1. On a very large, very complex remodeling and expansion project, an owner has contracted with numerous members of the design team independent of the architect. The architect does not have any second-tier design firms under their contract. The owner has also contracted with many different material suppliers and specialty subcontractors directly and not through the general contractor (GC). The owner is of the belief that they can save money avoiding multiple markups by doing business this way. The owner has, however, written into every contract that each firm is still responsible to coordinate and communicate directly with the other independent designers and contractors as if they were contracted under the standard vertical method, rather than this horizontal method.
2. Assume the following costs for the case described above. What would the cost increases have been to the owner if they had contracted in a normal fashion? Does this also provide contracting opportunities for the contractors or designers?

Explain why or why not.

• $50 million total construction cost.
• $30 million total construction cost of sub-consultant-designed work.
• Four percent total architectural fee on the architectural portion of the work, and they would receive an additional 10% markup on sub-consultants design fee if run through the architects books.
• The sub-consultants would receive 10% design fee of the construction cost of their portion of the design, either billed directly to the client or through the architect.
• Five percent general contractor fee on costs run through their books.
• The values for four sample subcontracting firms working directly for the

owner are $550,000 for landscaping, $950,000 for a swimming pool vendor,

$5 million for the electrical subcontractor, and $12 million for the mechanical subcontractor. Assume the subcontractor fees are included in these figures. The other subs traditionally work through the GC.

Please answer part b