement Quest software that further streamlines cost estimation and will interface with the company’s financial software.

Carley says the firm plans to add Internet accessibility to its two-way radios in the coming months. “We already use the Internet for storm warnings. Our receptionist has her terminal set up to notify her when there is severe weather in the area. She then pages the superintendents and project managers to inform them about the coming weather.

“When each cell phone has Internet capability, each unit will get that warning directly, resulting in faster notification. It’s one of the many ways we see the Internet-ready units helping our business,” he says.

Building the team
Because of the team-oriented atmosphere and the steady flow of work, the firm has had little trouble retaining its work force. “We stress the team attitude here. Every employee is part of a team with a goal to provide value for our customers,” John says.

To develop the team mentality, Nichols management meets every Friday to discuss jobs. “Once-a-month company-wide meetings are used to help build teams and share where we are with our business. We share financials with them. Most private companies don’t do that, but how can we expect team members to get the best value for our customers if they don’t know how we are performing? We also require each group to share examples of how they used teamwork on their project,” says John. The result has been a motivated, loyal work force.

However, with low unemployment, attracting new talent has been challenging.

“If we get an application or résumé that shows a person has the talents and experience we are looking for, we call them in, even if we don’t have a position open at the time,” says Carley. “We look at it as a networking opportunity. We get to know each other, and we often both learn something from it.”

Recently, Carley says the best resource for employees has been area staffing services. “People come to work for us through these agencies for 90 days. It gives us a good chance to evaluate each other. If it looks like a match after 90 days, we bring them on as an employee. The staffing agency runs the ads, does the initial screening and handles the payroll during that time. It’s one of the most efficient ways we’ve been able to locate good employees in this tight job market.”

Hiring decisions are made by the work team. “It’s a great team-building exercise. Everyone on the team is involved and they are also involved with salary decisions. When that person hires on, then all team members have buy-in. It works well,” Carley says.

Make a culture for change
John believes the company has been successful because it realizes that contractors are change agents. “When we build, we change things for our customers. We transform materials into something they need to make their businesses work. We must embrace the change-agent role. We must consistently provide innovative products and services that add value for our customers and stop doing things that don’t add value. Those who don’t will not be in this business in the long run,” he says.

Published in the January/February 2001 issue of Contractor Tools and Supplies magazine.

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