Comparing The Best Delivery Methods For Contract Bidding
A project delivery method is a comprehensive process involving planning, design, and construction that is required to execute and complete a goal. Each project involves three key stakeholders: an owner, a designer, and a contractor. However, these parties interact differently depending on the delivery method chosen.
Determining the construction delivery method is perhaps the most important decision made by any business owner starting a project. Choosing a method that is best for you must start with a firm understanding of the choices available. Owners need to have a grasp of the impact of each choice, as the delivery method establishes when parties become engaged, the choice of contractual relationships, and the respective influence of each party on the project.
The specific considerations of a project will have the largest impact on the delivery method selected. Some of these considerations include budget, schedule, design process, and risk assessment. Let's take a closer look at the most popular types of project delivery methods, how they compare to each other, and each one's advantages and disadvantages.
The Top Project Delivery Methods For Construction
The most commonly used delivery method, Design-Bid-Build, is what most people think about when they envision the construction process. Though this can be a lengthy process, it allows owners to work with architects and engineers to ensure they get the best price for their product.
As suggested by the name, this delivery method is divided into three linear phases: the design phase, the bidding phase, and the building phase. The first phase begins when the owner selects a designer, architect, or engineer to create plans for the structure. Once the design work is finished and all necessary drawings and specifications are complete, the project is opened for bids.
During the bidding phase, contractors review the plan made by the architect or engineer, ask clarifying questions, and meet with subcontractors to prepare their bids. A bid is a contractor's best price for a project, and they vary much more than you might expect. After bids are submitted, the designer reviews each one and chooses whichever they feel would provide the most benefit to the owner.
Finally, after the selection of the winning bid, this process moves into its build phase. The construction process is overseen by the designer of the project, a feature unique to this method. This method guarantees the owner receives the quality product that was shown to them during the initial phase.
- This method can result in lower costs due to competition in the bidding process
- Separating design and construction teams can reduce conflicts of interest
- It is the most widely used method, so there are many examples to follow and familiarity in the industry
- Having a design phase can require the owner to invest significant cash before knowing the price of the project
- The DBB method can expose the owner to delays and additional construction costs from the contractor, who could not provide feedback during the design process
- The project duration is longer on average under this project delivery method
You may notice that this delivery method shares a similar name with the one above, though with one major difference: it skips the bidding stage. Design-build is a process in which the owner contracts with a single firm for a project's entire design and construction.
In the design-build model, the entire project is handled by either the designer or the contractor, aiming to optimize the efficiency of the process. The party that takes the lead on the project is decided by the owner and is generally dependent on the type of construction involved.
Architects or engineers will normally head up jobs with a high difficulty of design, such as new buildings with intricate architecture. Contractor-led projects, on the other hand, usually don't rely on complexities and involve repeatable work, like infrastructure or road projects.
Aside from skipping over the bidding phase, this delivery process follows a similar path to design-bid-build throughout its two stages. This allows the DB method to get to the project's actual construction relatively quickly and simplifies communication between the owner and those executing the process.
- More efficient and less costly due to improved collaboration between design and build teams
- Simplified communication and financial commitments since only one contract is required
- The owner gives up significant control over design and must place a high level of trust in the contractor
- Possibility of conflicts of interest between the contractor/designer wanting to lower build costs and the owner wanting the highest possible quality product
- Adds liability for general contractors, who could require omissions insurance
- Requires the owner to choose contractors carefully and form a detailed contract with clear performance expectations
Public-Private Partnerships (PPP)
Public-private partnerships, or P3 projects, are the results of a partnership between a public entity and a private entity, just as their name indicates. This delivery method is often used with tasks such as affordable housing and infrastructure. It is also commonly protected by government bonds that guarantee every employee will be paid.
These projects have a unique combination of government funding and private-sector expertise in the industry. This process has reduced payment risks, and its projects benefit the general public, rather than only the companies involved in the construction.
- Bonds decrease payment risks
- Benefits from both government funding and industry expertise
- Priorities of the funding source (the government) can change and delay production
- Bonds can be difficult to manage
Construction Manager at Risk (CMAR)
In this delivery method, a construction manager (CM) acts as the representative for the owner in both the design and build stages. This manager also accepts the risk of meeting the deadline and cost requirements and provides the owner with a guaranteed maximum price (CMP) for the project. If costs are higher than this price, the CM must make up the difference out of his own pocket. Otherwise, if final costs are lower than the GMP, the manager is often rewarded by the owner through a cost-sharing agreement.
