During the four-year period from 2003 to 2007, Genentech experienced explosive growth nearly doubling its staff headcount and adding five new manufacturing and research sites. The company’s capital budget also skyrocketed from an average of $300 million in cash flow per year, up to approximately $1 billion annually.

Currently Genentech has an active facilities portfolio of more than $2 billion representing projects in some stage of design or construction. This includes a $250-million, 150,000-sf therapeutics filling and packaging facility under construction in Oregon, and an $800-million expansion of production and fermentation space in its Vacaville, Calif., manufacturing facility.

“Dealing with such a large and diverse portfolio led our project managers to implement just as many diverse and inconsistent ways of handling final project delivery,” says Carla Boragno, senior director of Project Engineering for Genentech.  “At times our project managers would select project delivery methods based more on time demands rather than cost considerations.”

Creating a Standard

When Genentech opened in 1976 its two founders operated out of one rented building in South San Francisco. After more than three decades of growth, the company, which is considered by many to be the originator of the biotechnology industry, is still based in South San Francisco. Today, however, its headquarters is located on a sprawling campus of 26 facilities, including a research center, manufacturing operations, and various administrative offices and warehouses.

Boragno explains that in 2005 several project managers volunteered to help her develop and implement a common process for evaluating and selecting project delivery methods, including but not limited to the most common approaches of design-build, design-bid-build, design-build-bridging, or negotiated select team.

“Our standardized process does not force project managers into using a specific delivery method,” says Boragno. “Instead it merely ensures that all project managers follow the same evaluation process and use the same criteria to select whatever delivery method will result in the best outcome and when possible, the lowest cost.”

She adds that since there is no one-size-fits-all approach to project delivery, standardizing the selection process has allowed Genentech to take a more proactive approach to planning and to ensuring that the best delivery method is chosen based on each project’s unique needs.

“Even though design-bid-build may offer the most cost advantages, we realize there are also reasons not to use this method,” says Boragno. “Having a standardized evaluation process helps project managers to justify why alternate cost delivery options are sometimes chosen.”

Timing is Everything

Prior to creating the standardized selection process for project delivery, Genentech already had a stage-gated process in place to guide project managers through design and construction of capital projects. Known throughout the company as the “Capital Delivery Process,” it outlines key action steps within five phases of asset management, including initial assessment, definition/feasibility, development, execution, and close-out.

Boragno explains that the new project delivery selection standard is entitled “Sourcing & Partnering Strategy,” and was added as a step within Phase Two (definition/feasibility) of Genentech’s overall “Capital Delivery Process.”

“Adding this as a defined step requires that all Genentech project managers seek formal approval for their recommended project delivery method prior to entering into the development phase, which is really where most of the engineering starts to take place,”says Boragno.

To receive approval, project managers submit a standardized checklist along with a narrative summary addressing the benefits and risks of the particular method that they are recommending.

“This step ensures that our project managers are proactively thinking about how to deliver the project before they actually get into engineering and construction, when changes can be costly,” says Boragno. “It also shows our service providers that we have a fair and consistent selection process.”

Introduction and Training

Boragno explains that the new standard was introduced via an online training course which all Genentech project managers are required to take.

“We worked closely with our legal and procurement groups to make sure that this training covers all different kinds of project delivery methods,” says Boragno. “We also use the training course as an opportunity to explain contract compensation terms such as lump sum, G-max pricing, and cost reimbursable.”

She adds that it is common for project managers and senior decision makers to incorrectly intermingle project delivery terms with contract compensation language.

Applying the New Standard

South Campus

“Several of our recent projects were further proof to us that there really is no one-size-fits-all method for project delivery,” says Boragno who points first to Genentech’s recent South Campus tenant improvement project, which consisted of eight new buildings—R&D and office—constructed over a four-year time period.

She explains that the South Campus project could have been viewed as one large project, but since each building had distinct needs they were each managed as separate projects.

“If we had tried to apply one delivery method to all of those buildings it just would not have been effective,” says Boragno. “On the second phase of the project, we decided to use design-bid-build for the office building rather than design-build, which is traditionally used in most office facilities.”

This allowed Genentech to include competitive bidding since several of the buildings were carbon copies of office buildings already constructed on the site.

Building 51

Genentech’s standardized selection process also helped the company justify the use of a modular-design-build approach for Genentech’s Building 51, a unique modular manufacturing facility in South San Francisco, the first of its kind to be built in California.

Genentech uses human genetic information to develop, manufacture, and market biotherapeutics, and is the leading provider of anti-tumor therapeutics in the United States.

Boragno explains that management gave the project team a goal of delivering a licensed fill line in 27 months.  The schedule was of critical importance to help meet the rapid increase in production demand.

“The only way we could meet the required schedule for this manufacturing facility was to go with a modular-design-build approach even though this was new to Genentech,” says Boragno.

“There was a cost premium for the project, compared to traditional stick-built construction, since the modules that formed the building were actually built in Sweden and shipped here, but the benefit of getting the facility built quickly and getting the final product to market faster outweighed the risks and costs of this delivery method.”

She adds that when schedule is the primary driver, the modular-design-bid method is gaining in popularity for manufacturing facilities.

“While the modules were being designed and fabricated in Sweden, we were able to start the foundation and site work,” says Boragno. “This delivery method is an incredible way to fast- track a project because it allows you to overlap building phases rather than doing it all from the ground up.”

Lessons Learned

“Even though design-bid-build typically offers the most competitive pricing for project delivery, it is not right for every project and there are so many other different approaches to consider,” says Boragno. “When selecting a project delivery method, you need to consider everything from market conditions, to project objectives and schedule demands, and any other unique design requirements.”

She adds that establishing a standard process for selecting the project delivery method is just as important as the actual selection. Once the process is in place it is flexible enough to apply to any type of project delivery, not just for laboratories. It can be applied just as easily to manufacturing facilities, offices, or amenities.

“While your delivery method may change from project to project, if you have a consistent approach and a consistent rationale applied early enough in the project, it will drive efficiencies in your overall capital delivery processes,” says Boragno. “It is also very important to train and educate your project managers and senior management so that everyone knows the necessary steps and is committed to a standardized selection process.”

Boragno adds that although project delivery is a critical component of project outcomes, she considers the overall capability of the project team as the ultimate factor in project success.

By Amy Cammell