Capstone: a buyout and procurement plan for a mid-rise project

This capstone brings the course together. You will prepare a buyout and procurement plan for a mid-rise building, using Larch Street Residences as the worked example and then applying the same method to a variation. The plan is the document a project manager would present to senior management in the first two weeks after award, and keep updated until the last subcontract is closed out. The worked example shows each part with Halyard's numbers; the assignment at the end asks you to produce your own.

The project and the brief

The plan has eight parts, matching the course: packages and strategy, responsibility matrix, procurement schedule, prequalification, selection and award, contracts and terms, supply chain risk, and logistics and closeout. Public procurement requirements would be a ninth part on a public project; the variation at the end adds them.

Part 1: packages and buyout budget

The starting point is the estimate's trade budgets, regrouped into the packages chosen in Lesson 2. Halyard separated switchgear as a contractor-direct purchase so it could be ordered before the electrical subcontract was awarded, and kept concrete formwork and placing in house.

# Larch Street: package list, budgets and final commitments (illustrative)
packages = [  # (package, route, budget, committed)
    ("Excavation and shoring",        "sub",  1_450_000, 1_392_000),
    ("Reinforcing steel",             "sub",    820_000,   865_500),
    ("Ready-mix concrete",            "PO",     910_000,   884_000),
    ("Concrete formwork and placing", "self", 3_095_000, 3_095_000),
    ("Wood framing",                  "sub",  3_900_000, 3_745_000),
    ("Roofing",                       "sub",    610_000,   596_000),
    ("Windows and storefront",        "sub",  2_350_000, 2_244_000),
    ("Exterior cladding",             "sub",  1_780_000, 1_812_000),
    ("Mechanical",                    "sub",  5_600_000, 5_812_000),
    ("Electrical",                    "sub",  3_700_000, 3_598_000),
    ("Switchgear (direct purchase)",  "PO",     410_000,   418_000),
    ("Elevators",                     "sub",    640_000,   702_000),
    ("Fire protection",               "sub",    690_000,   655_000),
    ("Drywall and ceilings",          "sub",  2_250_000, 2_223_000),
    ("Flooring",                      "sub",    980_000,   951_000),
    ("Painting",                      "sub",    520_000,   506_000),
    ("Millwork and cabinets",         "sub",  1_150_000, 1_188_000),
]
budget = sum(p[2] for p in packages)
committed = sum(p[3] for p in packages)
print(f"Packages: {len(packages)}  budget {budget:,}  committed {committed:,}  result {budget - committed:+,}")
for route in ("sub", "PO", "self"):
    b = sum(p[2] for p in packages if p[1] == route)
    print(f"  {route:4} {b:>11,}  ({b / budget:.0%} of package budgets)")
print(f"Contract value not in these packages (general conditions, other trades, fee, contingency): {36_400_000 - budget:,}")
losses = sorted([(p[0], p[2] - p[3]) for p in packages if p[3] > p[2]], key=lambda x: x[1])
print("Largest overruns:", ", ".join(f"{n} {d:,}" for n, d in losses[:3]))

Packages: 17  budget 30,855,000  committed 30,686,500  result +168,500
  sub   26,440,000  (86% of package budgets)
  PO     1,320,000  (4% of package budgets)
  self   3,095,000  (10% of package budgets)
Contract value not in these packages (general conditions, other trades, fee, contingency): 5,545,000
Largest overruns: Mechanical -212,000, Elevators -62,000, Reinforcing steel -45,500

The completed buyout shows a net saving of about $168,500 across $30.9 million of package budgets, or about 0.5 %. Savings on framing, windows, electrical and excavation were largely offset by overruns on mechanical, elevators and reinforcing steel. Subcontracts account for about 86 % of package budgets, purchase orders 4 % and self-performed work 10 %, consistent with the industry pattern in Lesson 1. The roughly $5.5 million outside these packages covers general conditions, smaller trades such as doors, hardware and specialties, the contractor's fee and contingency.