When an owner decides on CMAR as their delivery method, they'll bring an initial design to the construction manager, who will consult with designers to make plans for the job. During this phase, the CM will present the guaranteed maximum price, and then the manager will also oversee the project's construction.
This type of delivery method is helpful to owners, as the CM has a personal investment in reducing costs and completing the project on time. As the manager's profit can be heavily reliant on delivering the best product, owners are all but guaranteed a high-quality result within the expected time frame.
- CM helps keep costs under control
- Improves communication by providing a mediator between the owner and designers/contractors
- Shorter than average project delivery timeframe
- Failure on the part of one party (the CM) can sink the entire project
- CM must be actively guiding the project or face cost overruns
- Disagreements with the designer or CM can lead to delays or increased costs
Construction Management Multi-Prime (CMMP)
Following the same three stages of the design-bid-build process, in this method the owner contracts directly with the major parties involved: namely the design and construction teams. In this method, the owner hires specialty contractors for specific elements of the work, rather than hiring a single team and allowing them to oversee the project and bring in their own subcontractors.
This process is ideal for experienced owners who want a higher level of control over the product. This method can also simplify payments to subcontractors, as the owner pays them directly rather than going through an intermediary.
- The owner has more control over the project
- Subcontractors have personal relationships with owners, simplifying payments
- Difficult to manage problems without hiring someone to oversee the project, as the owner generally has other work to do as well
- Owners with less experience may struggle to guide the project
Integrated Project Delivery (IPD)
The newest addition to the selection of delivery methods, in the integrated project delivery method, the risk is shared among all stakeholders. All the team members are selected before design begins and are connected with each other and the owner through a singular contract. This structure allows those working on the project to have input in the entire process, from planning to execution.
This delivery method tends to lead to the most creative approaches to projects as team members are invested in the entire process, not just one stage. IPD can also greatly improve efficiency when combined with other construction methods, shortening project timelines and allowing for much quicker execution than other deliveries on the list.
- Collaboration and creativity improved with parties working on all stages of the project together
- Equal risk-sharing among stakeholders
- Digital tools specifically designed for construction and collaboration can enhance project success
- Requires extensive planning in the design phase
- Does not enlist specialists for each aspect of the project, so may lead to less expertise in some areas
- The newest and least familiar delivery method, and can have higher initial implementation costs
Main Factors to Consider Before Selecting Your Project Delivery Method
The factor with the most influence on the outcome of the project is your budget. Set your budget as soon as possible, and then discuss it with possible team members from the design and construction phases to see if that is a realistic expectation. You should also build in some flexibility for change orders, which are likely to occur during a project and may cost you some extra money.
If you're looking for a project to be delivered quickly, you'll need to be willing to either sacrifice some quality or swallow a higher cost. Budget will be your primary factor affecting the total size and quality of the final product, so it should be the first thing that you consider and plan.
What look are you targeting for your building? Should it prioritize functionality or innovative complexity? These are just two of the many design questions you should ask yourself before entering into the project.
Think about unique features you want to include, landscaping details, and consider the look of the surrounding properties. This way you can give a clear outline of your wishes to the team who designs your building.
If you're hoping for a complex design, choose a delivery method where a designer or design team is hired for the planning stage, as some expert knowledge will be required. If a simpler structure is your preference, consider selecting a process where a general contractor handles the planning stage as well as the execution.
A reasonable construction schedule is vital to performance. Ideally, you'd like your contractors to be working quickly, but not rushing the project and sacrificing quality. Planning for an ambitious schedule can often lead to construction crews working far longer than the expected delivery date and result in unhappy stakeholders. Create a feasible timeline by communicating with potential construction partners, and remember that the faster you want it done, the more it will cost.
Taking too many risks in the project's construction stage can lead to skyrocketing costs or project failure. A key risk concern to plan for is which party will be liable for dangers that occur during construction. To limit your own liability as an owner, you'll want to choose a delivery method like construction manager at risk. This plan places the burden of project risks firmly on a singular party and simplifies the sharing of liability.
Is the owner in charge of the project experienced in any aspects of project delivery? How involved should the owner be in design/construction? If the owner is extremely knowledgeable, a method such as CMMP can allow them to guide the project more carefully and have more influence over the final result. If the owner is less experienced, hiring someone to oversee the design and construction may be best, and a delivery method like CMAR can maximize the effectiveness of the project.
Overall, there are many factors to consider when choosing your construction project delivery method, and a large selection of processes to choose from. Carefully review your goals, budget, timeframe, and experience before making your choice, and don't hesitate to confer with potential partners to discuss whether your ideas are realistic.
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