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Newsletter Articles

Contracting Delivery Methods
James B. Salter, November 2002


THERE ARE PRIMARILY THREE CONTRACTING DELIVERY METHODS:
Design-Bid-Build System
Design-Build System
Construction/Project Management System

There are three primary financial forms of contract:
Lump Sum
Guaranteed Maximum Price
Cost Plus a fee


Traditionally construction projects have been based on the Design-Bid-Build delivery system. The owner hires a design team to create the plans and specifications of the desired project, which is followed by a bidding process and the contractor who provides the lowest qualified bid is awarded the contract. Sometimes the bidding is negotiated with one single contractor due to a prior positive and trusting relationship with the contractor. This process often breaks down based on the following common mistakes:
  1. Incomplete or poorly coordinated plans and specifications, which is becoming an all too common problem with the advent of Computer Aided Design (CAD) produced plans.
  2. Poorly prepared bid book (Instructions to Bidders) and bid process.
  3. Inherent adversarial relationships between the Owner, Design Team and General Contractor based on disputes over responsibility and delivery of the primary components of the project.
The Design-Build delivery method has experienced a rapid growth in the most recent decade and has only just recently experienced a drop off. ENR Magazine recently reported "revenue for the Top 100 Design-Build Firms fell 8% in 2001" while "Overall, construction revenue for ENR's Top 400 Contractors rose 3.2% in 2001". As with any major industry trend enthusiasts tend to push the "one size fits all" philosophy. It is CM&D's philosophy that the Design-Build delivery method is effective dependent upon four prime criteria:
  1. The type of project
  2. The structure and experience of the development team
  3. Having an experienced party produce a detailed and thorough Bid Book/Instruction to Bidders
  4. The quality and experience of the Proposed Design-Build Team
  5. The quality of the Design-Build Contract
  6. The trust and past experience ownership has with the Design Build Team
Mis-Scoped Project - Problems primarily arise from the following:
  1. The Owner's expectations are not consistent, aligned and well communicated/documented with the Design-Build Team.
  2. Inherent adversarial relationship between the Owner and the Design-Build Team.
  3. A clear and concise Design Brief is not prepared that clearly outlines the project's parameters, requirements, specifications and quality expectations.
Regardless of whether Design-Bid-Build or Design-Build delivery systems are used problems can be avoided by integrating the Construction/Project Management System into the process. The Construction/Project Management System brings continuity to the delivery process by being involved from the beginning of the Owner's election to commence the project. The Construction/Project Manager acts as the Owner's representative to create a level playing field of expertise as it relates to the design team and general contractor. Properly implemented, the Construction Manager is the Owner's representative and is instilled with the authority to direct the design, construction and management of the specialty contractors as one well orchestrated and integrated task. By utilizing the Construction/Project Management process problems are avoided by:
  1. Establishing an entitled on-site decision maker with Ownership's best interest in mind
  2. Having a third party provide a thorough independent quality control/conflict check of all drawings by a competent independent party.
  3. Having an experienced party produce a detailed and thorough Bid Book/Instruction to Bidders.
  4. Having an experienced and qualified party administer a well thought out bid process that allows for clear and concise communication prior to the bid delivery.
  5. Having an experienced and qualified party prepare a thorough and well thought out Differentiation Document (Document that simply and clearly outlines responsibilities for all facets of the project delivery).
Ultimately the Construction/Project Manager works as the team leader with a consistent project history from the project's inception. The Construction/Project Manger is the third party that maintains a level playing field between owner, design team, specialty contractors and general contractors' interests. The Construction/Project Manager is assigned to oversee the entire project to insure the owner's original project goals are met and that all contractual obligations are fairly administered. Due to the fact that the Construction/Project Manager is involved from the inception of the project, he is primarily responsible for maintaining the budget, schedule and quality of the project. The Construction/Project Manager allows the owner to have a single point of authority, responsibility and accountability for the project in that he is responsible for both the design process and the delivery.

All three contracting delivery methods have advantages and disadvantages depending on their application to a specific project, and all of the above can be negotiated directly with an individual General Contractor or bid to multiple General Contractors. CM&D has successfully acted as a team leader on hundreds of successful Design-Bid-Build and Design-Build projects over the years by implementing our Project Control and Delivery System.







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