Construction Delivery (construction contract) Options

As you may know, there are two basic methods of construction project delivery; design–bid-build and design-build.

The first and most familiar is the design-bid-build but design-build which accounts for about 40% of the current construction project delivery method will surpass design-bid-build in a few years. In the design-bid-build scenario, the architect prepares a complete set of bid documents (construction drawings and specifications) and distributes them to selected contractors for competitive bidding. The contractors submit their bids based solely on the construction drawings and specifications, and it is expected (though not required) that the owner will select the low bidder. Any changes required in construction that are not shown on the drawings will result in a charge (a change order) to the owner. Typically Owners include a contingency of 7–10% in addition to the bid to cover potential changes. The owner doesn’t really know the cost of the project until the bids are in and won’t know the final cost of construction until the project is completed and change orders are reconciled. The advantage of this approach is competition, but the incentive to the contractors is to use low cost sub-contractors and to look for potential changes. This means construction phase services (a process of coordination with the contractor and owner during construction) are required because considerable time must be allocated to observation and management of the contractor and their work during construction. The goal here is to assure the contractor doesn’t cut corners and that the owner is not unfairly charged for work the contractor should have included in their bid.

The second method to deliver a construction project is design-build. In this team concept, the owner selects a contractor early in the design process (typically based on qualifications, project estimates, and comfort level) and the contractor works with the owner and architect to maintain a set budget and schedule, but has latitude in the means and methods of construction to achieve budget. An example might be a switch from brick veneer to metal panel or from concrete block metal studs and drywall to maintain the budget. Of course this does not mean that the project scope or the budget can not change, or that quality suffers, or even that the owner must accept changes suggested by the contractor. The design build process simply assures that the owner will have real time cost information from the contractor as the design evolves and can make changes required to maintain the budget (or to change the budget) before construction starts. Design and construction can happen concurrently providing an opportunity to speed up the construction process. At the completion of the design phase of the project, the contractor will sign a turn-key contract with the owner to deliver the building for the agreed upon price. The advantage to this method is that the owner will know the cost of the project at the commencement of construction and change orders are minimized if not eliminated. A contingency of 5–7% should still be included to account for un-foreseen conditions and owner requested items. Most often the architect’s fees are lower in a design-build delivery method since bid documents are not required and little construction phase services would be needed.

In summary, there are four basic components to a construction project: Cost, Scope, Quality, and Schedule. The design–bid–build method controls scope, quality, and schedule but cost is determined through competitive bidding. The design-build method controls cost and schedule, but scope and quality are established with the contractor during the design process. Deciding which method to use is a big decision, but we hope this information will help you make the best decision.