Our physical spaces, whether our homes or our work-places, generally require the services of a general contractor during initial construction, for repairs, remodels or adaptive reuse purposes at some point in the property’s life cycle. The complexity of the project often dictates how an owner proceeds with contractual agreements for their contractor and design teams. It is important for an owner to consider what type of agreement they want with their construction teams before embarking on the project itself.
According to the Design Build Institute of America, “Project Delivery is a comprehensive process including planning, design and construction required to execute and complete a building facility or other type of project.”
There are a variety of delivery methods that can be used to engage design and construction teams, depending on an owner’s risk tolerance and relationship with its team members.
The most common methods for project delivery include:
- Design-Bid-Build (DBB)
- Design-Build (DB)
- Construction Management at Risk, also known as CM/GC
- Progressive Design-Build (PDB)
- Integrated Project Delivery (IPD)
Today, we will explore each of these delivery methods as they relate to non-residential construction in the United States.
Perhaps the most common delivery method in the US, the Design-Bid-Build (DBB) method of construction consists of an owner having the design completed, then bidding the work to contractors and subsequently completing construction of the building. The contractor is rarely involved prior to the bid stage of the work, and their contract with this method tends to be a fixed price agreement.
Typically, the owner has separate contracts with the design team and contractor. This method is commonly used when an owner desires to achieve the ‘lowest price’ bid from several general contractors and is common in public works projects. Owners are often unaware that other options exist to find a good general contractor that will complete the work for a fair market price through other contractual arrangements.
Unfortunately, the DBB method can present conflicts down the road. In this contractual arrangement, contractors are to bid the work only as shown on the drawings. If information is missing from those drawings, the contractor has the right to send a change order to the owner for any additional work. This can contribute to feelings of ill will between team members, as the design team and the contractor may disagree about what justifies a change in cost.
To develop a more cooperative relationship, let’s explore the Design-Build delivery method.
The Design-Build (DB) delivery model means that the owner hires the design and construction teams under a single contract. In this way, the design and construction teams act cooperatively to achieve the best result for the owner, often with the goal of fast-tracking design and construction timelines. The owner generally provides performance standards to the team, who then work to find the best means and methods to achieve those standards within a given budget.
Working closely together, both the designer and contractor can ensure that what is designed is feasible from both a cost and constructability standpoint. The contractor is involved before designs even begin, helping to develop clear expectations and analyze building structure types, components, and finishes with the design teams.
In this case, the liability of the construction process is shared between the designer and contractor, forcing them to find reasonable methods of resolving issues that may arise.
The Design-Build method of project delivery helps speed the process of procurement. Bid packages are often issued in phases, such as site work, followed by structure and building envelope, and then finishes. At each point in the process, the GC can ensure that costs meet budget. In addition, project specific contingencies to help the owner mitigate risk can be established so that change orders are minimized.
It’s important to note that it is possible to foster a relationship very like a design-build approach without the design and construction teams signing a single contract. If the owner wishes to engage these teams early in their process, a good general contractor and design team can easily approach a project with this cooperative spirit, even when they sign separate contracts.
This leads us to our next delivery model, the Construction Manager at Risk, or CM/GC.
Construction Manager At Risk (CM/GC)
In this delivery model, the owner signs a contract directly with the designer, and separately with the general contractor. The general contractor and designer are brought to the team around the same time so that the team can approach the project from a target-value-design standpoint; that is, they know what the target cost is, and design the project to meet that threshold while maintaining quality. The time to deliver the project is typically much faster than the DBB model and can be fast-tracked similarly to the Design-build method.
Depending on the team members involved, this method can lead to disagreements between designer and contractor, because they have separate contracts and the owner is between them making decisions. However, in our experience this method generates camaraderie between the design and construction teams, and allows the owner to achieve a finished product that meets their needs.
In a CM/GC model, contracts are often a Guaranteed Maximum Price (GMP), which means that the contract is based on completing the entire project at or below an agreed upon price, and that will only increase if the owner changes the scope. The price generally includes contingencies for unforeseen circumstances, to accommodate weather delays or capture the risk of site work. With contingencies in place, contractors have the ability to utilize funds already set aside for certain purposes, instead of sending through an owner change order to increase the project cost.
With a strong general contractor as part of the team, an owner can be confident that the final price of their project will match what was agreed to when the contract was signed.
Gaining in popularity, the Progressive Design-Build (PDB) method is almost a hybrid between Design-Build and CM/GC. In this case, the general contractor and design teams are still under a single contract, but they are brought into the development process even earlier than is typical. Importantly, this method usually involves awarding the contract to the contractor and design teams based solely on qualifications. As designs progress to a set of drawings that is 50 – 75% complete, the team establishes a Guaranteed Maximum Price for the work.
The advantage of this option for delivery method is that the owner has the team involved very early in the process, and still takes on the lowered risk of contracting with a single entity.
Integrated Project Delivery
The American Institute of Architects defines the Integrated Project Delivery Model as “a project delivery approach that integrates people, systems, business structures and practices into a process that collaboratively harnesses the talents and insights of all participants to optimize project results, increase value to the owner, reduce waste, and maximize efficiency through all phases of design, fabrication, and construction.”
This method is highly collaborative between the owner, end-users, design teams, general contractor and main subcontractors, often with construction beginning long before final designs are complete. Contractual arrangements between parties vary, and may include the owner contracting directly with the designer, GC, specialty subcontractors, etc. Decision makers on the front end of the design typically include all parties that will be involved in the design, construction and end-use of the building.
The IPD Model is relatively new to the United States, but is starting to gain momentum. Proponents see it as a way to create buildings with less waste and better sustainability over time, increased energy efficiency, faster speed to market and lower costs to maintain. In addition, the involvement of the end users, including tenants and building engineers, reduces the changes that may be requested following project completion.
This is a brief overview of common project delivery types. An owner’s choice of which to use should be carefully evaluated based on the goals for the project and their preferred communications strategies. Each one offers varied levels of required owner engagement, timing for onboarding design and construction team members, and speed to market.
If you’re considering a project, our teams are well versed in the options available during preconstruction and the pros and cons of each as they might relate to your needs. Reach out here if you would like to discuss your options.