PPP Notes - Delivery Methods

(These notes are compiled from Spreiregen's ARE Exam Review)

CHAPTER FOURTEEN - DELIVERY METHODS

OWNER REQUIREMENTS

The method of delivering design and construction services is typically based upon an owner's needs and capabilities.  A small organization, a small firm, or an individual that wishes to develop a project would typically require full professional design services from an architect and a traditional design/award/build delivery process.  An owner who desires to participate in the design process would likely select this traditional method, ensuring that the final project meets all of the owner's criteria.  The design/award/build delivery method allows for all design decisions to be made before contracting.

A large organization or firm that wishes to develop a project may have an in-house staff that has capabilities for project programming, design, engineering, facilities management, construction management, or construction.  Such a firm may not require the traditional design/award/build delivery method.  An owner also might have certain time frame and/or cost considerations that would require other types of delivery methods.  An owner who has a commitment to deliver a project for occupancy in a short time frame may not be able to take the amount of time required of the traditional design/award/bid process.  Such firms may require other project delivery methods, which typically consist of either the construction management or design/build methods.

DESIGN/AWARD/BUILD DELIVERY METHOD

The design/award/build delivery method typically begins when an owner hires an architect to develop a project program and its subsequent design and construction documents.  Bidding of the project to several contractors occurs after all construction documents and specifications have been completed.  This allows for the establishment of the lowest reasonable cost for the project.  The owner then awards a single prime construction contract to a general contractor to build the project based upon the completed design documents.  The architect acts as the owner's agent, representing the owner's interest throughout the design and documentation phases.  The architect's services typically include construction administration services.  The architect then acts as an impartial interpreter of the construction documents during construction.

The benefits of the design/award/build delivery process include owner participation in the design of the project and well-established construction costs based upon relatively complete documents.  The architect acts in the owner's best interests during design, and the architect acts as an impartial interpreter of the contract documents during construction.  This process allows for clear separation of design and construction responsibilities, and allows for simplicity in project scheduling since each phase of the design and construction process is separate.  

The design/award/build delivery process however, requires an extended time period for design and documentation before final costs can be determined and construction can begin.  This is a problem if an owner wishes to expedite a project.  Also, pricing and constructibility experience of the contractor who is to build the project is not available during the design and documentation phases of the project.  

CONSTRUCTION MANAGEMENT DELIVERY METHOD

The construction management delivery method allows an owner to address constructibility and cost issues during design.  An owner can also address time issues by utilizing fast-track construction, in which multiple construction contracts are let for different parts of a project as soon as each part of the work is defined enough for a contractor to reasonably commit to a price.  In this delivery method, the owner hires or utilizes his or her own construction manager to work with an architect to facilitate the process of design, bidding, and letting of the construction contracts.  The construction manager can act as either an advisor to the owner, or as a construction contractor.  The construction manager typically has substantial expertise in construction technology, constructibility issues, construction scheduling, and construction costs.

A construction manager who acts an advisor administers the design contracts and works as the owner's representative with the design team.  He or she also manages the various construction contracts, but does not have any financial responsibility for the construction of the project.  A construction manager may, however, handle some of the typical nonconstruction activities at the site, such as arranging temporary site facilities, site and construction testing, engineering, building and site layout, and construction site cleaning.  Some architecture firms offer construction management services, acting in an advisory role to the owner.

A construction manager who acts as a contractor assumes a vendor relationship with the owner.  This person or firm will take on the financial responsibility for the construction of the project, typically utilizing a fixed-price, cost-plus, or guaranteed maximum price cost structure.  The construction manager is brought onto the project before design work is complete so that he or she can help resolve constructibility and cost issues.

A fixed-price structure allows the manager to establish a guaranteed cost of construction, including his or her own services, before the design is fully documented.  The owner is not liable for bid-cost overruns.  However, the owner does not obtain any of the savings that might occur from a positive bid climate.  A cost-plus structure allows the construction manager to charge the owner the actual construction costs of the project plus a negotiated fee that is agreed to before construction begins.  The actual costs are typically determined by the lowest bids received from the manager's subcontractors, plus the cost of any construction work performed by the construction manager's own forces.  The guaranteed maximum price structure is a highest-probable-cost limitation for the construction of the project guaranteed by the construction manager.  This price is established before design documents are completed, and anticipates the full scope of work and detailing needed to complete the project.  Any cost savings from a positive bid climate go to the owner rather than the contractor.  However, the contractor becomes responsible for any bid-costs over the guaranteed maximum price.

The advantage of using the construction management delivery method is the ability of the owner to determine the costs of a project before construction documents are complete.  The ability to let portions of the work for bid before other portions of the design are complete allows for construction work to commence before all other project drawings are completed.  This is a great advantage for an owner who has a short time frame to complete a project due to occupancy requirements or when an owner has to work with high interest rates, which can add substantially to the financing costs of a project.  Another benefit of this method is the ability of the construction manager to resolve technological or constructibility issues before construction begins, which helps reduce costs due to construction change orders.

