Construction Project Delivery Methods

Question 2

List two (2) common types of construction project delivery methodologies and list three (3) risks
and opportunities for each.

Response:

Design-Bid-Build (DBB)
This project delivery method is the “traditional” means of delivering a construction project, and creates a clear separation between
the design and construction process.

Typically the only criteria for selection of a contractor in design-bid-build (DBB) projects is the lowest construction price. To begin
the DBB process, an architect or engineer (A/E) is hired by an owner to create design documents (drawings and technical
specifications) for a project. In addition, the A/E will usually develop a project cost estimate and schedule. Once the design
documents are completed, a Request for Bids (sometimes called a Request for Proposal) is created a released to contractors.
Contractors will then evaluate the project documents and provide a price for the work. The A/E is responsible for answering bidder
questions and for assisting the owner in evaluating the received bids. Once a bid is selected, the owner establishes a contract with
the chosen contractor and work begins on the project.

Having been the traditional means of delivering projects, the DBB method is typically the most familiar to those in the industry. It
also has, in theory, the ability to deliver a low-cost project. However, since this method isolates the contractor from the design
process, there is a high potential for project cost increases due to conflicts between the design documents and the constructability
of the project in the field. Also, selecting a low bidder can result in a decrease in the quality of the finished product, as the
contractor must often determine ways of achieving a profit on the job, working under a budget that was the lowest of all
contractors submitting pricing.

In general, the DBB process is best used on projects that are simple, that are not under a tight time crunch and that have a limited
budget.

Characteristics
 Two contracts (Architect & Contractor)
 Best understood
 Linear sequence of work (longest delivery)
Primary Reason opportunities/ to Choose:
Retain control of design
Procurement laws are well defined
 Low first cost (Bidding)
Disadvantages /Risk
 Final cost changes: Owner responsible
 Most litigious
 Contractor has no input to project

Design-Build (DB)
In a design-build project, the owner hires a company or team under one contract to deliver the construction project from start to
finish. Since the team is responsible for both the design and the construction components, pricing changes are kept to a minimum,
and are usually isolated only to those instances where unknown conditions or owner requests necessitate cost increases. If DB
entities are comprised of more than one company, it is important for the owner to identify the working relationship between the
members of a potentially selected team in order to minimize conflicts further down the road.

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The DB method provides the ability to deliver a project on a tight schedule, as projects can be split up and delivered in a package
approach, where individual components are designed and built as needed to achieve the final completion date. Generally the owner
can establish a firm maximum price of the project early on, and has a significant amount of cost control.

Design build is typically used for construction projects where the owner has clearly established the requirements prior to design. It
can also be an appropriate method when schedule is a concern, as it removes the components of the schedule that would typically
be consumed by the bidding and procurement process.

Characteristics
Single point of contact/responsibility
Often is the fastest delivery
Most cost effective
Need a well defined scope
Need for timely decisions
Must effectively administer design-build process
Benefits to the Owner
 Owner retains control of design
 Construction input occurs during the design process
 Overlaps & gaps in scope are identified during pre-construction
 Cost benefit of procuring the construction directly from the trades
 There are no mark-ups on subcontracts or on changes
 Improved schedule due to early resolution of design and construction
issues
 Packaging of work can allow for construction to start early
 Tighter control to adhere scope budget
 CM as Owner’s representative manages the construction in the
Owner’s best interest
Disadvantages
 Owner responsible for changes, overlaps and gaps in scope
 Exposure to CM’s lack of proper oversight
 Subcontractors may be brought into project late in the process
 Need up-front program & performance criteria
 Owner needs to manage decisions on quality
 Owner is pushed for early decisions

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Construction Manager at Risk (CM@Risk)
CMAR stands for Construction Manager at Risk, and is a relatively new type of project delivery
method. In a CMAR project, the owner selects a “Construction Manager” (CM) who is responsible for
building the project. The selection of the CM is made using criteria in addition to the construction
cost, such as quality, proven track record, detailed project approach and ability to meet the schedule
of the project. In this delivery method the design work and construction work are contracted
separately.

