A Guide to Common Construction Project Delivery Methods
Dec 06, 2021
Different construction projects prioritize certain elements over others like collaboration, risk, reward, and quality of the final product. In a perfect world, every construction project would have high collaboration, low risk, high reward, and high quality. Construction teams must inevitably make compromises, however, in order to finish the project on time and on budget. To accommodate multiple kinds of construction projects, there are a number of project delivery methods.
What is a project delivery method?
A project delivery method dictates how construction projects are organized from start to finish. It establishes how the project’s budget and schedule are determined, how the relationships and contracts between parties are structured, and how information is communicated throughout construction. Project delivery methods are like recipes: the steps and requirements differ, but they all create a meal.
Common project delivery methods
There are many kinds of project delivery methods, each with its own structure and process. Here are four common project delivery methods, including the advantages and disadvantages of each.
The design-bid-build project delivery method is a multitiered approach to a construction project. First, a project owner hires a design team to prepare programming, design, and draft the contract. Once the design phase is complete, general contractors bid on the job based on labor and construction costs, (which theoretically lowers construction costs due to the forces of market competition). While the owner has a contractual relationship with both the consultant and the contractor, they are not contractually bound to each other. Their obligations are separate, so they have separate contracts. Typically in design-bid-build projects, the owner and the general contractor sign a lump sum contract, meaning the project’s scope and costs are set in advance and they agree on a single fixed fee.
The owner overseeing the project—be it a hotel, school, or something else—has a set budget and the responsibility of ensuring goals are met on budget.
Advantages of design-bid-build
- Clear costs. With a lump-sum contract, both the owner and the contractor agree on the overall scope and budget before construction begins. As long as nothing impacts the overall cost, all parties can depend on the fact that the prices set out in their contracts will not change.
- Simplified process. Each stage of the process is set, so one stage must end before the next one begins. Roles are clear in a design-bid-build project, making it easy to keep tabs on individual responsibilities.
Disadvantages of design-bid-build
- Upfront charges. With the design-bid-build method, clients pay for design upfront before they know construction costs.
- Potential timeline delays. No stage can move forward until the previous stage is completed, which means that if there’s a delay, the whole project timeline will be set back.
- Limited collaboration. The builder has no input in the design stage and typically must stick to the original plan or negotiate any design changes—which could impact price.
With the design-build project delivery method, an owner hires one company to oversee both the design process and the construction. This is also known as a single-source project. Design-build is frequently used for residential and large-scale commercial projects like hospitals, office buildings, and large infrastructure.
With design-build, all parties report to the design-build firm, allowing the owner to avoid having to manage multiple contractors, which may reduce certain risks. The design-builder is responsible for doing their work on time and on budget.
Advantages of design-build
- Speeds delivery systems. The collaborative aspect of the project can appeal to clients who may not want to participate in two separate bid stages for design and building.
- Boosts profits. Budgets and project goals are aligned across different phases of the project since everyone is working together to get the job done. This keeps projects on budget, increasing the potential for bigger returns.
Disadvantages of design-build
- Shifts risk to design-build team. Any errors in the design or construction process are resolved by the design-build team, not the owner, leaving the design-build firm on the hook for any delays or miscalculations.
- Shifts financial liability to the design-build team. When the owner and the design-build firm sign their contract, the firm agrees to absorb any budget overages.
With the Construction Management-At-Risk (CMAR) project delivery method, the project owner hires a construction manager early on, typically in the design phase, to serve as a representative and consultant. The CM also manages the project, ensuring it stays on budget and on schedule.
A CMAR contract establishes a Guaranteed Maximum Price (GMP), or price limit, for the project. Per the contract, the CM must adhere to the GMP and is financially liable (at risk) if the project goes over.
Advantages of CMAR
- Owners aren’t liable for increased budget costs. CMAR is a collaborative, cost-efficient method, especially when a CM provides value engineering.
- Saves time. Given the CM’s direct involvement, there’s less risk of the project going over budget, especially since they’re personally liable.
- Reduces mistakes. With the CM contributing to the design phase, they’re well versed in the project’s specifications so there’s less room for error.
Disadvantages of CMAR
- More expensive. CMAR tends to cost owners more than traditional project delivery methods, as CM fees run higher due to their increased liability and heavy involvement.
- Hinges on the CM’s performance. As a key player, a CM can directly affect the budget, schedule, and project outcome. This is why the owner needs a trustworthy CM with a successful track record on similar projects.
Integrated project delivery (IPD) organizes construction projects so all responsible parties, from the design team to the general contractors, are involved in every phase of construction. It establishes multi-party agreements and puts all teams on one contract. Team members agree to delivery terms, and everyone shares the same level of risk, reward, and responsibility.
The owner hires the entire team, who signs the contract, then the design phase begins. When the group approves the design, the project moves into the construction phase.
Advantages of IPD
- Promotes communication. An IPD construction project promotes communication and frequent check-ins, since all stakeholders must be aligned on each phase of the project.
- Incentivizes quality. Shared accountability incentivizes team members to perform at their best, elevating the quality of the project.
- Boosts productivity. With every team involved in each phase, IDP cuts waiting time between phases. The general contractor can order materials and equipment because they took part in the design phase of the project and know what’s needed.
Disadvantages of IPD
- Individual performance affects the whole project. One person’s poor performance can jeopardize the whole timeline—and others’ success.
- Slows things down. IDP contracts typically require group consensus on certain decisions, which can slow down the process.
- Raises project costs. Since all parties are contractually bound, one team’s delay can have ripple effects across the project. This increase in liability means owners often pay their teams more than they would normally.
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