Delivery Methods

Design-Build vs. Design-Bid-Build

The design-build construction method “lends itself readily to concurrent activities and accelerated construction schedules” (Keck, 2020). With this project delivery method, the owner will send an RFP to the street for design-builders to bid. Typically, three or more design-builders will bid, and the owner will select a single design-builder who will perform the design and construction work. The work performed is under a single contract where the hired design-builder performs all or select portions of the design and construction work; however, the hired design-builder can subcontract work out to other companies. If the hired design-builder subcontracts work to other companies, the subcontracts between the hired design-builder and their subcontractors have no bearing on the prime contract between the owner and hired design-builder. A benefit of the design-build method is it is the most efficient because the timeline is expedited, thereby allowing occupancy sooner and allows the owner to collect money quicker ("Symmetry builders discusses design-build & design-bid-Build," 2019). Another benefit of the design-build method is that the working relationship is more personalized because the owner works directly with the design-builder from the cradle to the grave. As a result, this single point of contact relationship proves very beneficial because the owner and the design-bid builder are in constant contact with each other. The example below from Kirchner Custom Builders sums up the owner & design-builder relationship well:

Every project will have changes along the way and with a Design Build [sic] contractor those changes are easier to address because you’ve been with your contractor since day one. He knows your wants, needs, and expectations from the start and the Design Build [sic] contractor has a clear understanding of your overall project, which makes it easier for him to accommodate changes. ("Design bid build vs. design build," 2019)

One last benefit of the design-build project delivery method is that it shifts most of the involvement and risks away from an owner and allows the owner to focus on their business ("Symmetry builders discusses design-build & design-bid-Build," 2019). Another essential feature of the design-build project delivery method is the contracting and contract changes aspect.

When it comes to contracts, the design-build project delivery method has, at most, one or two contracts between the owner and design-builder because this project delivery method creates a single relationship between the owner and hired design/builder. Selecting this project delivery method also provides for a lower cost of contract administration. This project delivery method is also used when owners are unsure or unable to find their own specialized subcontractors such as electrical contractors, mechanical contractors, architects, etc. or they do not have their own in-house technical departments ("Design bid build vs. design build," 2019). The prime contract between the owner and design-builder will be a standard American Institute of Architects (AIA) contract, specifically the A141TM-2004 (Keck, 2020). Using an AIA contract is a standard in the construction industry because the parts and pieces of the scheduled work are clearly laid out, and this dramatically reduces any confusion on what services are provided by the hired design/builder. Even though the owner and design-builder strive to have no contract changes, this truly is unrealistic. What is more realistic is to have minimal contract changes on a project.

A design-build contract change is a legal and binding agreement that modifies the original contract. These contract changes may be issued for scope modification, substantial completion date extensions, overall contract price, or other terms as defined by the contract document ("Analysis of Design/Build vs. Design-Bid-Build," 2020). Project contract changes must go through a contract change process for approval. The contract change process takes the following form:

1. Design-builder creates potential change orders and submits to the owner’s representative, typically the owner’s Project Manager.

2. The project manager will review the potential change order against the contract documents. If needed, the project manager will consult with any subject matter experts (SMEs) and/or run the potential change order up the owner’s chain of command.

3. Once a decision is made, the owner’s project manager will deliver an acceptance or rejected answer to the Design-builder. If accepted, the owner’s project manager will typically hold this change order until the end of the month so it can be bundled with other potential changes for the design-builder’s prime contract.

4. Once bundled, a formal change order document, typically the AIA G701, is submitted to the design-builder to memorialize the formal contract change.

While the contract change process is straightforward, both the owner and design-builder work very hard to shy away from. Not only is this contract change process used between the owner and design-builder, but it is also used between the design-builder and their subcontractors. Now that we have reviewed the project delivery method, contract components, and contract changes process for design-build, let us look at the design-bid-build process.