The construction management delivery method, however, adds a cost for the construction manager that an owner would not have in the more common design/award/build process.  The addition of a construction manager adds complexity to the design and construction team.  This can be a benefit if the relationships are managed effectively, but can become problematic if these relationships are not adequately defined and handled.  The use of the fast-track construction method also adds to the complexity of the project, requiring the management of multiple prime construction contracts.

DESIGN/BUILD DELIVERY METHOD

The design/build delivery method allows an owner to utilize a single entity that is responsible for both the design and construction of a project.  This is the single greatest distinction between this method and both the design/award/build and the construction management methods.  A design/build firm can be a single company that has its own architectural and construction staffs, or a company that has its own construction staff that hires an architect to perform design services.  A development firm can hire an architect for design services and a contractor for construction services.  A design/build firm can also be a joint venture between an architect, construction, and/or a developer.

An owner who wishes to proceed with the design/build process typically issues a request for proposals to selected design/build firms that state the design and performance requirements for the project.  The design/build entities submit proposals to the owner that provide a design for the project and the costs for the design development and construction of the project.  The selected design/build firm then develops the design, provides construction documents, and builds the project based upon the proposal requirements.

An owner who wishes to have more control over the design of the building can have an architect develop the schematic concept for the project.  This can then become part of the request for proposals, which makes the selected design/build firm responsible for the development of the design, the construction documents, and the building of the project.

The advantages to the design/build delivery method include a single source of responsibility for both design and construction of the project, allowing the owner to select from a number of submitted designs.  A reliable cost for the project is determined early in the process, and conflicts between the designers and the builders are minimized.  This process also facilitates fast-track construction, since the portions of the design work that can be built early can be released for construction before the balance of the design and documentation work is complete.  

This delivery method, however, minimizes the ability of the owner to participate in the design of the project.  The design/build firm acts solely as a vendor so that the owner does not have an independent agent working for his or her interests.  This requires the owner to be adept at managing the design/build contract through construction, or to hire an independent firm to act on his or her behalf.  Any design changes would likely require a change order that the owner would have to pay.  Since the submitted designs are likely based upon incomplete drawings, disputes may arise regarding the actual scope of work provided in the proposal.  Also, a selection that is based solely on the lowest bid may have significant quality issues that would be difficult to address.

SUMMARY

Architects need to be well acquainted with different project delivery methods, from the possible liability issues they prevent to the extent to which the process may compromise the execution of the intended product.  Candidates should be familiar with the different methods and their benefits and drawbacks as they apply to different types and sizes of projects.

PPP Notes - Project Delivery Methods

(These are some notes from AHPP, which may help for those taking the PPP exam)

QUICKNOTES – DELIVERY METHODS AND COMPENSATION, Ch. 10

 

PROJECT DELIVERY OPTIONS

 

• Project Delivery Method depends on two considerations:
• What roles will the owner, architect and contractor play during development and construction?
• Which variable factor(s) – cost, schedule, building quality, risk, client capability – are driving the choices?
• Participants
• Results from complex sequence of decisions made by participants.
• Someone must define the key responsibilities and organize work of participants (in addition to managing delivery process).
• Owner relies on architect’s expertise about delivery decisions.

·     The General Contractor and Delivery Methods

o    The roles and responsibilities of the general contractor vary greatly in different delivery methods. 

o    Until late ‘70s, most projects were built under what was then known as a traditional delivery approach.  Now called DESIGN-BID-BUILD, this approach assigned each player a clear and expected role.

§     The owner hired and paid the architect to provide design services.

§     A set of contracts was developed and placed into the construction marketplace for bid

§     General contractors assembled a collection of subtrades and submitted bids for the project.

§     Lowest bidder was awarded the contract.

·     Today’s Design-Bid-Build

o    Evolved into multiple variants with different designer, owner, and contractor roles and responsibilities.

o    As interest rates rose in ‘70s, speedier project schedules required not a single construction sequence but multiple individual packages that were bid as their design was completed.

o    Resulted in asynchronous construction of individual pieces of project.

o    General contractors “became” construction managers attempting to control these complex projects.

o    Liability crisis in ‘80s pushed architects further from job site responsibilities and pressed new risks on contractors, who assumed job site responsibilities.

o    Owners demanded in-depth construction advice during design that architects were unwilling or unable to provide.

o    Large projects (hospitals, airports), which need to operate during construction, require sophisticated management and construction planning beyond the capabilities or interests of architects.

o    Today’s projects are built faster, entail more risk, and involve far more participants than those built twenty years ago.

·     Players in Delivery Process

o    The Owner

§     Initiates a building enterprise and is usually the eventual owner or operator of the finished building. 

§     Can be individual, organization, or other entity.

§     Owner is the entity that holds one or more contracts with the architect and contractor and is responsible for payment.

§     Also responsible for paying for construction of building.

o    The Architect

§     Licensed design professional acting as an agent for the owner by providing architectural expertise. 

§     Designs, documents, administers the contract(s) for the construction of the project.

§     Can be an individual or a firm and can include consultants such as engineers.

§     Generates documents and describe design intent.

o    The Contractor

§     Responsible for the actual construction of a building.

