What You Don't Know Will Hurt You and Your Business
It’s not unusual to find company owners who have placed their renovation and new building projects on the back burner due to the slow and unstable economy. But if you’re one of the ones that can’t wait any longer, then it’s time to review the best strategy for moving forward with the construction project.
Knowing and understanding the types of construction contracts is critical and can make a huge difference in the outcome of the project and your company’s bottom line.
Design-build, design-bid-build and construction management are the three project delivery systems most commonly employed in North America. Over the past 15 years, use of design-build has greatly accelerated in the United States, making this delivery method one of the most significant trends in design and construction today.
Construction Management (CM) uses multiple layers of project management staff and project costs are generally determined after the project is completed.
This methodology is usually associated with excessive fees, a lack of accountability for cost and schedule, as well as adversarial relationships and litigation. According to a national study conducted in 2010, it is estimated that less than 6.5% of projects are completed using this methodology.
Design-Bid-Build is a project delivery method where the owner contracts with separate entities, which means separate contracts and separate work. As with CM, final project costs are determined after the project is complete.
When compared to design-build, there are a disproportionate number of lawsuits and mechanics’ liens filed on design-bid-build projects where contractor selection decisions were made solely on price. This delivery methodology has been declining since 1985 and is anticipated to slip an additional 15% over the next five years.
Design-Build is a project delivery method where the owner contracts with a single entity with one contract for both design and construction services - one entity, one contract, one unified flow of work. It is the most practical approach to building because there is accountability from a single source from the beginning, with the design phase, through to completion of the project.
The design-builder keeps the owner informed through all the phases while protecting the customer’s investment. This approach benefits the owner in time, money and peace of mind.
Design-build is not new. Its roots are found in medieval master builders. It is the most noteworthy and heavily discussed method and many predict that design-build will be the majority project delivery method before the end of the decade.