The design-bid-build project delivery method is the “most traditional process in the U.S. construction industry” ("Analysis of Design/Build vs. Design-Bid-Build," 2020). As the name suggests, this project delivery method introduces a new component and a shifted risk. In the design-bid-build project delivery method, the design component is separated from the bid and construction component. With this project delivery method, the owner first works with an architect or engineer and then selects a builder after a competitive bidding process ("Analysis of Design/Build vs. Design-Bid-Build," 2020). The new risk introduced is one of responsibility. With the design-build project delivery method, the owner shifts the responsibility risk to the design-builder because they are responsible for designing and building the project. However, when the design-bid-build project delivery method is used, the responsibility shifts to the owner because it is the owner who selected the designer, and the owner is taking the construction documents to the street for bid ("Symmetry builders discusses design-build & design-bid-Build," 2019). Because of this, any bidder’s risk is almost nil because the bidder’s bids can only be as comprehensive as the construction documents they are bidding from. Any discrepancies in scope are solely on the owner’s shoulders and the architect and/or engineer the owner hired. This can lead to schedule delays, a high number of contract changes, and possible litigation because team members are less concerned with working together and instead more concerned working alone. In doing so, the team members’ vested interest is in their only piece of the project instead of the project as a whole. When selecting a project delivery method, owner’s must consider the following:

1. Capacity and technical capability to closely manage the process

2. Individual project drivers

3. Sensitivity to cost and schedule escalations

4. Degree of comfort with bearing project risk. ("Analysis of Design/Build vs. Design-Bid-Build," 2020)

In the design-build project delivery method, the owner’s risk is greatly minimized. In the design-bid-build project delivery method, architects and/or engineers and bidders bear no contractual obligation to each other because the owner takes all the risk. Another essential feature of the design-build project delivery method is the contracting and contract changes aspect.

When it comes to contracts, the design-bid-build project delivery method has at a minimum of two contracts - one between the owner and the architect and/or engineer and another between the owner and builder. Having two contracts introduces a greater risk for the owner because they now have full responsibility for the construction documents’ validity. An unintended side effect of having two or more contracts is the cost of contract administration. With design-build, a project can generally get away with having one contract administrator; however, there are now more pieces to manage with two or more contracts. This introduces the possibility of more errors. While one of the benefits of design-bid-build is the competitiveness of the bids - read lower cost - it is not always the best for the project. This project delivery method is best used when plans are already in place. Having these plans in place does not change the project delivery method. The contracts between the owner and the architect and/or engineer and the selected builder will be a standard American Institute of Architects (AIA) contract, specifically the A101 (Keck, 2020). Using an AIA contract is a standard in the construction industry because the parts and pieces of the scheduled work are clearly laid out, and this dramatically reduces any confusion on what services are provided by the hired design/builder. Even though the owner and design-builder strive to have no contract changes, this truly is unrealistic. What is more realistic is to have minimal contract changes on a project.

A design-bid-build contract change is a legal and binding agreement that modifies the original contract. These contract changes may be issued for scope modification, substantial completion date extensions, overall contract price, or other terms as defined by the contract document ("Analysis of Design/Build vs. Design-Bid-Build," 2020). Project contract changes must go through a contract change process for approval. The contract change process takes the following form:

1. Builder creates potential change orders and submits to the owner’s representative, typically the owner’s project manager.

2. The project manager will review the potential change order against the contract documents. If needed, the project manager will consult with any subject matter experts (SMEs) and/or run the potential change order up the owner’s chain of command.

3. Once a decision is made, the owner’s project manager will deliver an acceptance or rejected answer to the builder. If accepted, the owner’s project manager will typically hold this change order until the end of the month, so, if needed, it can be bundled with other potential changes for the builder’s contract.

4. Once bundled, a formal change order document, typically the AIA G701, is submitted to the design-builder to memorialize the formal contract change.

While the contract change process is straightforward, it is something that both the owner, architect and/or engineer, and builder work very hard to shy away from. Now that both project delivery methods have been explained, which one is the best for a project?

