Advantages and Disadvantages of Construction Delivery Methods
In construction, each project presents unique challenges. Various delivery methods accommodate these challenges to meet the different needs of each owner. Competitive Bid (Design/Bid/Build), Construction Manager at Risk (CMAR), and Design/Build projects have emerged as the most popular and most common delivery methods. Sierra has extensive experience with each of these and first-hand knowledge of the ups and downs of each style. Check out our Projects List to see our past projects.
Delivery Method: Competitive Bid (Design/Bid/Build)
Most owners are familiar with this delivery method where each stage follows the others in a linear progression with no overlap. After securing the services of an architect, who reports directly to the owner, plans and specifications will be drafted, and then contractors will bid for the project. The lowest responsive, responsible bidder is awarded the project, which progresses exactly as designed.
Being a familiar method, Competitive Bid projects are an easier sell, and they’re easier to manage because the scopes and stages are rigidly defined. Because the design team and contractor both report to the owner, the owner has a greater degree of control over the process. As the name suggests, the bidding process typically results in the best price.
While the Competitive Bidding structure elicits low bids, the cost of a design is not determined until the bids are received. This could mean that a redesign is required if the bids exceed the budget, and because time is a financial factor, cost estimates can change during the design process. The fragmented approach can also cause more finger-pointing between parties, since the contractor is not able to give advice during the design, budget, or project planning phases. Finally, the linear schedule makes this the slowest of the three methods.
The competitive bid or Design/Bid/Build delivery method is a good choice for simpler projects that are budget (but not schedule) sensitive and unlikely to change.
Delivery Method: Construction Manager at Risk (CMAR)
The Construction Manager at Risk (CMAR) delivery method allows the owner to select a construction management firm (CM) that will act as a consultant to the owner during the design phase, and then act as the general contractor during the construction phase. In the vast majority of cases, the owner and the CM will agree on a Guaranteed Maximum Price (GMP) for the execution of the project.
Because the construction manager is working “at risk,” usually under guaranteed maximum price, they have incentive to act, not only in the owner’s interest, but also to continually manage the construction costs, since the CM would be liable for any amount in excess of the GMP. Because the CM is managing the entire process, phase overlap is possible, which allows a faster construction schedule. Perhaps the biggest advantage is the ability of this method to handle changes in design or scope.
Since the guaranteed maximum price is settled before design begins, it is difficult for owners to know whether they received the best possible bid; this fact also lowers competition in pricing contractor overhead, fee, and subcontract costs. All this causes CMAR jobs to cost more than completive jobs in most cases.
The Construction Manager at Risk delivery method is best suited for large projects—both new and renovation—that are difficult to define, likely to change in scope, or schedule sensitive. It’s also useful in projects requiring extensive management, whether due to technical complexity, multi-trade coordination, or multiple phases.
Delivery Method: Design/Build
The Design/Build delivery method is one the newest of the group, but it is quickly growing in popularity. In 2010, 40% of non-residential projects used the Design/Build method. For such a project, the owner will engage one entity to act as the architect and contractor, and based on design criteria prepared by the owner, they set a guaranteed maximum price (GMP) early in the project. The Design/Build firm then prepares drawing for owner approval, after which subcontractors are selected and construction begins.
Since the Design/Build firm serves as a kind of “master craftsman” accountable for the entire project, the owner has a single point of contract throughout the work, and design can be tailored to the budget and easily changed if necessary. These projects tend to be significantly faster than Competitive Bid jobs, and slightly faster than Construction Manager at Risk jobs, and they give the owner peace of mind, since the GMP is settled early in the process.
While the single point of contact can be easier, the checks and balances that exist between the architect and contractor are missing, which can create conflict between the owner and Design/Build firm. Like CMAR jobs, it can be difficult to assess whether the best price has been achieved, and since the process is somewhat sophisticated, the owner must have a clear idea of the requirements before firm selection.
The Design/Build delivery method is most useful in time-sensitive projects have either small user groups or a reduced need for user reviews, and they particularly excel in projects with specialized or technically complex scopes.