Originally posted Friday, 20 August 2010

Written by Chloe O’Neill

The following article is a summary of the June 2nd COAA Webinar entitled “Project Delivery Methods,” hosted by Terry Cook, COAA immediate past president and associate vice president of administration services at the University of Baltimore, Maryland; Larry DiGennaro, principal architect and market leader of science and technology for BHDP Architects; and Richard Tilghman, senior vice president of Pepper Construction Group, president of Pepper Environmental Technologies, Inc. and secretary of Pepper Construction Group and Company. Don’t miss the next COAA Webinar, “Staying On-Schedule,” coming up on October 14, 2010. To register, visit www.coaa.org and click “Register” under the Webinar title in the “COAA Events” sidebar on the right.

Defining the Methods

While the meaning of the phrase “project delivery method” is highly debated, there are three different definitions of which most Owners can agree on at least one:

  1. “The way a project will be planned, designed, and built.”
  2. “A procurement strategy for designing and constructing (or renovating) a facility.”
  3. “The means for translating a facility’s need and funding into a usable facility.”

Because there’s no consensus on what a project delivery method is, there is also no cap on the number of “methods” out there. Each Owner is free to customize a basic method to their own uses. It’s a highly flexible part of the construction process, and yet, it’s one of the most important decisions an Owner makes no matter the size or scope of the project. It’s important that any Owner takes inventory of all methods used by their company, and pays extremely close attention to which situations warrant which method.

All methods fall under one of the two overall delivery processes: linear or fast-tracking. While a linear process includes all phases including bidding, and goes from each phase to the next with no overlap, the fast-track approach overlaps certain phases of production, allowing the next phase to start before the last is finished in order to save time.  Which of these processes an Owner uses depends heavily on the amount of time given to complete the project.

The three “most common” methods that cover most of the project situations Owners may face are:

  1. Design/Build
  2. Design-Bid-Build
  3. CM At-Risk (CMAR)

Design/Build

A typical Design/Build project uses a fast-tracking process, where instead of having a designer plan the project then pass it along to a builder, the designer and builder work together as a team to overlap the two processes. The Design/Build team may be selected with or without a bidding process.

Design/Build Team Types:

Integrated Firm: A firm that has both an architect and contractor/builder in-house.

Contractor-Led: The Owner has chosen a contractor, and the contractor subcontracts the design work.

Architect-Led: The Owner has chosen a designer, and the designer subcontracts the building.

Joint Venture: A designer and builder team up for a project, or possibly have a history of working together on certain types of projects. This is an equal partnership, but the drawback can be that whoever has more to lose on the project naturally has more risk as well.

This delivery method can be extremely beneficial when a project must be completed in a strict, short timeframe and the traditional linear approach is just too lengthy to complete. It can also be less complicated in certain ways: less contracts to draft, agree upon and regulate; less designer-builder disputes, as long as the two parties get along well; more of a checks and balances system between services; and less explanation when it comes time to build, because the builder has been on-board all along.

The downsides or complications to this are often related to the quality issues that can arise from overlapping the stages of production and therefore rushing the project. Beginning the building process before design is complete means the initial design plans need to be solid from the start, or rushed decision-making can ensue later.

Additionally, that designer-builder checks and balances system mentioned as a benefit can also be a downside if your design-build team is too close-knit to check on each other. The Owner can start to feel out of the loop and have less control over the project’s direction when the experts are on the same side.

Design-Bid-Build

The Design-Bid-Build method is the more traditional, conservative delivery method.  Many Owners select this method when they have plenty of time to complete a project and want to ensure it’s done right. But it’s important to note that in the 6th Annual FMI/CMAA Survey of Owners, 66 percent of Owners used Design-Bid-Build most often, but only 23 percent think this method offers the best value. This indicates a misconception on when to use this method and what other alternatives might be better in certain circumstances.

The most common pros and cons are pretty obvious for this model: the fact that it’s a linear process means you get to take your time with each phase and in hiring vendors, assuring better quality in most cases; but you often get what you pay for if you take the lowest bid, and the process takes longer than the other two methods.