§     Includes a variety of subcontractors, supplier, and fabricators who together execute the design intent of the architect’s documents. 

§     Agrees at a prearranged point in the design process to construct the project for an agreed-upon sum. 

·     Variables

o    Key variables may affect the selection of a delivery approach.

o    Construction Cost

§     Owner’s greatest financial obligation.

§     Central concern of design and construction.

§     Fixed budgets create clear and definite obligations for the architect and contractor.

o    Schedule

§     Schedule/timeframe in which the project must be complete, ready to occupy.

§     When a building program is important to an owner’s mission, meeting a precise schedule may be the most important consideration in determining how a project will be built.

§     Typical of such situations are academic projects, which must be synchronized with an academic calendar.

o    Building Quality

§     The demand for particular standards of performance.

§     Directly related to schedule and construction cost. 

§     The architect typically establishes a clear relationship between a project’s level of quality, budget and program.

§     For a shorter period of time, owners may be willing to accept lower levels of quality / saving construction cost.

o    Risk

§     The most intractable variable in the building process is risk.

§     Each player in the process makes its best effort to reduce or transfer its exposure to liability.

·     For owner: can the project accomplish its goals within the constraints of time and budget?

·     For architect: can the project be accomplished within the standard of care at an acceptable level of quality, the owner’s parameters, and strictures of the fee?

·     For contractor: is it possible to complete the project within the contractually stipulated time frame and/or cost?

o    Client Capabilities

§     Internal capabilities of a client organization can significantly affect the roles of the client, architect and contractor.

·     Methods of Delivery

o    Architect’s role:

§     What are the responsibilities of the architect?

§     How do these apply to successive design phases?

o    Contractor’s role:

§     What entity is responsible for building the project?

§     When in the process is that player selected?

o    Establishment of construction cost:

§     When is the actual cost of construction definitively established contractually (between owner and contractor)?

o    Number and type of design and construction contracts. 

§     How many individual contracts for design and construction are necessary to accomplish the approach?

o    Design-Bid-build

§     The “Traditional” Approach.

§     Linear design sequence that results in a set of construction contract documents against which contractors submit fixed price bids. 

§     The lowest-bidding contractor whose proposal responds to the requirements of the contract is awarded the project.

§     Most projects in the US are constructed under this approach.

§     A variation of this approach is the NEGOTIATED SELECTED TEAM approach, in which the contractor is selected early in the design process and certain of the firm’s contract terms (overhead, profit multipliers) are determined prior to completion of the construction documents.  Subcontractors are then selected and a final contractor team is assembled (once documents are complete).

§     Yet another approach is the COST PLUS FIXED FEE method.  In cost plus, the contractor is selected at the completion of the contract documents, but the scope of construction is unpredictable (due to unknown factors, such as existing conditions).

§     Under cost plus, the contractor is paid actual labor and material costs for construction plus a fee for coordination of trades on the site.

§     Added incentives may be added to the fee if the project finishes early or under the original budget.

o    Construction Management

§     Participation of a contractor who acts in both advisory and technical roles during design and construction.

§     The CM (construction manager) can play one of three roles:

·     CM-advisor: acting only as a constructability and cost management consultant during the design and construction process, but will not build the building.

·     CM-agent: provides early consulting and may act on behalf of the owner in assembling and coordinating the construction trades prior to and during construction.  Provide services for fixed fee and assume no risk for actual construction costs.

·     CM-constructor: Technical and cost advisor role of the contractor during the design phase of a project.  CM-c method typically includes:

o    Establishment of guaranteed maximum price.

o    The GMP acts as a commitment by the CM-c to build the project for a specified price based on early design documents.

·     Typically construction managers are involved in many large building projects.

o    Design-Build

§     Popular when an owner is interested in single-point responsibility for both design and construction. 

§     Approach stems from clients’ growing dissatisfaction with the inherent tensions and conflicts of delivery approaches that place the architect and contractor in adversarial roles.

§     Under design-build, a consolidated entity provides both design and construction services to the owner.

§     A single contract is established between the owner and the architect-contractor or design-build entity. 

§     Contract typically includes fixed price for both design services and construction cost.

§     Design-build requires explicit determination of the roles and responsibilities of the design-build team.

o    Bridged Design-Build

§     Borrows a design approach from architect teams that include both a design architect (who establishes the design concept) and a production architect (who determines technical criteria and generates the construction contract documents).

§     Owner eventually hires two architects.  The first is a design architect for preliminary design and performance specifications.  The second is a design-build team to whom the concept and criteria packages are tendered.

§     The bridge between concept and technical design is the juncture at which design-build teams bid on a project, and a team is selected based on the consolidated costs of technical documents and construction.

§     Design architect remains in an advisory role to the owner. 

§     Detailed technical documents are provided by a technical architect, who is part of the design-build team.

§     This approach takes maximum advantage of the traditional architect-owner relationship with the participation of the design architect and simplifies the contractual responsibilities of the design-build approach.

§     May not be suited to projects that require extensive interaction between the architect and the owner, since a portion of the design team is contractually tied to the contractor.