4 Basic Methods of Project Delivery
- Conventional: Design-Bid-Build
In this method (the most common) the architect or engineer designs and prepares the drawings, obtains the approvals, then bids the drawings among several general contractors (GC-usually general contractor- who have several sub-contractors working for them) reviews the bids with the owner, vets out the GC’s and helps negotiate the best price and terms for the Owner. Then construction contracts are signed and construction begins.
It’s common to have a good working relationship between builders and designers (i.e. architects and engineers) and associations and a certain level of trust among parties can be helpful in maintaining fruitful referrals and understanding, but in this example, there’s no monetary relationship between the Designer and the builder.
The pros- of course are that through competitive bidding, the Owner generally gets the best price, best schedule and terms, the ability of having the foxes separated from the chickens-where a level of oversight can keep all parties in check. The cons can revolve around “finger pointing” when a grey area of the drawings could be interpreted different ways, or “change orders” (extras) arise due to miscalculations by the contractor, concealed conditions, or omissions by the designer, and of course the costs that the General Contractor marks up his subs and materials. Schedule can also increase if lengthy negotiations during bidding occur.
2. Owner as GC
Some Owners do have the skills and moxie to coordinate, schedule and supervise the trades and vendors for a successful project….But most don’t. Many are seduced by the slick HGTV shows that deploy attractive models and bullshit in exchange for good ratings. For an architect or engineer – this model often involves more hand-holding, more coordination and involvement since the design professional is left connecting the dots and become much more of an adviser than the typical level of involvement during construction…With that said, the Owner can potentially save a lot of money if they have the time and certain level of training and chutzpah.
3. Design- Build
In this model there is one entity that is the Design-Build Team. As the name suggests, this one entity contains the designer and builder under the same umbrella.
The “pros” center around improved communication between the builders and designers, since they are “pulling on the same end of the rope”, which usually reduces finger pointing and can speed up the process since coordination is improved and the bidding period is somewhat shortened (though subcontractors still require time to do their pricing). Naturally, the main “con” here is the absence of competitive bidding to ensure that the project is being paid for at a reasonable market value. The other negative is the lack of objective oversight where the checks and balances of an architect or engineer monitoring the construction is more dubious since they are in affect the same party- hence “mixing the foxes with the chickens”.
4. Construction Manager
Another model is paying a construction manager (typically someone with lots of construction experience and contacts) who actually has no workforce on the job, but coordinates and oversees design with the Owner, as well as day to day construction operations. The construction manager is generally paid by the hour, week or a percentage of construction cost. This too is for owners who do not mind getting their hands dirty but wish to save money. Like the example before the materials are usually obtained at net cost. Labor is usually bid out by the CM among several subs, and likewise with the material vendors.
Three most Common variations on the three models are outlined below but center around the way project is bid out:
a. A “cost plus” contract (often called time and materials) involves the contractor purchasing the material and labor at “cost” plus a mutually agreed percentage or fee.
The downside is that a monitoring system needs to be in place to review all costs (usually a weekly basis) which takes substantial time for the owner and contractor and good book-keeping and good communication. This can be a good model for repeat projects where trust and familiarity have already been established. This method is not for the faint of heart and the uncertainty of not having a fixed price can also be harrowing…BUT if you have the time, gumption and knowledge -typical savings generally fall in the 5-20% range!
b. A GMP (Guaranteed Maximum Price) is based, as the name implies that the contractor provides a GMP. However, he continues shopping for possible savings on materials and labor. If there are savings- the savings are split between the owner and contractor at a mutually agreeably percentage.
c. Lump Sum as the name implies, is a contract that stipulate the full cost of the project. This generally sounds attractive-but one has to remember that there is usually extra cost built in to cushion for the unknowns and many variables that cannot always be expressed in drawing an specs.
Each method contains its own set of merits and demerits. Selecting the most suitable approach necessitates careful consideration of the project’s unique needs, budget constraints, and owner preferences. It’s essential to weigh the advantages and drawbacks of each method to determine the one that aligns best with the project’s objectives and limitations.
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