However, there are a lot of other factors involved than just cost and time. The bidding process can range from a “lowest bidder wins” approach to a careful analysis of vendor qualifications, skills, safety procedures and cost. Often the bidding process involves a Request for Qualifications (RFQ), then Request for Proposal (RFP) before it even begins, depending on the type of project. Owners must balance their time and budget with the importance of hiring the right vendors through these processes. (See this issue’s “Project Management” column on common issues that arise during Request for Proposal, and the “Risk Management” column on the legal issues today’s economy presents.)

There are three common bidding processes:

  1. Competitive Sealed Bid: Price is the only criteria upon which the Owner makes their vendor decision. The lowest bid wins.
  2. Bid with Prequalifications or “Best Value I”: Owner requests price and qualifications to choose “best value” vendor. The lowest bid of the qualified vendors wins.
  3. Competitive Sealed Proposal or “Best Value II”: Owner requests price and qualifications in an extensive proposal. A combination of qualifications and price is considered and negotiations are often made in order to select the all-around “best value” vendor.

Another issue that can arise in Design-Bid-Build is miscommunication between the design and construction phases. Since the design must be 100 percent complete before the construction begins, there is little interaction between the builder and designer. While this gives the Owner more control over each phase, it does have some drawbacks. Concepts the architect devised months ago may not be fully possible once put into practice for one reason or another, or builders may misinterpret the designs, causing costly rework in either of these scenarios if the plans must be adjusted or construction work redone. And if these issues cause problems between the designer and builder, the fact that neither vendor have been around through the whole project means the Owner is in the middle and most liable.

CM At-Risk

The CM At-Risk method is similar to the Design/Build model in that it is fast-tracked rather than linear, and the contractor and designer work closely together through the use of a Construction Manager (CM) who is typically involved in the project starting in the design phase. The CM’s unique role during design involves project review, cost estimating, scheduling, value engineering, constructability review and trade bidding. The Owner may or may not select the CM through a bidding process.

A project that follows the CM At-Risk method has a combination of Design/Build and Design-Bid-Build benefits. The CM often acts as a building consultant during the planning, then phases out of design and into a contractor role to smoothly transition the project from design to build. This gives the same well-rounded and all-informed feel of the design/build team as well as the checks and balances system from having the contractor and designer work together from the start. A CM At-Risk project often involves a Guaranteed Maximum Price (GMP), including the CM’s charge, which is often a fixed fee. This gives the Owner the same cost control benefits as the bidding process, and better yet, guarantees that cost control is carried out by having the CM there to keep close tabs on the budget without adding too much to the cost.

The downsides of CM At-Risk also resemble select cons of Design/Build and Design-Bid-Build. Like Design/Build, the fast-tracked process can lead to quality issues. And just as a Design/Build team can lead to a “Who’s in charge?” crisis when the parties butt heads, the CM can certainly be too opinionated for the designer as well, putting his or her two-cents in where it doesn’t belong or is unwanted.

By limiting the budget to a strict GMP, Owners may also face the “you get what you pay for” downside that comes along with taking the lowest bid in a Design-Bid-Build project. And like Design-Bid-Build, the Owner is the liable monkey-in-the-middle if a designer/builder dispute arises.

How to Choose?

So, knowing the different pros and cons of these three common methods, how does an Owner choose the best delivery method for the project at hand? There are many factors to consider in delivery method selection, including:

  • Site Issues
  • Technical Complexity
  • Special Situation/Circumstances
  • Time Frames
  • Decision Making Structure

Ultimately the decision is yours, and there could be any number of disagreements among Owners as to which method is best for a project. But you can still make sure your decision is educated by taking the time to list your available delivery method options, and weighs the pros and cons of these methods against the unique specifications of your project.

The “Project Delivery Methods” webinar is an excerpt from COAA’s 2-day classroom course OTI 101: Introduction to Construction Project Management.  Visit www.coaa.org (Conferences and Training/Owner Training Institute) for more information.