CE 476

Construction Management
Lectures # 15 and 16

Dr. Abdulrahman K. Yussef

Chairman of the Architectural

Engineering Department
 Today…
4.8 Project Delivery Methods
•Design Bid Build (DBB)
•Design Build (DB)
•Construction Manager Agent (CMA)
•Construction Manager at Risk (CMAR)
Project Delivery Methods

Project Delivery Methods

DBB DB CMAR Job Others

Order
Project Delivery Decisions
• Project Delivery System
• Procurement Methodology
• Contracting Procedure
 Project Delivery System
Two key attributes:
1. The relationships between projects stakeholders
2. Their timing of engagement
Most Widely Used PDS
• Traditional Method (DBB)
• Construction Manager (CM)
– Advisor
– At Risk
• Design-Build (DB)
• Job Order Contracting (JOC)
 Project Delivery Decisions
• Project Delivery System
• Procurement Methodology
• Contracting Procedure
 Procurement Methodology
The process of choosing designers,
constructors and various specialty
consultants including:
• Assessment of technical qualifications
• Assessment of price proposals
• Definition of the “best value”
• Final selection of project participants
Contracting Procedure
The form of agreement in a construction
project including the parties’
• Requirements, obligations & responsibilities
• Allocation of project risk
• Payment procedures
 Popular Types of Contracts
• Lump-Sum
• Cost-Plus
• Unit Price
 Types of Contracts
A. Stipulated Sum Contract (Lump Sum Agreement)
– Separate designer and contractor entities, in general
– Provides owner advance knowledge of construction costs
– Costs can only be changed with owner approval
– Competitive bid process generally used with this contract
Types of Contracts
B. Cost - Plus Fee Agreements
– Separate designer and contractor entities, in general
– Shifts risk from contractor to owner
– Contractor will be reimbursed for actual project cost plus
an additional amount for profit and overhead
– It is essential that the contract clearly define what is
considered reimbursable as a cost and what is included in
overhead and profit
Types of Contracts
C. Unit Price Agreements
– Separate designer and contractor entities, in general
– Often used for public works projects, such as roads, dams, and
utilities
– Material quantities are distributed to potential bidders for purposes
of estimating a unit cost
– Bidders base estimates on listed quantities and bid a unit price for
each item (price per CY, SF, ton...)
 Types of Contracts
Payments are made on the basis of number units actually installed
– This means that neither owner nor contractor will know exact cost
of contract until completion
– This contract type allows the estimator to spend more time
focusing on the most economical approach to the construction
process
Note: The project delivery systems and commercial contract types
can cross match
 PDS Decision
– Method of delivery is usually determined by the complexity of
the project, the owner’s resources, and past experiences.
• corporate policy, value of time, and value of innovation can
also play a role.
– Owner always has the risk in selecting project delivery system
to best achieve the specific project objectives.
Project Delivery Methods