Both are best for a project because it comes down to personal choice. With design-build, the owner has one contract with the design-builder, and the owner’s risk responsibility has shifted to the design-builder because the design-builder is responsible for the validity of the contract documents and subsequent building. With this method, changes regarding the contract documents reduce because the design-builder created them. If having a more cohesive project team is vital to an owner, then selecting a design-build project delivery method would be the way to go. If the lowest cost is the driving factor, an owner will choose the design-bid-build project delivery method. With this method, owners can leverage their existing relationships with architects and/or engineers to design the construction documents or send a design bid to the street and select an architect and/or engineer this way. Once selected and the design documents are in place, the owner can then send a construction RFP to the street for bid. By using this method, the owner now has, at a minimum, two contracts - one with the architect and/or engineer and another with the selected builder. Having two contracts increases the likelihood of contract changes because the project team is less concerned with the project as a whole and more concerned with delivering their piece of the project.

References

Analysis of Design/Build vs. Design-Bid-Build. (2020). Commercial Construction & Architecture I The Beck Group. https://www.beckgroup.com/wp-content/uploads/2015/06/DesignBuildVsDesignBidBuild.pdf

Design bid build vs. design build. (2019, August 29). Kirchner Custom Builders, La Crosse, WI. https://kirchnercustombuilders.com/design-bid-build-vs-design-build/

Keck, J. (2020, February 5). Design Bid Build and Design Build. BCOM115-10C-C1-202020-I>Pages>M05 Part A Learning Activities. https://ivylearn.ivytech.edu/courses/1023494/files/82787921/download

Symmetry builders discusses design-build & design-bid-Build. (2019, July 16). Symmetry Builders, Inc. | Denver, CO Commercial Construction. https://www.symmetrybuilders.net/symmetry-builders-blog/2019/7/16/design-build-vs-design-bid-build-delivery-methods

CM vs. IPD

The construction management (CM) project delivery method is one where “the owner, architect, and the CM are a ‘team’ who work together to design a project” ("Benefits of the construction management delivery method," 2020). The CM project delivery method is one with a few flavors. They are Construction Manager at Risk (CMAR), Construction Manager Multi-Prime (CMPP), and Construction Manager (CM).

When owners need a defined completion date and price, CMAR is usually the preferred project delivery method. During the project’s design, the “construction manager acts as a direct consultant to the owner; then, it is the construction manager who oversees all subcontractors” (Brennan, 2020). With CMAR, the construction manager accepts all the risk of keeping the project on time and under budget. In return for the construction manager’s services, the owner provides the construction manager a fixed or guaranteed maximum price (GMP) payment. As with design-bid-build, the owner only forms contracts with two parties–the designer and the construction manager. It is the construction manager who creates contracts with a general contractor and/or any subcontractors. The CMPP project delivery method makes a subtle change to the CMAR formula.

If an owner’s objective is “to retain financial control, be an active participant in the construction project, and the owner does not have the resources to manage the project on their own” ("What is construction manager multi-prime?", 2020), then CMPP is a smart choice. With CMPP, the project is divided into three phases - design, engineering, and construction. When using multi-prime, the owner secures separate contracts with firms spearheading different project stages. For example, Southern Illinois Health (SIH) is constructing a new hospital in Carbondale, and they have selected to use the CMPP method. As a result, SIH will secure a contract directly with Carbondale Hospital Architects for the design phase. Once the design phase is over, SIH will secure a contract with Carbondale Medical Engineering for the engineering phase. Finally, for the construction phase, SIH will secure multiple contracts. One contract with Turner Construction for the construction management portion and several others for the general contractor (GC) and trade contractors, such as electricians and plumbers. In this example, the prime contracts are with the GC and the main trade contractors. Now that we have examined CMAR and CMPP, we will now focus on CM.

