Private Owners Have More Options Than Public Owners - and Selecting the Right Contractor Is One of the Most Important Project Decisions
Public projects must use competitive bidding with award to the lowest responsive, responsible bidder - the procurement statute leaves little discretion to the owner. Private projects have complete flexibility in how they select their contractors: they can negotiate directly with a preferred contractor, run a competitive bid among pre-qualified firms, use a best-value selection that weights qualifications and fee together, or use a construction manager at-risk who provides a guaranteed maximum price. The architect's advisory role in private contractor selection is one of the most valuable services the architect provides during the pre-construction phase - the owner needs to make an informed decision about which delivery method and which contractor is most appropriate for the specific project, and the architect's knowledge of the local construction market and of contractor capabilities is essential to that decision. The ARE PjM and CE exams test contractor selection as a project management and procurement competency.
Prequalification
Prequalification is the process of evaluating potential bidders' qualifications before inviting them to bid, to create a short list of firms capable of successfully completing the project. Prequalification criteria: financial strength (bonding capacity relative to project size; balance sheet review); relevant project experience (similar project type, scale, and construction system); current project load (is the firm overcommitted?); key personnel experience (project superintendent and project manager qualifications); subcontractor relationships (access to the specialty trades required for the project); safety record (experience modification rate - EMR). Only prequalified firms receive bid documents; this reduces the number of bids received (lowering bid administration cost) and improves the quality of bids (from firms who are genuinely capable).
Best-Value Selection
Best-value procurement weights qualifications and price together, rather than awarding on price alone. A typical best-value scoring matrix might weight: price (40%), project team experience (25%), project understanding and approach (20%), safety record (10%), small business participation (5%). The contractor with the highest weighted score wins - not necessarily the lowest price. Best-value is particularly appropriate for complex projects where contractor qualifications, team quality, and construction approach matter as much as unit costs. Many public agencies have adopted best-value procurement for complex projects.
Negotiated Contracts
The owner negotiates directly with a selected contractor (often a contractor with whom the owner has a positive prior relationship) without competitive bidding. The contract is typically cost-plus (actual costs reimbursed plus an overhead-and-profit fee, either fixed or percentage-based) or GMP (the contractor commits to a Guaranteed Maximum Price; cost savings below the GMP are shared between owner and contractor per the contract). Negotiated contracts are faster to execute and allow the contractor to be engaged during design, but they require the owner to trust that the negotiated price is fair.
Key Exam Points
- Private owners: full flexibility in contractor selection method; negotiated, competitive, best-value.
- Prequalification: short-lists capable bidders; evaluates financial strength, experience, key personnel, safety record.
- Best-value: weighted scoring of qualifications + price; appropriate for complex projects.
- Negotiated/GMP: direct contractor engagement; faster; allows preconstruction services; requires owner trust in price fairness.
- Architect's role: advise owner on selection method; help develop prequalification criteria; evaluate proposals and interview firms.
AREprep's PjM and CE project delivery and procurement content covers the full range of contractor selection methods for private projects - competitive bidding, prequalification, best-value, and negotiated contracts - giving ARE candidates the procurement knowledge the exams test in project delivery scenario questions where the owner's priorities (speed, price certainty, qualifications, or flexibility) determine the appropriate contractor selection approach.
Study PjM on AREprep
AREprep's PjM flashcards and practice exams are built around the actual NCARB exam guide - so every study session targets what the exam tests.