Project Delivery Methods

DBB DB CM Job Others

Order
Part 1: Design Bid Build
Design Bid Build (DBB)
Design Bid Build (DBB)
Why change from DBB?
•Industry problems and inefficiencies
•Lack of constructability input in design phase
•Does not allow for “fast tracking”
•Over-the-wall sequential processes
•Segregated industry (behavior)
•Predominant risk of contractors is labor!
•GC sees opportunity to offer services to the client, without the risk of
labor…
•Acts like A/E (professional service)
Part 2: Design-Build
Major reason for DB:
Inefficiencies and claims in segregated
processes can create adversarial
relationships at times.
Survey asked owners to rank these items…
• Constructability/Innovation
• Reduce Claims
• Establish Cost
• Large Project Size/Complexity
• Reduce Cost
• Shorten Duration
• Establish Schedule
DB seeks the benefits of schedule
reduction (+ cost, innovation,
claims).
 Design-Build
“Design-Build” is a project delivery method in which:
•There is a single contract for design services and construction services.
•Design and construction of the project may be sequential or concurrent.
•Sometimes finance services, maintenance services, operations services,
preconstruction services and other related services may be included.
•The DB team is typically responsible for the design and construction
services, as well as management of these services, management of the
bid process & trade subcontracts. Open book GMP or fixed price are
typically used.
 Design-Build Defined
Alternative delivery method
• Project based on definitive Performance Criteria
• Recognizes design-build entity as “Professional”
• Award based on Best-Value basis
• Applies “Singular Responsibility” principle to design-build entity
 The Design Build Entity
Designer and contractor can originally be separate entities or be part of
the same organization. There are several types of DB teams:
1. Integrated Design-Build firm, with in-house architecture, engineering, and
construction services (e.g. Haskell)
2. Contractor-led team with A/E as consultant! The norm because of
“deeper pockets”:
GC typically have more net worth / financial capabilities
3. A/E-led team with contractor as consultant (rarely)
4. Joint venture
Design-Build
Regardless of structure, a single contract
is executed for both design and
construction.
Design-Build
Characteristics
– 2 Continuous Phases (design and build)
– 2 Primary Players (Owner and DB)
– 1 Contract (Owner-DB)
Selection Process
– DB: Qualifications Based/Low Bid/Best Value
 Basic Difference
-Contract Language-
Design Bid Build
• The owner warrants to the contractor that the drawings and
specifications are complete and free from errors.
Design Build
• The design-builder warrants to the owner that it will produce
documents that are complete and free from errors.
 Basic Difference
-Approach-
Design Bid Build
• Any problem with design = $ Profit
• Make the problem bigger = $$ More profit
Design Build
• Any problem with design = $ Lost profit
• Quick resolution = Fewer $ lost
Why Design Build?
• Time savings
• Cost savings / value enhancement
• Innovation
• Claims
• Single responsibility
Reasons for increased popularity within construction industry
• Owners are asking for it
• Information technology
 Design-Build Project Candidates
The primary questions to ask are:
• Can significant time savings be realized through concurrent
activities?!
• Will higher quality products be realized from designs tailored
to contractor capability?!
• Do staff resource constraints impact project schedule?!
• Will there be less impact on the public with the use of
expedited construction processes?
Not A Design-Build Candidate
• Final Design Must be Completed Before
– Accurate Estimate of Costs
– Approval to Proceed
• Owner Wants “Heavy” Input to Design
• Project too Small to Attract Competent Contractors
 Design-Build Advantages
Additional Advantages
– Less claims
• Design-Build process averages 35% less than all processes average
• Design-Build process averages less than half of the claims that Design-Bid-Build
process averages
– Single source responsibility
• Blended incentives
• Designer-constructor focused on the same goals
• Owner doesn’t have problems associated with coordinating two separate contracts
– Improved risk management - risk assigned to party best able to manage that risk
Design-Build Disadvantages
•Complexity of the process
•Unfamiliarity with the process
•Difficulty in writing good performance based
specifications
Design-Build Disadvantages
Owner
– Fewer checks and balances
– Reduced owner involvement
– Difficulty of selection
– Difficulty of defining scope
Design-Builder
– Large staff
– Additional Risk
Part 3: Construction Management Agent
 Construction Management Agent
•In construction-management (CM) type delivery system, one
firm is retained to coordinate all activities from concept design
through acceptance of the facility.
•The firm represents the owner in all construction management
activities.
•In this type of contract, construction management is defined as
that group of management activities related to a construction
program, carried out during the predesign, design, and
construction phases, which contributes to the control of time
and cost in the construction of a new facility.
 Construction Management Agent
•This firm has the function of a traffic cop or enforcer,
controlling the flows of information among all parties active
on the project.
•The CM firm establishes the procedures for award of all
contracts to architect/engineers, principal vendors, and the
so-called trade or specialty contractors.
•Once contractual relationships are established, the CM
