METHODS OF DELIVERY


You have heard the horror stories of hiring a bad contractor, everybody has. It's important to understand that often it isn't the contractor's fault when construction projects go awry.

In our experience we find that discrepancies and disagreements between owners and contractors often stem from lack of communication. There is a mis-conception that in order to get a building built, the owner needs only to hire a contractor. Contractors, as good as they are swinging a hammer, many times are lacking in translating owners' desire and intent into something physical.

From the point of initial failure, the project only has one way to go, and that's down. A spiraling money pit where the owner is unhappy with the results and the contractor is unhappy about the time and cost required attempting to keep the customer happy.

Many of the bigger and more experienced contractors will advise owners who approach them for a construction project to have a plan in hand. This will allow them to adequately and accurately understand the project in terms of cost and schedule. Some of the larger companies may even offer the design services up-front or in conjunction with their delivery of the building. One thing for all owners to understand is that if you don't know what you want, a contractor certainly won't know what to build.

As you start to consider a new building, there are some important considerations regard the procurement of these design and planning services that need to be navigated if you expect the building to be delivered in an acceptable fashion.

We wrote a blog article previously that discussed an Architects role in one of these types of delivery methods. This method of delivery is also one of the most common, or most easily understood. It is commonly referred to as the traditional method, or the design-bid-build method.

Delivery Type 1 - Design-Bid-Build

Just as it sounds, the project is started by an architect who is responsible for the design. Once the owner and the architect have completed the design, the project is then sent to contractors to bid. The owner then hires one of the contractors based on cost, schedule, experience, and other criteria and they start to build.

Like all things, various types of delivery methods offer both advantages and disadvantages. In the format outlined above, the advantages look something like this:

Design-Bid-Build

Advantages

  • Reduced Costs

  • Designing up-front allows for a better refined solution

Disadvantages

  • Longer delivery times as phases are separate

  • Fragmented design and construction teams

  • Schedule and cost assumptions

As you can see, the Design-Bid-Build method of delivery allows for planning and forethought but to some clients, and in some circumstances, may not be desirable. Especially in fast-track project types.

Delivery Type 2 - Design/Build

For owners who are willing to pay a premium to fast-track the project, they may desire to sole source the entire delivery. That is, pay one organization to conduct the design and construction under one contract. As you can see, the "bid" portion of the project is removed, often resulting in premium construction costs.

Design/Build

Advantages

  • Faster delivery and occupancy

  • Early cost and schedule impact understanding

  • Cohesive design and construction teams

Disadvantages

  • Higher construction cost

  • Elimination of checks/balance between entities

  • Builder selects design team rather than owner

The final type of delivery that will be discussed as part of this article is Construction Manager At Risk. This is essentially a model that meshes the Design-Bid-Build with the Design/Build method. By integrating a construction manager into the process, the owner still perceives a simple and sole source delivery though behind the scenes a bidding phase for contractors and sub-contractors. This method is known as Construction Manager at Risk or (CMAR). Often, the owner will hire an architect to conduct the programming phase, and will then engage a Construction Manager in a separate contract with a guaranteed maximum price for the delivery of the building.

Construction Manager at Risk

Advantages

  • Perceived sole source delivery to the owner

  • Similar cost reductions to Design-Bid-Build due to competitive process at the sub-contractor level

  • Due to CM fee mark-up processes, all costs and fees are transparent

Disadvantages

  • Potential for increased cost as General Contractor savings may be exceeded by CM fee

  • Potential conflict as the construction manager has established a guaranteed price before project expectations are well defined

  • Owners have little influence on the sub-contractors engaged in the work

Because so many organizations are specializing in sole-source project delivery in today's construction world, it's important for owners to understand potential disadvantages while discussing their project with various organizations. As Design/Build entities now often include construction cost financing, operation, and a host of other add-on services, enticing owners with appealing delivery packages, owners are well suited to understand the sacrifices they potentially could be making and evaluate them against the benefit.

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