Part 2: responsibility matrix

The plan includes the responsibility matrix for commonly disputed items. For Larch Street, the matrix was issued with every bid package and attached to every subcontract. The capstone version should cover at least the following interfaces: firestopping by penetrating trade; blocking and backing; rooftop curbs, flashing, power and controls; window perimeter sealant and air barrier transitions at cladding; temporary heat, power and protection; access panels; final cleaning; and elevator pit, sump and electrical requirements. Run the one-owner check from Lesson 2 on it before issue.

Part 3: procurement schedule

The procurement schedule works backward from need-by dates, using expected submittal durations from Lesson 7 rather than single cycles, and lead times confirmed with suppliers at the time of planning.

# Procurement schedule for long-lead and critical packages (weeks after award)
import math
pkgs = {  # name: (need_by, ship, fab, first_cycle, extra_cycle, p_resubmit, award, bid)
    "Switchgear":      (56, 2, 40, 5, 3, 0.30, 2, 2),
    "Elevators":       (52, 3, 30, 7, 3, 0.40, 2, 3),
    "Windows":         (40, 2, 18, 8, 4, 0.40, 2, 3),
    "Mechanical RTUs": (50, 2, 26, 6, 3, 0.25, 2, 3),
    "Reinforcing":     (9,  1,  1, 2, 1, 0.20, 1, 1),
}
float_weeks = 2
rows = []
for n, (need, ship, fab, first, extra, p, award, bid) in pkgs.items():
    subm = first + (1 / (1 - p) - 1) * extra
    chain = ship + fab + subm + award + bid + float_weeks
    issue = need - chain
    rows.append((issue, n, math.ceil(subm), chain))
for issue, n, subm, chain in sorted(rows):
    print(f"{n:16} submittals ~{subm:2} wk  chain {chain:5.1f} wk  issue by wk {issue:5.1f}")

Reinforcing      submittals ~ 3 wk  chain   8.2 wk  issue by wk   0.8
Switchgear       submittals ~ 7 wk  chain  54.3 wk  issue by wk   1.7
Windows          submittals ~11 wk  chain  37.7 wk  issue by wk   2.3
Elevators        submittals ~ 9 wk  chain  49.0 wk  issue by wk   3.0
Mechanical RTUs  submittals ~ 7 wk  chain  42.0 wk  issue by wk   8.0

Even with the shortened bid period and faster first review agreed in Lesson 2, switchgear must go out within the first two weeks, which is why Halyard issued it immediately on a letter of intent with a capped deposit (Lessons 4 and 6). Reinforcing steel, needed for the footings, must also be bought in the first week. Windows and elevators follow by week 3, and rooftop units by week 8. The schedule is presented as a simple bar chart in the plan, with each package's latest bid, award, submittal approval, release and delivery dates.

Part 4: prequalification

The plan states the prequalification criteria, weights, knock-out requirements and threshold before any bids are seen (Lesson 3), and lists the approved bidders for each package. For Larch Street, Halyard required at least three approved bidders on every package above $500,000, a valid trade certification or licence, insurance meeting the owner's requirements, and an acceptable safety record. Packages where fewer than three firms qualified, such as elevators, were flagged in the risk register as limited-competition packages.

Part 5: selection and award

For each major package the plan records the levelled bids, scope review outcome, award decision and reason. Most Larch Street packages went to the lowest compliant levelled bid among approved firms. The windows award illustrates the value of the scope review: confirming plugs with the low bidder turned an $18,000 levelled advantage into a $47,000 confirmed one (Lesson 4). Where the low bidder was not chosen, the reason was recorded.

Part 6: contracts and terms

The plan names the subcontract and purchase order forms, the attachments each must carry, and the key terms checked against the prime contract (Lesson 5).

One correction from the course is worth highlighting: at bid, Halyard accepted a lumber escalation clause from its framer without a matching clause with the owner. In the plan, Halyard negotiated a matching lumber and rebar adjustment clause with the owner in exchange for a reduced contingency, closing the gap identified in Lesson 8.