The selected CM becomes a project team member early on in the project process and, working
directly with the owner and the A/E, provides input as the project moves through design into
construction. The CM provides input on items such as project budget, construction cost estimating
and the overall schedule as well as providing review of design drawings to identify constructability
issues and potential cost savings. Typically the pricing of the construction is begun early in the
design process, and is refined as the design progresses with a final guaranteed maximum price
(GMP) provided to the owner prior to beginning of construction. The GMP is typically comprised of a
cost-plus-fixed-fee structure, where the actual project costs for labor and materials are passed
through to the owner, and the CM charges a fixed fee on top of that amount. Though owners
typically work with trusted contractors in this type of delivery method, it can be difficult to determine
if the established maximum price is reasonable for the type of project constructed.

The CMAR process is most successful in projects that have a large undefined scope and are under
pressure to finish in a limited time. This process may also be applicable to some projects that
involve complex integration between disciplines or multiple phases of construction, where the
oversight and coordination delivered by a construction manager is extremely beneficial.

Characteristics

 Two contracts (Architect & Contractor)

 CM is selected on qualifications and fees
 Some construction risks are transferred to GC
 Similar to CM Multi-Prime for selection and management of the work
 Open book on costs (subcontractor and supplier payments) and procurement process
 Flexibility to price the project  Subcontracts are re-assigned to the CM
 Bonding can be for the entire scope of the work (GC and subcontractors)
 Risks can push the CM not to act as the agent of the Owner
Primary reason to choose

 Retain control of design

 Contractor involved early
 Flexibility to price the project
Disadvantages

 Owner responsible for changes

 Owner’s qualification-based selection of CM
 Architect may not take input from CM during design

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 Public-Private-Partnership (3P)
The public-private-partnership (also known as P3 or PPP) delivery model is commonly used outside of the United States and is
slowly making inroads into limited areas of domestic US public projects. In the design and construction industry, the P3 model
involves a contract established between a government entity and a private corporation to fund, construct/renovate, and usually
operate and maintain, public infrastructure. In return, the private entity will receive income that is generated from the project (for a
pre-determined time period) in order to pay back, and eventually profit from, the investment. For example, a private corporation
may agree to fund the construction of a light rail system within a city under an agreement that the corporation will receive a specific
percentage of the revenue that is generated from the ridership fees.

Some of the benefits of P3 are:

 Taxpayers are relieved of some or all of the burden related to project funding
 Private entities are typically seen to provide greater expertise and efficiency in construction and operation than the public sector
(as there is profit motivation)
 The public entity can still provide regulation over the operation of the infrastructure to help maintain proper operation
Utilization of a P3 model brings with it the understanding that a certain amount of risk must be taken on by the public entity. The
profit motivations that drive private corporations to be efficient can also create shortcuts in operation and maintenance that lead to
problems down the road. Public entities need to balance budgetary issues with the amount of control that they are willing to hand
over to private entities. In addition, at some point the public entity will need to take over operation of the infrastructure when the
contract has ended, or will need to solicit bidders for another contracted period of operation.

Integrated Project Delivery

Integrated project delivery (IPD) is relatively new delivery method, having made significant inroads into the construction industry
only in the last decade. In this delivery method the owner selects an A/E and CM prior to the kickoff of project design. A joint
contract is signed between the three entities after goals and objectives are established collaboratively. This delivery method
incorporates early participation from the contractor, which can lead to a streamlined design that is directed specifically towards a
project objectives. Similar to the CMAR process, the owner must remain highly involved in the project as a crucial member of the
project team. Integrated project delivery provides opportunities for minimizing project costs and increasing efficiency through
cooperation of the team members.

It is important to note that the owner, A/E, and CM are legally bound into a single entity so risk that is normally assigned to one
party is now spread to all parties, which is uncomfortable for many owners. However, the increased collaboration among the parties
is thought to reduce the overall risk.

IPD is best suited for projects in the private sector that are complex, under a tight schedule or may be largely undefined. Public
entities normally cannot use IPD is a delivery method due to the lack of a bidding component.