So you want to build an addition on your house? How about a store? Maybe an office? And you don’t know where to begin. Hopefully you’ve come to us for advice. So, let’s review some methods about how to get this done. These different methods are known as “project delivery systems”. Each system has strengths, weaknesses and are suited to different:

  • -Project size
  • -Type of project
  • -Legislative and regulatory requirements
  • -Tolerance for risk
  • -Schedule
  • -Location
  • -Local market knowledge
  • -Desired level of involvement
  • -Owner’s resources and capabilities

The most common delivery and sequence to get projects built is to design, bid, build by a General Contractor or Construction Manager. This is well-suited to most  projects. The major issue is that the sequence of designing, then bidding then building has no overlap in schedule and may take slightly longer than some other options.

The primary difference between a General Contractor (GC) or Construction Manager (CM), is that the GC has his own men involved in the project, typically the carpentry trade. The CM generally does not have any men performing actual construction.  CM tend to work better for larger, more complex projects where a higher degree of owner involvement is anticipated.

Design Build has a single source of responsibility where the entity will design and build the project under the same “umbrella”. This method can save some time since you can be building while the final design is simultaneously being worked out . However, the questions usually arise about the lack of objective construction oversight and the potential of “the foxes watching the hen-house”.

The lump sum method of payment usually presents a clearer picture of the final cost and schedule which is comforting to most owners….but….The” lump sum” also may be harbor extra costs as most builders seek to cover unforeseen issues with inflated prices as a form of protection.

The cost plus method is based on the total cost of the labor and materials of the contractors, plus an agreed percentage or flat fee paid to the General Contractor (GC) of Construction Manager (CM). This method does require a high degree of owner monitoring- to review the ledger of accounts on a routine basis but can yield potential savings to the owner. This is also well suited to larger projects or projects with a high degree of trust among parties.

Guaranteed Maximum Price (also known as GMP, Not-To-Exceed Price, NTE, or NTX) contract is a cost-type contract (also known as an open-book contract) where the contractor is compensated for actual costs incurred plus a fixed fee subject to a ceiling price. The contractor is responsible for cost overruns, unless the GMP has been increased via formal change order only as a result of additional scope from the client, not price overruns, errors, or omissions). Savings resulting from cost underruns are returned to the owner or shared between the Owner and Contractor.  This is different from a lump-sum contract where cost savings are typically retained by the contractor and essentially become additional profits.

Stated Price and conditions delivery means that one states the price, scope and conditions of the project, i.e. a 2,500 sf store, $500,000, complete in 4 months,  then sends it out for review and the GC or CM either decline, accept or comeback with another offer.

Let’s talk about which is best for your project! Call right now 914 674 2950…ask for Steve.

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Article by Steven Secon