The CM project delivery method “features a construction management company providing professional services for a fee” (Keck, 2020). With the CM delivery project method, the owner hires an architect and construction manager simultaneously, which allows the owner, architect, and CM to work together to achieve a common goal - project construction. Unlike CMPP, where the construction manager may not be the constructor, the construction manager constructs the project with the CM project delivery method. With the CM project delivery method, the construction manager provides the following services:

1. The construction manager serves as an objective, experienced owner’s representative protecting the client’s interests.

2. The construction manager centralizes communication by acting as a project liaison amongst all participants.

3. Protects the owner from unnecessary liability. ("Benefits of the construction management delivery method," 2020)

From an owner’s perspective, the benefits of a CM project delivery method are:

1. The owner pays a guaranteed maximum price for the construction manager’s services.

2. Because the owner and construction manager have a tight working relationship, the owner has access to all financial records at any time.

3. Since the construction manager serves as the owner’s representative, the owner’s exposure to change orders is significantly reduced because the construction manager is brought on early in the design process. The construction manager works closely with the architect and is expected to bring their expertise to the table to ensure the architect’s construction documents are correct.

The CM project delivery method alleviates some of the owner’s project fatigue because the owner does not have to juggle multiple contracts with multiple vendors, like CMPP, because it is the construction manager’s responsibility to solicit bids for construction work. Once the bids are awarded, the contracts are secured between the owner and main trade contractors, but the construction administration falls on the construction manager’s shoulders. Because of this, owners who use the CM project delivery method will have to “work with the construction manager to ensure the project’s scope is extremely well defined” (Ellis, 2020). This is where the construction manager’s domain expertise comes into play because, as the owner’s trusted advisor, the construction manager can help the owner refine the scope as necessary. The main reason for this is that the construction manager is the project’s constructor. It allows them access to the project’s scope early, thereby allowing the construction manager to mobilize resources first.

When it comes to contracts, the CM project delivery method has at least three contracts. These contracts are found between the construction manager, the architect, and all trade contractors. The contract relationships are as follows:

1. The construction manager’s and owner’s contract is a standard American Institute of Architects (AIA) contract, specifically the AIA form C132™–2009, Standard Form of Agreement Between Owner and Construction Manager as Adviser.

2. The architect’s and owner’s contract is a standard American Institute of Architects (AIA) contract, specifically the AIA form B132™–2009, Standard Form of Agreement Between Owner and Architect, Construction Manager as Adviser Edition.

3. The contractor’s (trade contractors) and owner’s contract is a standard American Institute of Architects (AIA) contract, specifically the AIA form A132™–2009, Standard Form of Agreement Between Owner and Contractor, Construction Manager as Adviser Edition. (Keck, 2020)

Because there are many contracts with the CM project delivery method, there is a higher cost to contract administration. The owner is responsible for managing all aspects of the construction manager’s contract, the architect’s contract, and all the trade contractor’s contracts (gkkworks, 2013). Using an AIA contract is a standard in the construction industry because the parts and pieces of the scheduled work are laid out. This dramatically reduces any confusion on what services are provided. Even though the construction manager strives to have no contract changes, this truly is unrealistic. What is more realistic is to have minimal contract changes on a project.

A contract change is a legal and binding agreement that modifies the original contract. These contract changes may be issued for scope modification, substantial completion date extensions, overall contract price, or other terms defined by the contract document. Project contract changes must go through a contract change process for approval. The contract change process takes the following form:

1. Trade contractors create potential change orders and submit them to the owner’s representative, the construction manager.

2. The construction manager will review the potential change order against the contract documents. Because the construction manager acts as the owner’s agent, the construction manager has the full authority to approve change orders; however, there is usually a limit to what a construction manager can approve. This is called a Limit of Authority (LoA). LoA’s aside, if needed, the construction manager will consult with any subject matter experts (SMEs) and/or run the potential change order up the owner’s chain of command.

3. Once a decision is made, the construction manager will deliver an acceptance or rejected answer to the trade contractors. If accepted, the construction manager will typically hold this change order until the end of the month to be bundled with other potential changes for owner sign-off.

