Precept Builders Sees the Light

The folks at Precept Builders Inc. had a revelation of sorts.

With a contract to build the $25 million Church at Pinnacle Hills in Rogers, and construction booming in Northwest Arkansas in general, the Dallas firm needed a permanent office here.

And it doesn’t plan an exodus any time soon.

“We are doing work in 10 states,” said Dave Karcher, president of Precept. “When we saw what was going on in Northwest Arkansas, we abandoned other plans.”

Precept opened its office in the Pinnacle Hills area of Rogers about six months ago. About 12 employees work in Precept’s Rogers office.

Besides the church, Precept has two other commercial office buildings under construction in the Pinnacle Hills area for The Pinnacle Group.

The firm’s revenue for fiscal year 2005, which ended in June, totaled about $110 million. Church construction accounts for about half of that business, with high-rise residential projects coming in second.

Arkansas Roots

Precept has roots in Northwest Arkansas.

Its chairman and CEO, Doug Deason, graduated from Rogers High School in 1980, and his family can trace its area heritage all the way back to 1840, when some of his ancestors moved from Tennessee to a homestead in Pea Ridge.

Deason said the “laid-back sophistication” of Northwest Arkansas meshes with his company’s culture.

“Its absolutely unique,” Deason said. “It’s a combination of character and culture that we’ve not seen.”

Deason founded Precept in 1993 with his father Darwin Deason. The firm also has an office in Miami, where an 18-story, 128-unit condo building is under construction.

Karcher said Precept had monitored the Northwest Arkansas market for years, waiting for the time to enter. Precept started its first project in June 2004 with the 60,000-SF HB Rentals building in Rogers.

Karcher also has a Fayetteville connection. His parents lived in the Fayetteville area for more than 20 years after he graduated from high school.

Karcher said he hopes Precept can bring a level of contracting professionalism to the area.

“We saw that the market was ripe for some relationship-driven opportunities,” Karcher said.

Aside from local and Texas-based jobs, Precept has projects under construction in California, Louisiana, Florida, Ohio and Wisconsin.

Projects Precept has under construction include:

• Two buildings being built for the Pinnacle Group in the Pinnacle Hills area of Rogers. • One is 26,000 SF and one is 15,000 SF.

• A 51,000-SF Cinemark Theater in Lubbock, Texas.

• An 11-story, 58-unit condominium complex called Cliff Towers in Dallas.

• A 16-story, 107-unit condominium complex called Brickell Vista in Miami.

• A 180,000-SF Calvary Baptist Church in Clearwater, Fla.

The company is divided into two divisions. One division performs a majority of the design-build work and the other focuses on retail and interior office finish-outs. However, Precept only does interior finish-out in the Dallas market because of the fast-paced nature of the work. The segment accounts for about $30 million in billings per year.

No-Bid

Aside from its interior finish-out work, Karcher said Precept primarily functions in the design-build market, which is when the architect and contractor work together on a project from its inception.

Essentially, with design-build projects, a construction firm doesn’t participate in the competitive bidding process. Instead, it establishes a contract with the owner in the design phase of the project. A guaranteed maximum price is set at the beginning of the project with the owner, usually before the final plans are completed.

The Church at Pinnacle Hills, however, ended up being a competitive bid project. Originally, the contract was awarded to Baldwin & Shell Construction Co., but as the building’s costs rose above initial projections, the owner decided to rebid the project.

Precept bid for the job, along with four other contractors, and was awarded the contract.

Barney Saia, vice president of business development in Precept’s Rogers office, said about 50 percent of the firm’s design-build projects are actually “negotiated” work, where the architect hires the contractor, but there is no competitive bid process. The other half of its design-build portfolio is a true design build, where the owner hires the contractor who then hires the architect.

Both the local offices of Nabholz Construction Corp. and Baldwin & Shell said about 80 percent to 90 percent of their work is done on a negotiated basis and the firms do not go through a competitive “hard bid” process. Both offices also said about 70 percent to 80 percent of their projects come from repeat clients.

