Understanding Project Delivery Systems: An Introduction

At D. Hart Consulting, we recognize that the construction process, from initial planning through to final construction, is often referred to as the project delivery system. For clarity, we categorize these systems into two primary types: 1) Design-Select-Build, where design and construction are contracted separately and sequentially, and 2) Design/Build, where both are contracted on a “turn-key” basis.

Design-Select-Build: A Traditional Approach

The Design-Select-Build method is a classic example of a sequential project delivery system. Initially, the design work is completed by a design professional. Following this, a contractor is selected, and a construction contract is established to build according to the finalized plans and specifications.

In this system, the project design is typically completed before the contractor is chosen and construction begins. The design work is carried out by architects or other design professionals who are independent of the contractor. For larger projects, owners might engage separate architects for the building’s shell and interior finish-out. Additionally, specialized professionals such as engineers may be contracted for site work, civil engineering, and various systems designs (structural, electrical, mechanical, plumbing). Some owners prefer direct contracts with these specialists to maintain greater control, while others opt for a single contract with an architect who then subcontracts the specialized work.

Once the design is sufficiently complete, the owner selects the contractor(s) to execute the construction. The owner must decide whether to use one general contractor for the entire project or multiple prime contractors for different segments. Each approach has its pros and cons.

Advantages and Challenges of Multiple Prime Contractors

For experienced owners with the capability to supervise and coordinate work, contracting directly with specialized subcontractors (multiple prime contractors) can offer cost savings by eliminating the general contractor’s markup. However, this requires significant oversight and coordination, which can be challenging. Inadequate supervision can lead to miscommunication and disputes among contractors, complicating problem resolution.

Conversely, using a general contractor simplifies coordination and accountability, as the general contractor is responsible for delivering a complete, finished product. This approach reduces the risk of disputes and ensures smoother project management.

Contractor Selection and Cost Control

After deciding on the number of prime contractors, the owner must choose whether to select contractors through competitive bidding or direct negotiation. Once selected, a construction contract is established, detailing the contractor’s responsibilities to build according to the plans and specifications.

The Design-Select-Build system offers significant advantages in terms of control over project design and costs. During the design phase, architects can provide cost estimates, allowing owners to make informed decisions and adjustments to stay within budget. This system also leverages market forces, giving owners a strong negotiating position before contractor selection, leading to more favorable contract terms.

Design/Build: The Turn-Key Solution

In the Design/Build delivery system, also known as “turn-key,” the owner contracts with a single entity responsible for both design and construction. This entity could be a joint venture between an architect and a contractor, a general contractor subcontracting design work, or an architect subcontracting construction services.

The primary advantage of Design/Build is the single point of responsibility. The owner deals with one entity for both design and construction, simplifying problem resolution and accountability. This system often saves time, as construction can begin before the design is fully completed, a method known as “fast track.”

Design/Build is particularly beneficial for projects requiring flexibility in design after initial contract negotiations, such as “build to suit” projects for specific tenants. While some argue that this system can save money through efficiencies, it can also introduce cost uncertainties if the design criteria are not well-defined from the start.

Owners must provide clear and specific design criteria to ensure accurate pricing and control over project costs. Without this, there is a risk of the project not meeting the owner’s expectations in terms of design and functionality.

When comparing total project costs between Design-Select-Build and Design/Build, owners should consider the cost of preparing design criteria. Although less expensive than full project design, these costs can be significant and should be included in the overall budget.

Other Variations

While most contracting arrangements fit within one of the two primary project delivery systems, there are notable variations that can be encountered.

Fast Track

A fast track project begins construction before the design is fully completed. While Design/Build projects are often fast track, not all fast track projects follow the Design/Build model. In some Design-Select-Build arrangements, construction can also commence before the design is finalized.

Fast track projects are chosen when owners prioritize shortening the construction timeline over maintaining strict control over costs. This approach can provide leverage in contract negotiations but often results in less certainty regarding final costs. Owners may find themselves negotiating prices after construction has started, which can reduce their bargaining power. Many fast track projects are Design/Build to benefit from dealing with a single responsible entity.

Construction Management

Construction Management can be adapted for both Design-Select-Build and Design/Build systems. As construction projects have grown more complex, the role of architects as owner representatives has diminished, leading to the rise of construction management.

Construction managers provide professional oversight and coordination of the work of architects and contractors, assisting owners with decision-making throughout the project. This role has become essential as owners recognize the need for skilled management to navigate the complexities of modern construction.

Types of Construction Managers

There are two types of Construction Managers (CMs): CM Agent and CM at Risk.

CM Agent: The CM Agent provides professional management and coordination services to the owner without assuming responsibility for the construction work itself. The owner contracts directly with either a general contractor or multiple prime contractors. The CM Agent does not control the means and methods of the contractors or subcontractors.

CM at Risk: The CM at Risk enters into subcontracts and supply agreements, assuming the risk for delivering the completed work. This type of CM advises the owner during the pre-construction phases, including planning, architect selection, and coordinating design services. The CM at Risk also provides value engineering to identify cost-saving opportunities during design. Once construction begins, the CM at Risk takes on the role of a general contractor, benefiting from a comprehensive understanding of the project.

In the Design-Select-Build system, a CM Agent can act as the owner’s representative, managing and coordinating all project facets from initial negotiations through final acceptance. In Design/Build projects, CM Agents often assist in developing design criteria, helping owners control costs and design. While a Design/Build contractor might be seen as a CM at Risk, this is inaccurate due to the design responsibilities involved.

Conclusion

At D. Hart Consulting, we are dedicated to helping you navigate the complexities of modern construction projects. Our upcoming series of articles will delve into the various types of construction contract documents and essential terms from an owner’s perspective. We will begin by exploring the key factors that influence the required documents and terms for different projects.

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