4. Once bundled, a formal change order document, typically the AIA G701, is submitted to the trade contractors to memorialize the legal contract change.

While the contract change process is straightforward, the construction manager works very hard to shy away from. Now that we have reviewed the CM project delivery method, contract components, and contract changes, let us look at the Integrated Project Delivery (IPD) project delivery method.

Integrated Project Delivery (IPD) is a delivery method that sets out to optimize efficiency. This method is formed by a single, multi-party agreement that is based “on a shared risk/reward model, guaranteed costs, and waivers of liability between team members” ("What is integrated project delivery?", 2020). IPDs encourage proactive involvement and knowledge collaboration amongst all team members. With IPD, it is not just the owner, architect/engineer, and contractor who are expected to bring their experience to the table, but all team members are expected to do so because it is in everyone’s best interest to have a successful project. A significant reason the IPD project delivery method is used is because of building-information modeling (BIM). According to Autodesk, “Building Information Modeling (BIM) is an intelligent 3D model-based process that gives architecture, engineering, and construction (AEC) professionals the insight and tools to more efficiently plan, design, construct and manage buildings and infrastructure” ("What is BIM | Building information modeling | Autodesk," 2020). In layman’s terms, BIM technology allows IPDs to take a project’s plans and specifications and create a 3-D model. Contained within this 3-D model is every project detail. Team members can navigate the BIM model and view a project’s exterior, floors, landscaping, electrical system, mechanical system, etc. This model can help the team visualize alternative design options and ultimately allow the IPD team to understand what the project will look like before it is built. BIM allows IPD teams to work more efficiently “because it allows them to capture data during all project phases which benefits the project’s operations and maintenance” ("What is BIM | Building information modeling | Autodesk," 2020). BIM aside, it is crucial to understand the phases of an IPD project delivery method.

The IPD project delivery method has four phases:

Conceptualization

In this phase, the IPD team will assemble to analyze the owner’s project request. The IPD team will identify and discuss any potential issues. All team members must speak up because the owner is counting on their expertise.

Design

During design, the architect and/or engineer firms will take the owner’s concept and create the plans and specs. The architect will create the architectural drawings, and the engineer will review the drawings and create the necessary specs. The design phase goals are to optimize costs and reduce waste.

Implementation

Once the project has moved from design to implementation, this is when BIM becomes critically important. The BIM modeler will take the architectural drawings and plans and specs and create the project’s model. BIM will then evaluate the data and predict the project’s performance and outcome. The IPD team will also be able to take a virtual walk through the project as well.

Construction

Once in construction, this is when the most significant benefit is achieved. Because the IPD team planned and collaborated, the construction phase should move along smoothly. This will result in minimal delays, near-zero waste, and minimal scheduling problems. While a lofty goal, it is what all IPD teams strive to achieve.

The most significant benefit of the IPD project delivery method is collaboration. This collaboration aspect forces the entire IPD team to consider the implications of their individual decisions on the project as a whole. When this writer worked for URS in San Francisco, CA, it was on an IPD team tasked with re-building several California Prisons. Whenever issues arose, the team was forced to resolve issues with the entire team in mind. This meant that not every team member would walk away happy, but their feedback was heard, and the most pragmatic decision for the project was agreed upon.

When it comes to contracts, the IPD project delivery method has one contract. IPD teams use the “AIA Document C191™–2009 is a standard form multi-party agreement that perhaps represents the most complete means of creating a contract for an IPD project” (Keck, 2020). This single AIA contract is used for “the owner, architect, general trades, contractor, and primary IPD project team members”(Keck, 2020). Having a single contract for all IPD team members forces the team to collaborate because each team member has a vested interest in delivering a quality project on time and under budget. This is what the risk/reward model is designed to do. From a social science perspective, this technique is used to foster the desired outcome because making the right decision rewards while making decisions that benefit only one party can be detrimental to the project’s success. The downside to this model is that it can promote unnecessary competition and infighting. It falls on the owner to verify all aspects of the IPD contract are being met from a contract administration standpoint. When managing an IPD contract, there will typically be three to four contract administrators onsite. While the IPD contract is a single contract from the AIA perspective, the reality is owners typically treat the IPD contract as separate contracts because there can be separate payment terms, provisions, and deadlines for each IPD team member. Like the CM project delivery method, the IPD project delivery method has a change management component.

