Levi W. Barrett, Nathan A. Cohen and Stewart Shurtleff are partners with the national construction law firm Peckar & Abramson. Opinions are those of the authors.
From the pyramids to the Burj Khalifa, the ability to create sophisticated structures has been the yardstick by which civilizations have been measured for centuries. As our ability to build has evolved over time, so have methods of project delivery.
From Design-Bid-Build to CM-at-Risk and Design-Build to integrated project management, each method is developed for a very specific need and each method has its own risks and opportunities. Here is an overview of each of these types and the projects that will benefit most from them:
The first step in this classic project delivery method is for the owner to hire an architect to prepare complete project designs. The finished architectural drawings are then tendered by various contractors, usually on the basis of an agreed sum. Due to the simple comparability of these fixed sum bids, this delivery method has been a mainstay of public procurement for decades.
With a few exceptions due to governmental legal requirements, the owner of a design-bid-build project guarantees the design documents made available to the design builder. Errors in planning usually entitle the contractor to additional time and remuneration for the project. This provides the owner in the event of a dispute between the contractor and the architect. It can be left to the builder to relieve the contractor of delays and costs caused by mistakes made by the architect, sometimes with limited ability to compensate for such losses from the architect.
This method is not the most time-efficient means of bringing a ready-made structure to market or delivering it to the end user. Because the designs must be completed before the project can be advertised, there is a lead time before the project can be advertised and a contractor selected. This model lacks the previous collaboration found in other methods. At the end of the design process there are any value or buildability analyzes by the contractor, which can lead to further delays.
Site manager in danger
This method aims to streamline project delivery and reduce costs by involving the site manager early on in the planning phase of the project. The client is still responsible for commissioning the architect directly, but the CM, who is usually involved earlier in the process compared to the contractor using the design-bid-build method, is responsible for drawing up the designs of the Review architects for build feasibility and provide feedback on cost reduction measures that can be incorporated into the design for project savings.
While the CM should generally not be responsible for the design, it is often necessary to notify the owner and the architect if he finds any errors or omissions in the architect’s work. At various intervals in the design development, the CM will provide estimates of their projected costs that will allow the owner to assess their budget and evaluate their cost reduction options.
Once the designs are sufficiently refined, the CM will provide a price – often on a cost-plus basis with a maximum guaranteed price (GMP), although it is not uncommon for these contracts to include options to be on a pure cost-plus or cost-plus basis agreed amount to continue also basis.
If the costs exceed the GMP, the contractor bears the risk of additional costs, unless the excess is the responsibility of the owner or is otherwise excused by the contractual conditions. Often times, these projects enable joint savings when labor costs are not in line with GMP.
This project delivery method provides the owner with a one stop shop for design and construction services. Rather than hiring an architect directly, the owner hires a design builder who is responsible for executing the construction work and also for maintaining the services of a qualified and properly licensed architect. As a result, the owner transfers a large portion of his design responsibility to the design builder and the design builder has to track his design advisor on the impact of his mistakes on the project.
Rather than providing drafts, the owner provides the design builder with a program of design parameters or requirements that need to be included in the final draft of the project. The design builder provides the owner with increasingly sophisticated design documents and price information at agreed intervals. This allows the owner to rate the design and price in a similar way to CM-at-Risk.
The delivery of design-build projects is becoming increasingly accepted by public institutions in the United States. However, since price certainty cannot be given until the design is nearly complete, design-build usually works best when the design-builder is selected based on qualification rather than price. This can make it difficult to comply with tender requirements, and in many cases, approval legislation is required in order for Design-Build to be used on public projects.
New delivery methods
One example of the continuous innovation in this area is Progressive Design-Build. The design builder is engaged by the client in the earliest phases of project development and the design is then gradually developed by the client and design builder. Once the design is between 50 and 75% complete, the design builder usually issues a GMP. There are numerous variations on the design-build theme, including public-private partnerships (P3s) that combine design-build project delivery with options for funding, operating and maintaining the project.
Another example of a delivery method geared towards greater collaboration between the parties is integrated project delivery. This structure is unique in that the parties do not find ways to pass risk on to one another, but rather share and manage design and construction risks as a team throughout the process.
In all forms of project implementation there are a number of considerations including, but not limited to, those discussed above. The contractor embarking on a new project without a clear understanding of the delivery method, including the contractor’s obligations and associated risk profile, does so at their own risk.
For everyone in the construction industry, it should be a top priority and best practice to be informed about all aspects of the ever-changing world of project delivery.