5 Construction Myths of Design-build Project Delivery Exposed
Design-build projects is a trend that is exploding in the market.
It’s a great option for an Owner to have the same team design their project, and then build it. It’s an all-in-one shop. Over 70% of projects are using the design-build model vs the design-bid-build.
One of the benefits of having the contractor involved early on is the accuracy of the construction takeoffs. Pricing for projects is determined early, and allows the owner and architect to make decisions based on pricing.
A big reason for the shift in the market is because of the more personalized feel of the project. Using the traditional design-bid-build method, the contractors comes in at the end of the design and submit a lump-sum price. The contractor is going to want to go as cheap as possible to make a profit.
The design-build method keeps cost estimates and pricing within a budget, and both parties are involved in the selection. This leads to a more streamlined approach.
So, we are here to investigate these issues regarding design-and-build projects. We will also have an insight into construction sales and negotiations to debug the most common myths regarding these projects.
Now let’s check out some of the most common mythsregarding design-and-building projects and see for ourselves whether they’re legit or not.
Myth #1 – The owner loses all control on a design-build project
Owners are put in the driver’s seat in a design-build project. With one organizing the entire project, there are certain levels of accountability that are maintained. For example, in the traditional design method, once the drawings are created, any mistakes or conflicts in the drawings drawn by the architect will result in additional costs to the Owner. The contractor will say “the drawings have an error, and now here is the cost to fix it”. In a design-build arrangement, that liability falls on the company because they are in charge of managing the design portion.
Secondly, when the design-build firm sets a budget, they will be contractually required to maintain that budget throughout. In these contracts, they typically include a GMP or Guaranteed Maximum Price. This makes the contractor have “skin in the game”.
Myth #2 – Design-and-Build uses a single method
The delivery system must be predetermined among the owner and contractor.
A few of the notable delivery systems are integrated project delivery, engineer led delivery system, design-and-build and maintain, OEM design and maintain, etc.
Thus, we can see that there are many delivery systems and an owner can choose any according to their convenience. The contractual obligation needs to spell the type of delivery system agreed upon by the two parties. As we can see, there are multiple methods of the delivery system.
In design-build, the most popular, and in our opinion, best delivery method is the integrated project delivery. This is where the entire team is involved in the entire progress of the project. This leads to a better products because building systems are designed together, therefore will work together much better. This also allows for cost-effective input from the specialists.
Myth #3 – It will cost more because the competition is limited
Most design-build contracts will establish 3 budgets during the life of the project. These are the Schematic Budget, Design Development Budget, and the Final Construction Estimate.
This holds the design-build firm accountable each step of the way. If a project is budgeted at $500,000 in the schematic phase, this holds the contractor accountable so the price is maintained or even reduced when they get to the Design Development phase. The contractor can’t come up with a price of $700,000 when the final drawings come out for construction. That’s why there is an established GMP from the onset of the project.
Myth #4 – Design-and-build is good for speed, bad for quality
Design-build projects are not necessarily better for speed or for quality. It’s just the method that combines the design discipline with the construction portion. One benefit having the design team be the builder is that construction can start for portions of the project while other parts are still being designed.
One word of caution with moving forward before having a final design is that it raised the possibilities of additional costs coming into play for unforeseen circumstances. I’m a fan of figuring out the entire design, specifications, and engineering of projects before commencing with construction. In terms of the quality, the main motivator of quality in our experience is the payment schedules you use.
When contractors get paid up front, or too much money up front, they rush through the project because they already have their client’s payment. This isn’t always they case, but it’s human nature. There is no longer a risk. Our suggestion is to always make payments based on schedule of values that allows you to hold a retainage. Retainage is typically 10% and the Owner can hold this amount until the end of the project when the Owner is satisfied. In the event that a contractor performs bad quality work, you can use that retainage to hire someone else to fix or finish the job. Therefore, design-build doesn’t sacrifice speed or quality.
Myth #5 – All decisions are locked in at the very beginning
There is a process called “fast-track” in which the design team can design certain parts of the projects to start construction and design the rest while the construction commences. This is a great way to accelerate a schedule. Decisions aren’t locked in.
We do not recommend rushing the design as it could cost more in “fixing” rushed design conflicts, but parts of the project can change throughout. One of the benefits of a good construction contract is it allows for change orders. If an Owner decides on a different tile, the contractor can add or deduct costs.
Conclusion
Design-build projects are gaining significant amount of traction in the real estate and construction industries because of many of it’s benefits. This type of building method gives you ability to build quickly, efficiently, and within budget.
Having one company manage the entire operation has it’s benefits. These myths have all effectively been busted.
