PROJECT DELIVERY METHODS -- Spaces4Learning

PROJECT DELIVERY METHODS

By Thomas G. Dolan
05/01/03

During the past couple of decades, several alternative project delivery methods have evolved for the management of design and construction of new school facilities. The traditional method, called Design/Bid/Build, is sequential in nature. The architect designs the building. The owner accepts the design and puts it out for bids. The contractor with the lowest bid gets the job and builds the facility.

The advantages to this conventional method are that it's familiar, easy to manage, has a defined scope and goes to the lowest price. It works well for uncomplicated projects that are budget sensitive. However, this method is also fraught with obstacles that are, in fact, what has galvanized the growth of alternative methods.

The main problem is the linear process in which one task follows the completion of the other, with no overlap. Therefore, there's a real disconnect between the architect who designs the building and the contractor who builds it. The architect tends to feel he's done his job once the design is complete and goes on to his next project. The contractor, on the other hand, has had no say in the design. Therefore, when the architectural concept hits the real world of actually building it, there is often finger-pointing, along with accompanying liability issues.

These, in turn, often require redesign or rebidding to meet the budget, which means cost overruns and delays. The contractor, who has had no input into the practical aspects of turning the design into its actual fulfillment, or been able to offer a realistic budget necessary to achieve the quality the owner expects, got the job by offering to do it cheaper than anyone else. Since he's struggling to make a profit, it's not surprising that what often results is the use of inferior materials and too hasty workmanship.

One alternative method that has grown in popularity to resolve these difficulties is called Design/Build. One advocate of this method is Richard Belle, editor of the monthly newsletter for The Design Build Institute of America. What this method does, explains Belle, is remove the finger-pointing disconnect by having the designer and contractor, by definition, working together as a team. The architect and builder are one major entity hired by the school to deliver a completed facility. The designer and contractor may work for the same firm, or two or more firms may work together.

Like many“new” ideas, this one has historical precedent. "A building in 16th-century Florence and other Renaissance cities was under the authority of a single person who designed it and then was responsible for having it built. He was not necessarily engaged in the actual construction work, but he managed the crews who were," explains Belle.

What this means is that there is input from all sides at the start of the project. There is a single point of accountability, stopping at the start any argument as to who is liable for what. Since a realistic budget is defined at the start, there is no temptation to use inferior materials or building methods. A guaranteed maximum price (GMP) is furnished based on the design criteria prepared by the school district. This eliminates cost overruns. The early GMP facilitates alternative financing methods and enables fast-track delivery, since construction can begin before the design is complete. Belle says 33 to 35 percent of nonresidential products are using design/build, and this percentage is growing.

There are some problems with Design/Build, however, maintains Gary D. Keep, CEO of SHW Group, Inc., of Dallas. One is that this particular team approach tends to be contractor-driven in terms of costs and schedules, and the designer's and owner's program tends to be down on the list. There is also no check and balance between architect and builder. The owner must select a team rather than the best architect and the best builder. It is also difficult to control quality since the Design/Build team must only meet minimum criteria standards. For instance, says Keep, "We have not seen a lot of Design/Build in Texas, because the law says you can use an alternative as long as you state it, and it can be stated very generally. But schools are very specific in their needs. They can lose control of what they want." Since Design/Build is not publicly negotiated, what is being done may not be completely in the open, Keep adds.

Another option, says Keep, is Competitive Sealed Proposals. This is similar to the traditional Design/Bid/ Build, except that it offers the advantage of awarding the bid on the basis of quality as well as price. It also allows the owner to modify proposals before the bid is accepted to avoid having to rebid. This provides some flexibility and helps solve the quality problem, but shares the other disadvantages of the traditional method.

Bridging is a concept, Keep says, which combines the traditional process with Design/Build. The owner selects an architect who develops the design to the 30 to 50 percent document stage and then selects a Design/Build team to complete the design and construction. The owner thus gets a better understanding of the overall project before moving to the second stage. He has more control, especially cost control. But, Keep adds, there's a potential for conflict between the architect and design/builder, and the other weaknesses of Design/Build are still there.

The method Keep favors is Construction Manager (CM) at-Risk. This method starts with the separation of design and construction services. The school may have a favored architect, but then interviews and selects a fee-based firm to manage construction before design is complete. The CM firm is selected by the school based on quality rather than low bid. This early contractor involvement helps in estimating and constructability. The CM at-risk signs contracts with all subcontractors after the former has established the GMP. The final construction price is the sum of the CM's fee and the subcontractors' bids. The owner will not pay any more than the GMP and retains any savings.

A variation is Construction Management Agency. But here the CM is in more of an advisor role and does not accept the risk, nor is there a GPM. The owner contracts with both the CM and architect, but signs separate contracts with each subcontractor who will actually perform the work. The CM is still selected on quality rather than bid and is involved in early estimating and constructability. But the management responsibility falls more heavily on the school, which may have higher costs because of multiple prime contractors.

Bill Echols, vice president of operations for The Facility Group in Smyrna, Ga., offers still another variation that he calls "the next evolution in project delivery." This is called the @ risk program management (@ risk PM).

Echols says that his program can use and build upon any of the former methods. The distinguishing feature here is that the PM assumes responsibility for every aspect of the project. In fact, it often becomes involved in scoping out the bond referendum. "This process encompasses the global view of the program, not any single piece or part," Echols says. "The paradigm shift here is in the program manager embracing every aspect of an owner's facility program, full responsibility and full accountability, without qualification." By the same token, Echols says, the school must be willing to assign total control and management to the PM.

Echols says the school is not taking a risk in assigning total control to the PM, for it is the PM who is taking the risk. Moreover the entire scope of the project, going back to even helping the school choose the architect, has been analyzed to encompass the full parameters of the owner's goals. The PM will either receive a fixed fee or have incentives built into the contract for a proportion of any savings under the GMP.

Although this concept can build upon one or more of the other alternative methods, ultimately the PM controls the contracts and they go out to a public bid. The advantage to this method, Echols says, is that all financial transactions are transparent and open to public scrutiny. And, though the contracts ultimately go out for bids, they do so in a very different manner than the traditional way. The various weaknesses in the traditional method have, through this process, been eliminated.

Why have so many different delivery methods emerged?

There are three reasons, Echols replies. One is that each state has evolved its own rules for alternative methods. The construction industry operates differently and is growing in different ways in different parts of the country. And, finally, owners or school districts also differ and have their own histories, conventions and current political considerations.

So, there is no single path, but rather many paths that can be taken to manage design and construction factors while meeting each school's unique needs.