In a 2005 survey, The Design-Build Institute of America reported that about 40 percent of all nonresidential construction projects in both the public and private sector use the design-build approach. That’s compared to less than 10 percent 20 years ago.

“Our motto is, design it once, build it once and be friends when you are finished, and just go do another one,” Karcher said. “We believe the industry has morphed to a point where owners don’t want to see architects and contractors fight.”

The owner might not shave off lots of money from the cost of a project with design build, but the process does eliminate future headaches by saving time with early communication.

“It produces a climate of teamwork where you can put the fussing and fighting at bay,” Karcher said.

Karcher said he thinks the real estate cycle in Northwest Arkansas is conducive to the design-build format.

“We believe that the marketplace is going to be under substantial pressure to deliver buildings in a quicker format,” Karcher said.

Karcher said in a “white-hot” real estate market like Northwest Arkansas, building resources get stretched thin and the costs pressure builds.

Karcher said, for example, if a developer buys a commercial lot, it might take four months to get the building designed and then another year to get it built. Time is money.

“It is a home-run to shorten 16 months to 12, because of interest expenses paid [on a mortgage], in addition to materials costs,” Karcher said.

Northwest Arkansas might also see more design-build projects in the future since the Arkansas Legislature passed a law in April allowing for public institutions to use the concept in future construction projects. Arkansas joined about one-third of the U.S. as a state that has passed such a law.

Architecture Allies

Stephen Pickard, a principal with Dallas-based Alliance Architects Inc., said the hope is that in the end, with a design-build project, the owner ends up with a higher quality cost-effective product.

Pickard said in a true design-build situation, the contractor hires the architect and originates the contract with the owner. In a traditional bid system, it’s the architect hiring the contractor.

Pickard said although Precept is the holder of the job contract (and essentially the money) in this situation, the firm has always treated Alliance as if the architecture firm were working directly for the owner, not Precept.

He said in some design-build projects, especially in situations where the architect is an in-house employee for the contractor, the integrity of the project can be compromised because the architect’s loyalty is to the contractor.

“Generally what happens is you get a drop in quality overall, and most definitely in design quality,” Pickard said.

Karcher said better design usually comes from stand-alone firms.

“The best and brightest architectural design majors won’t go to work for me when they graduate,” Karcher said. “They will work for the best design firm. So when we partner with some of the best design firms, the owner gets the best of the best.”

Pickard, whose firm has worked with Precept on about 25 projects, said Precept establishes the line of communication between the architect, contractor and client early on.

“For whatever reason, there is sometimes a distinction between what the architect and contractor does,” Pickard said. “Sometimes that relationship can be adversarial, but with Precept that isn’t the case. They are interested in putting the project first.”

Pickard said in the older traditional competitive bid system, a lot of “finger-pointing” went on between the contractor and the architect as to why there was a need for a “change order,” or increase in price from the original bid quoted to the owner. “I just think the product we deliver, because we parner with pure design firms, is bottom line a better product for the owner,” Karcher said. Pickard said the ultimate goal is to avoid change orders. “The number of change orders is a reflection of a poor drawing,” Pickard said. Aside from an owner requesting multiple changes, the number of change orders is a reflection of the effectiveness of the design build team, he said.

The design-build process minimizes the need for change orders very early on.

“The contractor is involved early enough that they have a clear understanding of what needs to be accomplished,” Pickard said.

More cost effective materials might be substituted to trim the price or it could just be the original design could be changed to simplify the building process.

“You can reduce the cost of the projet or go with a lesser material that essentially accomplishes the same thing.” Pickard said.

Alliance is one of two architects working on The Church at Rock Creek in Little Rock. PB2 Architecture & Engineering in Rogers is the architect of record on the project. Deason’s mother, Bonnie Deason, managed the PB2 office for 22 years.