Design-Build vs. Design-Bid-Build: What’s The Difference?
Nov 24, 2021
There are two traditional project delivery methods for construction projects: design-build and design-bid-build. While they both sound similar, each delivery method has its own process, schedule, and contractual framework.
In this article
What is design-build?
Under a design-build contract, the owner hires one company to oversee the design and construction of the new property, also known as a single-entity construction project. Design-build is frequently used for residential and large-scale commercial projects like hospitals, office buildings, and large infrastructure.
On design-build projects, all parties report to the design-build team, whether they are employed by the company or contractors. This keeps the owner from having to oversee multiple contractors throughout the process; the design-builder is solely responsible for getting the work done on time and on budget.
Advantages and disadvantages of design-build
There are several advantages to the design-build method.
- Faster delivery systems. The collaborative aspect appeals to clients who may not want to participate in two separate bid stages for design and construction.
- Potential for larger profit margins. Budgets and project goals are aligned across the project since everyone works together to get it across the finish line. This helps keep projects on or under budget and increases the potential for higher profits.
The primary drawback of design-build really applies to the firm.
- Risk shifts to the design-build team. Any errors made during the design or construction process are resolved by the design-build team, not the owner. This puts them on the hook for any delays or miscalculations.
- A guaranteed maximum price. The design-build firm absorbs budget overages, not the client.
What is design-bid-build?
The design-bid-build project delivery method is a more multitiered approach than design-build. First, a design team works with the project owner to prepare the programming, design the project, and draft the contract. Once the design phase is complete, general contractors bid on the job based on labor and construction costs, which opens the project to the bidding process (and theoretically lowers construction costs due to competition).
There are three parties in a design-bid-build project: the owner, the consultant, and the contractor or builder. The owner overseeing the project—be it a hotel, school, or something else—has a set budget and the responsibility to ensure goals are met without overspending.
The owner has a direct contract with the consultant, who is usually an architect or engineer. This person serves as the owner’s representative throughout the construction project, although they have no contract with the builder. Instead, they create a separate contract between the owner and builder, which could either be a construction manager or a general contractor. All three parties must work together for the project to succeed, particularly in terms of quality assurance and payment applications.
Advantages and disadvantages of design bid build
The design-bid-build process has several upsides:
- Fixed costs. The project is under a lump-sum contract, meaning the scope and cost of the project are set in advance. As long as there are no unforeseen conditions or changes (such as changes to the design) that impact the overall cost, all parties can depend on the prices set out in their contracts.
- Simplified process. Each stage of the process is set and one stage cannot begin before the previous stage ends. The roles are clear in a design-bid-build project, making it easy to track each party’s responsibilities.
The design-bid-build process does present some challenges for collaboration and delivering great results:
- Upfront costs. In the design-bid-build method, clients pay for the design phase upfront before they know the construction cost.
- Timeline delays. No stage can move forward until the previous stage is complete. If one aspect causes a delay, the project’s timeline is set back.
- Potential for cost overages. The builder is contractually responsible for completing the project on time and on budget. That means the builder is responsible for any overages, except those caused by changes to the building’s design.
- Minimal collaboration. The builder has no input in the design stage and typically has to stick to the original plan or negotiate any changes to the design—which could impact the price.
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