CHOOSING A DELIVERY METHOD

featured in St. Louis Construction News and Real Estate July/August 2008 issue

Construction is a complex process. This fact, coupled with our weak economy, makes determining the most advantageous plan of attack the first and most vital step to any successful and cost-effective project.

However, there is no silver bullet delivery method that can achieve all project objectives in every situation. One delivery method might be best for design and cost control, while another may be a better fit for schedule compression. The key is to remember there are advantages and disadvantages to all methods, which have proven to benefit the overall success of a project and, in other instances, failed to meet expectations. It’s all about finding the right mix.

The Top Four Delivery Methods:

1) Design/Bid/Build – Single Prime

Design/Bid/Build is a conventional method that is well-established and best understood. During this process, the owner holds two separate contracts – one for design, the other for construction. Before competitive bidding begins, 100 percent of plans and specs are completed. All subcontractors are selected by the general contractor based on their own competitive bidding process. Furthermore, the designer provides administrative services during construction.

Advantages

  • Owner controls design decisions and knows what they are getting prior to bidding
  • All construction-related costs are competitively bid
  • Bidding is done based on completely finalized plans and specifications, minimizing unknowns and the need for changes during construction
  • There is a sole point of construction responsibility

Disadvantages

  • A high level of investment is made before a fixed cost is determined
  • There is no assurance of getting the best contractor team
  • Subcontractors may be at a disadvantage or have limited control in bidding
  • The designer and contractor may serve cross purposes or lack direct incentive to cooperate

2) Design/Build

In contrast to the Design/Bid/Build, the Design/Build method allows the owner to hold one contract, offering responsibility of both design and construction.  A consultant develops the preliminary scope and design of the project.

Advantages

  • The designer and contractor choose to work with each other
  • The owner does not have to resolve conflicts
  • The total cost of the project can be capped at an early stage if desired

Disadvantages

  • Requires significant upfront work to select the design/build team
  • Requires more skill and expertise to manage
  • Contractor controls design decisions
  • Competitive bidding is not used for all construction-related costs
  • May be difficult for the owner to verify the value received for the  money

3) Construction Management-At Risk (CM@R)

This method allows the owner to hold separate contracts for design and CM@R, both of which are selected based on qualifications. Before competitively bidding each trade package to subcontractors, 100 percent of the plans and specs are completed. The selected subcontractors ultimately contract the CM@R. The designer will provide administration services while the CM@R manages the construction and may perform work with their own forces.

Advantages

  • Owner controls design decisions
  • The total cost of the project can be capped at an early stage if desired

Disadvantages

  • Requires more skill and expertise to manage
  • Designer and CM@R may serve cross purposes or lack direct incentive to cooperate
  • The shift of the CM@R’s role from advisor to at-risk contractor can cause some confusion
  • Competitive bidding is not used for all construction-related costs

4) Construction Management (CM-for-Fee)

This is a non-risk form of the CM@R model. Owners hold multiple (typically between 15 and 25) contracts for design, construction and construction management. The designer and CM are selected based on qualifications. Before competitively bidding each trade package to contractors, who contract directly with the owner, 100 percent of the plans and specs are completed. The designer provides administration services during construction.

Advantages

  • Owner controls design decisions
  • Bidding is done based on completely finalized plans and specifications, minimizing unknowns and the need for changes during construction

Disadvantages

  • Requires more skill and expertise to manage
  • Designer and CM may serve cross purposes or lack direct incentive to cooperate
  • Moves some design and at-risk contractor responsibilities to a third party
  • Increases risk due to number of separate prime contractors
  • Competitive bidding is not used for all construction-related costs

Keys to Success

The delivery method selected should be based on an independent comparison of viable options and customized to minimize cost and risk, while maximizing value and speed. It is often helpful for owners to select independent construction experts who can help define their profiles, project goals and help better assess which options are best for the project in question.

From there, selecting the best team of designers, constructors, consultants, etc., and the best manager to independently manage the entire team and its delivery of the project on behalf of the owner, is essential. Plus, roles, responsibilities, processes and success metrics should be set at the beginning of the project and tracked continuously from start to finish.

It is also important to recognize that competition is good, except when based solely on low prices. Always involve qualifications in the selection criteria and make sure construction documents are completed before going to bid. And never under estimate the power of effective communication. Applying collaboration technologies to improve communication, reduces mistakes and saves time.

Sitton is president of Sitton Consulting Group and regularly addresses industry association groups regarding ways to simplify the complexity of construction projects, while saving money, reducing risk and increasing value. He has 28 years of diversified experience in the design and construction industry, overseeing 500+ new construction and renovation projects with a total project cost of over one billion dollars.