Exploring Construction Delivery Methods: Design-Bid-Build vs. Construction Management at Risk

• By James L. Britton, II
• 09/01/14

There are many advantages, disadvantages and misconceptions that complicate the building owner's decision process for selecting a construction delivery method. The delivery methods available today include new options that, until recently, were only employed in the private market.

Those delivery methods new to the public market include Design-Build (DB), Construction Management at Risk (CM@R), and Integrated Project Delivery (IPD). Combine these with Design-Bid-Build (DBB), and there are four major models available for implementation. Each of these methods have unique advantages and disadvantages and should, therefore, be carefully reviewed and coupled with a project based on specific needs or constraints.

It is a rare opportunity to compare projects that utilize different delivery methods for the development of identical buildings. However, after Fort Mill School District's recent building program in South Carolina, we are able to compare the outcomes of three separate prototypical elementary schools that explored different delivery methods.

What follows includes a comprehensive comparison between CM@R and DBB, both with a program manager serving as the owner's agent to help manage the projects.

Background
In 2008, Fort Mill School District Four initiated a building program that included, among other projects, two new elementary schools that were designed to be prototypes for site adaption for future elementary facilities.

Initially, the facilities were scheduled to open in August of 2011, but the recession dampened the district's bounding student growth for several years, and the projects were postponed. The projects were later revived with a new scheduled completion date of August 2014, and the recommended delivery method was DBB with multi-prime/single-prime options. This recommendation was made based on the lack of critical project constraints (specifically schedule); therefore, the district wanted to implement the most cost-effective delivery method.

Elementary School No.8
The first project, Elementary School No. 8, was bid in November 2012 and awarded based on a single-prime low-bid model. After removing costs associated with site-specific elements, the overall building cost (Five Foot Line Cost) of Elementary School No. 8 was $15,853,320.00 or $131.04 per square foot.

Elementary School No. 9
In December 2012, the second prototype, Elementary School No. 9, was bid using the same delivery method and contracting options as No. 8. The project was again awarded based on low bid; however, the multi-prime option (which allows the owner to consider multiple bids per construction trade) was most cost-effective in this case.

Historically each time a prototype facility is bid, assuming the project is only a site adaption, the bid costs realized are lower than the previous project's due to the establishment of the previously awarded contracts.

Without new variables to impact costs and an established price ceiling, the overall Five Foot Line Cost for No.9 came in $336,215.00 less than No.8 ($2.78 less per square foot).

Elementary School No. 10
Simultaneously, the school district was in the final stages of planning a 2013 bond referendum that included a third iteration of the prototype, Elementary School No. 10, with a scheduled completion date of August 2015.

Shortly after the bond referendum passed, revised student enrollment projections indicated higher than expected growth. Consequently, the district requested the Program Manager to explore scenarios that would allow the district to occupy No. 10 at the same time as No. 8 and No. 9. After completing this due diligence, the program manager and the owner agreed that the implementation of the Construction Management at Risk delivery method would be best suited to accelerate the construction schedule.

Three contractors were short listed, and a selection was made based on qualifications, performance, and familiarity with this prototype project. In order to accomplish the aggressive schedule, the project was broken into two packages: early sitework and building. Both packages had a Guaranteed Maximum Price (GMP), and the sitework was released prior to the building to allow time for the completion of construction documents.

DBB vs. CM@R
The decision to select DBB for both Elementary Schools No. 8 and No. 9 was based on the lack of significant project constraints. In the absence of critical technical, schedule or site-related constraints, the most significant factor was cost; therefore, the DBB delivery method was recommended and selected for its cost effectiveness advantage.

One of the advantages of CM@R is the ability to select a contractor earlier in the process based on criteria such as schedule performance, so the decision to pursue CM@R was recommended and approved, with the condition that the project could be awarded within budget.

Shortly after this decision was made, the GMP of $26,197,059 for the Building Package of Elementary School No. 10 was received from the CM@R contractor. While the GMP included costs for a condensed 13-month construction schedule, the premium of $5,343,739.00 ($175.89/SF) - 25% more than Elementary School No. 8 — was more than the district was able to fund.

Consequently the district decided to utilize DBB, even though the decision process of changing delivery methods from CM@R to DBB caused the occupancy date to shift from August 2014 to December 2014. The 13-month schedule as well as the work scope remained the same as the initial CM@R plan. Similar to Elementary Schools No. 8 and No. 9, single-prime and multi-prime options were offered, and the district awarded the project based on the low bid.

The Five Foot Line Cost of Elementary School No. 10 was $130.30/SF. Although higher than No. 9 ($128.26/SF), it was still lower than No. 8 ($131.04/SF). This outcome was based on the presence of market escalation associated with the recovering economy, but it did not impact the costs as significantly as the CM@R approach did ($175.89/SF).

As a result of the change in delivery method, the district was able to stay within the "cost of building" budget without removing scope from the project, while maintaining the 13-month expedited schedule.

Although this case study highlights a single prototype of three projects exploring different delivery methods, it is indicative of the outcome and conclusion that one can associate with this alternative delivery method (CM@R) in most cases. There is value in selecting the CM@R delivery method, but this decision should be based on constraints other than cost, since a significant premium can typically be expected.

It should also be noted that no matter the delivery method selected, the owner should strongly consider retaining an advocate devoted to serving their best interests from design through construction. A program or project manager serving as the owner's agent can oversee the entire development process, helping to control cost, schedule, quality and navigate the myriad of decisions an owner faces during each step.

James L. Britton, II, CCM, LEED-AP is vice president of Cumming, an international project management and cost consulting firm.