firm controls not only the prime or major contractor but all
subcontractors as well as major vendors and off-site
fabricators.
Construction Management
 Construction Management Agent
• Design and Construction phases can overlap: Fast Track
• CM provides advice and early input from a constructability perspective:
– Cost estimates
– Means & methods
– Knowledge of labor market
– Bid packages
– Risk management
– Value engineering studies
– Design and construction integration ideas
– Managing change orders
– Managing shop drawing
– Etc.
 Construction Management Agent
• Design Phase
– Owner, designer, engineers, and CM form a team to develop design
– CM evaluates design’s cost and time implications
– This allows designer to maintain owner’s goals within budget, sometimes leads to major design
changes which could not be made later
• Construction Phase
– Project is being designed, bid, and built in stages
– Excavation, foundations, structure can be bid and started before design work is finished
– Mechanical and electrical are bid and built while finishing and partition work are still being
designed
 Construction Management Agent
“Fast Track” Construction possible!
– Stages of design and construction are overlapped
– Time from conception to occupancy is reduced
– A construction manager is used to coordinate between all parties
• A “pure” construction manager will not guarantee a budget or schedule nor will
they perform any work on site (CM for fee)
• A CMAR (sometimes general contractor acting as a construction manager) will
guarantee both and can also perform work that is critical to control cost and
schedule (CM at risk)
Construction Manager Agent
Characteristics
– 3 Linear Phases (design-bid-build)
– 3 or 4 Primary Players (Owner, CM, A/E, possible GC)
– 2 or 3 Contracts (Owner-CM, Owner-A/E, & possible Owner-GC in some instances)
Selection Process
– CM - Qualifications Based
– A/E - Qualifications Based
– GC - Lowest responsible bid
 Construction Manager Agent
Advantages
Owner
– Increased representation
– Independent evaluation
– Increased constructability
– Increased value engineering
– Enhanced phased construction
 Construction Manager Agent
Disadvantages
Owner
– CM assumes no risk/Owner holds contracts
– CM does not guarantee cost
– CM licensing relatively recent and not yet mainstream
– Higher owner involvement (if phased)
The key issue is that CM assumes no risk.
How would you address this?
Part 4: Construction Management at Risk
 Construction Manager at Risk
•In the CM at-risk contract, the CM firm assumes the
same risk that a construction contractor in the DBB
format would assume for the successful completion of
the project.
•In this situation, the CM-at risk signs all contracts related
to the construction phase of the work.
•The design and other preconstruction contracts and
responsibilities are signed by or remain with the owner.
 Construction Manager at Risk
•Prior to the commencement of construction, the CM at-
risk provides services similar to those provided by an
agency construction manager.
•The CM at-risk contract is similar to the DBB format in
that design and construction are separate contracts.
•It differs from the DBB format, however, in that the
selection criteria are based on issues other than lowest
total construction cost.
 Construction Manager at Risk
Construction Manager at Risk is a project delivery method in which:
• A separate contract for design services and another for construction
services.
• The contract for construction services may be entered into at the same time
as the contract for design services or at a later time.
• Design and construction of the project may be sequential or concurrent.
• Many times finance services, maintenance services, operations services,
preconstruction services and other related services may be included.
 Construction Manager at Risk
Definition:
• Construction Manager at Risk is a delivery method wherein the CMAR firm
participates in the design phase by evaluating costs, schedule, implications
of alternative designs and systems and materials during and after design.
• Besides value engineering the CMAR firm also provides constructability
reviews and continuously refines the project’s estimated cost and schedule in
preparation for the GMP.
• During construction the CM assumes the risk for price (the GMP) and
schedule.
 Construction Manager at Risk
Architect/Engineer
• Design services with active CMAR participation.
• Some construction administration.
Construction Manager at Risk
• Preconstruction services & construction services.
• Management of subcontractor selection.
• “Open book” philosophy possible.
 Construction Manager at Risk
Preconstruction Services – During Design
– Team building and partnering
– Management plan
– Value analysis
– Constructability reviews
– Cost model — budget
– Estimating/price guarantees
– Long Lead Items
– Bid package strategy – subcontracting and vendor strategy are important!
 Establishing the GMP
What is a GMP?
• A Guaranteed Maximum Price (GMP) is the amount that
the CMR guarantees (the sum of the cost of the work and
the CMAR’s fee) they will not exceed.
• This maximum is subject to additions and deductions, due
to changes in the scope of work. All costs which exceed the
GMP and are not approved by change order are paid by
the CMAR.
CMAR Reducing the Risks
•Reduced risk of schedule overruns
•Reduced design errors & omissions
•Reduced RFI’s
•Reduced material impacts
•Reduced change orders
•Reduced cost overruns
•Reduced warranty problems
•Reduced claims & litigation
•Reduced frustrations of adversarial relationships
Comparing Project Delivery Methods
HW 4
4.2
4.6
4.15
4.16