Project Delivery Methods Part I

What is A Project Delivery Method?

• The owner’s selection of the organizational structure of the project.

• Three popular structures:

1. Traditional (Competitive Bid)2. Design/Build 3. Construction Manager

• Includes the selection of a team to manage project from design through construction

• Also includes selection of contract arrangements• Ie: Lump Sum, Unit Price, Cost Plus A Fee, etc.

Three Most Common DeliveryMethods

• Traditional• Design/Build• Construction Management

Each has its own specific risks, incentives and capabilities.

Owner’s Order of Priorities Will Dictate Best Delivery Method

• Certain contract types will serve specific goals better than others.

• Some typical owner’s goals:• To achieve project completion within time

allowance• To build a high quality project• To finish the project within budget

The Traditional Project Delivery Method

Owner

Architect/Engineer General Contractor

Sub Sub

TWO PRIME CONTRACTS:

Traditional ProjectDelivery• Owner hires a design professional

• Design professional prepares design drawings & specifications.

• When design is complete: • Owner initiates bidding process or,• Negotiates a private contract with prime contractor

• Contractor is responsible for execution of the work

• Owner may hire representative for quality assurance• Owner’s rep is often the design professional at this stage

Advantages of the Traditional Project Delivery Method to The Owner

• Well defined relationships & responsibilities

• Traditionally, MOST risks of construction performance lies primarily on contractor

• Open bidding (IF COMPETITIVE BID) gives owner the lowest price available

• Owner has minimal involvement in construction phase (MAY OR MAY NOT BE ADVANTAGE!)

Disadvantages of the Traditional Project Delivery Method to The Owner

• Design & construction phase are linear (finish to start relationship)

• Design must be complete before bidding begins (lag time)

• Reduced interaction between designer & constructor

• Unforeseen conditions may require costly renegotiation of the contract for changes (CHANGE ORDERS)

Design/Build Method

Owner

Design Consultant(Architect/Engineer)

Design Build Firm

Subcontractors & Suppliers

ADVANTAGES TO THE OWNER

• Less complicated structure for the owner

• One responsible party throughout entire project (single point of contact)

• Design phase & construction phase can run parallel = time savings

• Enhanced communication & constructability

DISADVANTAGES TO THE OWNER

• Early estimates are usually not realistic because:• Design & construction phase overlap• Scope of project may vary as design progresses

• Owner loses the “representative” option in the field….which means…..

• No system of “checks & balances”

Construction Management Approach

Owner

Architect/Engineer

General Contractor

Sub Sub

ConstructionManager

Resident Field Engineer

Advantages of Construction Management Structure to the Owner:

Owner hires CM firm & designer in preconstruction phase:

• Allows input by CM during design phase

• Leads to “value-engineering” & collaboration

• Best product for the $$

• “Team” approach

• Quality assurance is provided by CM firm

• Changes during construction are simpler due to close communication between designer & CM

Implications ofContract Changes

• Construction contracts are entered into before the work is performed.

• The contract is based on an “estimate” and a set of working drawings & specifications.

• Sometimes, conditions change (or are discovered) that require changes to the contract.

Some Examples:

• Scope of the project increases or decreases due to owner’s requirements

• Unforeseen conditions are present that were not known at the time of execution of the contract.

• Omissions in the drawings/specifications that must be accounted for.

The type of contract will dictate the way changes are handled.

• For example:

• Cost Plus Fixed Fee: Changes in cost of project are automatically absorbed.

• Fixed Price Contracts: Contract will require modification to fairly account for price change

Changes are a REALITY!

• Changes cost the project (owner) money, especially on competitively bid jobs

• Contractor will often negotiate inflated prices when changes occur (PROFIT)

• Preparation and a competent design/construction team is paramount!• Constructability reviews, etc.