In the construction industry, every building project is different, but 99% share a few commonalities. For example, general contractors typically work with a design team and project owner. How these stakeholders work together though is a different story. This is where the intricacies of project delivery methods come in.
On most projects, the owner will choose how they want their project delivered. This choice will determine how the general contractor, architect, and owner come together to deliver a final product. Additionally, the chosen delivery method helps set the tone and guide expectations around decision-making, and how responsibilities and contract obligations will be met.
Below, we’ll take a closer look at the five most common project delivery methods, and explore how they influence project design, planning, and execution.
Construction project delivery methods outline how general contractors, architects, and project owners will work together to plan, design, and build a project.
The most common project delivery method is Design Bid Build, a very linear and traditional method that offers a more cut-and-dried process than others.
While other project delivery methods are gaining popularity, a project’s complexity or risk profile usually needs to reach a certain threshold before anything other than a DBB model is considered.
In this Article
Design Bid Build
One of the most common project delivery methods is called Design Bid Build. Under this very linear method, the building is designed, bid out to a general contractor, and then built. It’s also assumed that the architect will be closely working with the owner to hire a GC. If you look at anything from the AIA, Design Bid Build will be the assumed project delivery method — especially if you’re looking at older documentation or contract templates.
Generally speaking, the Design Bid Build method is a straightforward, static process, especially if the design phase is already complete. It also more easily takes advantage of a competitive bidding process, generally allowing owners to fetch a lower price.
Because of how rigid DBB is though, you often sacrifice some flexibility in the schedule as you get through the design process – and it can easily stifle some creativity or value-adding constructability reviews. And, if the design isn’t fully fleshed out, it can cost a lot more in change orders because contractors must hold to the plans and specs as opposed to inferring any design intent. Lastly, because of the siloed nature of how architects and GCs are hired, on separate contracts, it’s not uncommon for teams to become at odds with each other, ultimately creating a less collaborative, more transactional relationship.
Lately, we’ve been seeing more project teams opting for a Design-Build project delivery approach. This method can mean that either the architect and general contractor are a part of the same company, or that the GC holds the architect’s contract (or vice versa). Put simply, the owner hires one entity to take care of both the project design and construction.
One advantage of this method is that it can help reduce a lot of the back-and-forth and potential infighting that’s common under DBB. At the same time though, it is only as good as the partnership between the designer and builder. Sometimes, a little bit of friction between design and build team members can help refine the finished project.
Construction Management at Risk
In this project delivery method, the owner hires a construction manager earlier on in the construction process. The ‘at risk’ piece comes from the fact that the CM is hiring the subcontractors as opposed to the owner or another GC holding those contracts. The main difference in CMaR as compared to DBB is that the design is more influenced by constructability and construction reviews. This means construction might be able to start sooner if the CM is selected early enough in the process and depending on the type of project.
This method also allows subcontractors to be brought to the table sooner, with the goal of achieving better quality and estimates. Because of the more collaborative nature of Construction Management at Risk, it’s easier to spot mismatches in the project design early on and prevent costly change orders and cost overruns. We’re seeing this method becoming more common, particularly in the commercial space, probably because it allows you to fast-track the schedule and makes it easier to assemble a cohesive, collaborative team.
One last callout here: On large complex construction projects that use Design Build or CMaR delivery methods, it’s not uncommon to see a guaranteed maximum price (GMP) agreement in place between the project owner and general contractor or construction manager. Especially on building projects that require specialized expertise from the contractor and key trade contractors.
Construction Management as Agent
In Construction Management as Agent, the contractor helps with a lot of the initial research, pricing, and estimating, then puts the onus back on the owner to hire out. In this method, the construction manager isn’t bound to any construction contract and acts purely as an advisor to the owner.
This delivery method is common for extensive building programs that span multiple projects or in larger commercial or infrastructure projects where the owner is looking for additional oversight or specialized expertise up front.
Integrated Project Delivery
While integrated project delivery has been around for decades, it’s still not too common to see it in its purest form. True Integrated Project Delivery brings the contractor, architect, and key trade contractors together under the same contract – and through this partnership, any cost savings are split amongst the construction team according to an agreed-upon ratio.
The big advantages of IPD delivery system are that it can foster teamwork and more creativity in how the project is going to be delivered, and incentivizes all parties to save for the project. Because of how complex this project delivery method can be though, it’s important to find the right legal specialist to draw up a good contract. Also, the participating businesses are often skeptical of entering into an agreement that changes their strategy for profitability. Naturally, this can make IPD an intimidating choice for an owner.
Those we’ve talked to who have experience with Integrated Project Delivery say it’s great in principle, but challenging to follow through on in practice. Even though the contract incentivizes a higher degree of collaboration and teamwork, it can be difficult to go against the grain of more typical work practices and company structures. That’s probably why you see many projects adopt many of the practices and functionality common to IPD delivery systems and lean construction (e.g. pull planning or co-location) while foregoing the IPD contract structure.
Also worth mentioning here are joint ventures. A joint venture might look similar to an IPD contract in that a joint venture typically brings resources from multiple companies together to form a new company to deliver a specific project or set of projects. Joint ventures often involve sharing expertise, technology, and financial resources, allowing the participating companies to undertake larger or more complex projects than they could individually. Additionally, these ventures distribute risk among the partners, making them more resilient to project-specific challenges. Unlike IPD contracts, however, joint ventures usually result in the creation of a new, separate legal entity, reflecting a deeper level of collaboration and commitment among the partners beyond a single project’s scope.
What Method Should Emerging Contractors Use?
When choosing what type of contract to work on, it’s important to note that Design Bid Build is the most common project delivery method for a reason. DBB allows for checks and balances and clear roles and responsibilities in spite of its tendency to promote finger pointing.
That said, Design-Build can offer a more optimal project flow. Or, if you’re working with an owner in the commercial space who needs a more favorable schedule to start an asset in generating revenue, Construction Management at Risk can be a solid method. Ultimately for contractors though, the biggest consideration should be what the owner’s primary driver is. Each of these methods should allow for profits for a contractor if managed correctly, but the best path to profitability is through customer satisfaction. If you are in a good position to help a client decide on a delivery method, be sure to first understand the project goals of the owner and their project scope.
Financing Project Delivery
An important aspect to consider in project delivery methods is their impact on cash flow for both the owner and the General Contractor. In most cases, these methods assume that work is completed before any payment is made throughout the entire project, with the exception of certain materials requiring a down payment. This setup places a significant financial burden on general contractors and subcontractors who often need to procure materials in advance of work to cover construction costs. The pressure is even higher for subcontractors who usually operate with tighter cash flow constraints covering project costs for the procurement of labor, materials, and equipment required during the construction phase.
From an owner’s perspective, financing a construction project typically involves a construction loan or making payments out of pocket, often without the guarantee of immediate revenue upon project completion. This can be a considerable financial risk, especially in large-scale or complex projects. The chosen project delivery method can influence the timing and structure of these payments, affecting the overall financial strategy and stability of both the owner and the contractor. Understanding these financial dynamics is crucial for both parties to manage risks and ensure the successful completion of the project within the planned budget.
In the end, while project delivery methods often come down to an owner’s personal preference, that doesn’t mean you have no agency. By understanding each method’s pros and cons, you can choose jobs that align best with your construction company’s preferred work style. A solid understanding of each method and its incentives should help you thrive regardless of the organizational structure.
Further Reading: Foundations of Construction Project Management for SMBs
The CrewCost Team consists of men and women who have worked in the construction industry as project managers, general contractors, sub contractors and more. They share their decades of experience on our blog as a way to help other contractors grow healthier and more profitable businesses.