Part 7: supply chain risk register

# Supply chain risk register with responses and owners (illustrative)
risks = [
    ("Switchgear lead time",       4, 5, "LOI and capped deposit at week 0; production slot in writing; weekly expediting", "PM"),
    ("Elevator lead time",         3, 4, "Award by week 3; early pit and hoistway details to supplier", "PM"),
    ("Lumber price",               3, 4, "Matched escalation clause with owner; early buy for floors 2-3", "PM"),
    ("Rebar price",                3, 3, "Matched escalation clause; deposit to lock price", "Coordinator"),
    ("Cross-border tariff change", 2, 4, "Domestic sources for steel and aluminum; tariff clause in owner contract", "Procurement"),
    ("Window supplier quality",    2, 3, "Factory visit before release; mock-up and water test", "Superintendent"),
]
for name, p, i, response, owner in sorted(risks, key=lambda r: -r[1] * r[2]):
    print(f"[{p * i:2}] {name:27} -> {response} ({owner})")

[20] Switchgear lead time        -> LOI and capped deposit at week 0; production slot in writing; weekly expediting (PM)
[12] Elevator lead time          -> Award by week 3; early pit and hoistway details to supplier (PM)
[12] Lumber price                -> Matched escalation clause with owner; early buy for floors 2-3 (PM)
[ 9] Rebar price                 -> Matched escalation clause; deposit to lock price (Coordinator)
[ 8] Cross-border tariff change  -> Domestic sources for steel and aluminum; tariff clause in owner contract (Procurement)
[ 6] Window supplier quality     -> Factory visit before release; mock-up and water test (Superintendent)

Every significant risk has a named owner and a concrete response, most of them actions taken in the first weeks after award. The register is reviewed at each monthly procurement meeting and closed out item by item as packages are delivered.

Part 8: logistics and closeout

The plan attaches the site logistics plan by phase and states the rules every subcontract carries: delivery booking 48 hours ahead, crane windows by trade, laydown allocations, unloading responsibility and protection of stored materials (Lesson 9). It also sets the closeout requirements from the start: the documents each trade must deliver, the target date for each trade's closeout, and the release documents required before final payment (Lesson 11).

# Commitment curve: cumulative value committed by week of buyout (illustrative)
awards_by_week = {0: 418_000, 1: 1_392_000, 2: 865_500 + 884_000, 3: 702_000 + 3_745_000,
                  4: 5_812_000, 5: 3_598_000 + 655_000, 6: 2_244_000, 8: 1_812_000,
                  10: 596_000 + 2_223_000, 14: 951_000 + 506_000 + 1_188_000}
total_bought_out = 27_591_500        # all packages except self-performed concrete
cum = 0
for wk in sorted(awards_by_week):
    cum += awards_by_week[wk]
    print(f"week {wk:2}: {cum / total_bought_out:5.0%} of bought-out value committed")

week  0:    2% of bought-out value committed
week  1:    7% of bought-out value committed
week  2:   13% of bought-out value committed
week  3:   29% of bought-out value committed
week  4:   50% of bought-out value committed
week  5:   65% of bought-out value committed
week  6:   74% of bought-out value committed
week  8:   80% of bought-out value committed
week 10:   90% of bought-out value committed
week 14:  100% of bought-out value committed

Halyard committed about two-thirds of the bought-out value within the first five weeks and all of it by week 14. Front-loading buyout this way reduces exposure to price changes and lead-time surprises, though the finishing packages (flooring, painting, millwork) can reasonably wait until their designs and samples are settled.

Variation: the same building as a public project

Suppose the same building were procured by a federal agency as a $48 million laboratory and office building. The plan would need a ninth part covering the Buy Canadian Policy requirement for Canadian steel, aluminum and wood (with origin certification flowing into the rebar, structural steel, aluminum storefront and framing packages), a 5 % Indigenous participation commitment planned by package, federal fair wage requirements, integrity checks on every subcontractor and supplier, and security clearance lead times. The procurement schedule would lengthen for packages where Canadian sources have longer lead times, and the prequalification and invitation documents would change accordingly (Lesson 10).

Your assignment

Prepare a buyout and procurement plan for the following variation of Larch Street. The building is the same, but: the contract is $39.8 million; the owner has pre-purchased the elevators and will assign the purchase order to the contractor; the window package must use a specified European glazing system with a 26-week fabrication time; and the site has an adjacent lot available for laydown for the first 30 weeks only. Your plan should contain the eight parts shown above, with the following deliverables.