Also called “hard bid”, this is the oldest contract approach in the book and, therefore, comes with some old school opportunities and pitfalls. In this method, the owner hires an architect who prepares the plans and specifications without contractor input. The project is bid competitively among several general contractors, exactly as designed, and a contract is awarded to the lowest bidder. If there are errors or omissions, they end up added cost to the overall project. If the project is over budget, the entire process is repeated with a reduced scope, but with no guarantee that the rebid will be in budget. While simple to administer, lump-sum general contracting ensures neither lowest price nor best value. This is often chosen with the owner has a strong architectural relationship and doesn’t have a preferred contractor.
Utilizing the team approach, construction management introduces a construction professional—the construction manager (CM)—who is engaged early in the project to represent the best interests of the owner throughout the building process. The CM operates as an extension of the owner’s staff and works alongside the design and other consultants to ensure the developing plans are reviewed for cost, content and constructability.
The CM writes the work scopes and leads the bidding process with trade partners. During construction, the owner holds all trade contracts while the CM manages the work of the trade contractors and monitors their performance for quality, cost, and schedule.
Because construction management is a service rather than a product, a public entity can choose a construction manager on the basis of qualifications and reputation rather than price alone; and because all trade contractors bid directly to and contract directly with the owner, construction management is in full compliance with public bidding laws. This is a good approach if the client wants integrated advice from design and construction experts.
If you are a public sector client, you can pursue a CMAR approach, which enables you to gain the benefits of a trusted construction advisor (as noted in the CMA section) that also holds the resulting trade partner contracts directly. In the private sector, this would be achieved via a preconstruction consulting agreement pared with a Guaranteed Maximum Price (GMP) contract. This approach is a fantastic way to manage the overall project risk with professional advice at every step of the way, leading into a contract management approach that passes the overall cost and schedule risk to your construction partner.
Fundamentally, in design build, one firm assumes responsibility to the owner for both design and construction of the project. Through the initial agreement, the firm resumes responsibility for feasibility, initial cost and design through Design Documents before ultimately guaranteeing cost, schedule and completing the relative design and construction through the second agreement. Incorporating the two functions into one contract produces efficiencies which tends to reduce costs, shorten schedules, and improve overall project value. And with only one contract, the owner has a single source of responsibility. Design build is the “one-stop-shop” of the project delivery methods. This is a great fit for owners that have a strong relationship or value alignment with a developer/ builder or contractor.
The Integrated Project Delivery (IPD) method strives to create a truly collaborative team consisting of, at minimum, the designer, general contractor, and project owner under a single contract. The work is shared to plan, build, and maintain a project to meet its objectives. The team must work together to design to target cost and deliver the project at or under target cost. Thus, IPD is a shared risk approach to project delivery.
The cost of work is not guaranteed via an IPD contract either. There isn’t cost escalation protection in a traditional sense, except that everyone’s fees are at risk and the additional funding comes from a shared pool called an incentive compensation layer (ICL) if the entire group doesn’t agree to increase the target cost to accommodate the increased expense. But, the team is producing their work relative to a target cost that’s set as a group and the shared risk incentivizes team members to not just hit the target but exceed it to unlock additional profit potential.
There are a lot of terms associated with IPD and the model is based on LEAN and pull planning methods. We utilize LEAN practices on all of our projects, and we work with architects to design to target cost regardless of the delivery format. Thus, elements of this delivery format are useful for consideration within other contract types too.
IPD is a fascinating model that drives exceptional value IF the teams at the table are engaged, experts in their field and truly collaborative. It’s easy to talk about this process but finding good collaborators can be the hardest part.