A contract change is a legal and binding agreement that modifies the original contract. These contract changes may be issued for scope modification, substantial completion date extensions, overall contract price, or other terms defined by the contract document. Project contract changes must go through a contract change process for approval. The contract change process takes the following form:

1. IPD project team members create potential change orders and submit them to the owner’s representative, the construction manager. Like the CM project delivery method, more often than not, there is a construction manager the owner hires who acts as the owner’s rep representative.

2. The construction manager will review the potential change order against the IPD contract. The construction manager will meet with the IPD team to discuss all risks.

3. The construction manager will meet with the owner to discuss the potential change. The owner will work with the BIM modeler to see how the potential change affects the project. Once the owner decides, they will meet with the construction manager and deliver a decision.

4. The construction manager will deliver an acceptance or rejected answer to the IPD team. Typically, the construction manager will hold all approved potential change orders until the end of the month. They will create a bundled change order for the owner’s sign off.

5. Once bundled, a formal change order document, typically the AIA G701, is submitted to the IPD team to memorialize the legal contract change.

While the contract change process is straightforward, the IPD Team works very hard to shy away from. Now that both project delivery methods have been explained, which one is the best for a project?

This writer believes that the IPD project delivery method is best for delivering large scale projects. The construction industry is slow to adopt new technology. As a result, some owners are currently using excel sheets to manage multi-million dollar projects. It is not until an owner gets burned by a project they begin exploring different project delivery methods and, by extension, adopting a formal Project Management Information System (PMIS). If more owners building large scale projects adopted the IPD project delivery method, they would see an immediate improvement in their project construction delivery. With the IPD project delivery method, the owners can embrace BIM technology and begin to see the project right away. No longer will owners rely on using plans to visualize in their heads what a project will look like. By using BIM, owners can see a realistic rendering. When project changes arise, owners can use BIM technology to see how the proposed change will affect the project. With the IPD project delivery method in place, the owner and project teamwork towards a common goal - to deliver a project on time and under budget. This writer believes that the IPD project delivery method can do just that.

References

Benefits of the construction management delivery method. (2020). Your Premier Midwest Construction Company - Chief Construction. https://www.chiefconstruction.build/about-us/news/benefits-of-the-construction-management-delivery-method.html

Brennan, T. (2020). What is construction management-at-Risk (CMAR)? Water Design-Build Blog. https://info.waterdesignbuild.com/blog/what-is-construction-management-at-risk-cmar

Ellis, G. (2020, August 17). The ultimate guide to choosing the best project delivery method. Autodesk Construction Cloud Blog. https://constructionblog.autodesk.com/best-project-delivery-method/

gkkworks. (2013, June). Comparison of Project Delivery Methods [PowerPoint]. AIA KnowledgeNet. https://network.aia.org/HigherLogic/System/DownloadDocumentFile.ashx?DocumentFileKey=f2d69710-6d8b-4c83-82b2-f755dc513f65

Keck, J. (2020, March 25). Construction Management and Integrated Project Delivery Building Construction Project Delivery Methods, Contracts, and Changes [PowerPoint]. Jonathan Keck. https://ivylearn.ivytech.edu/courses/1023494/files/82787897/download

What is BIM | Building information modeling | Autodesk. (2020). Autodesk | 3D Design, Engineering & Construction Software. https://www.autodesk.com/solutions/bim

What is construction manager multi-prime? (2020, February 13). Levelset. https://www.levelset.com/blog/multi-prime-contract/