If you’ve ever seen Abbott and Costello’s “Who’s on First?” skit, you probably understand how many people feel about the evolution of project delivery methods. (If you haven’t seen it, it’s definitely worth a trip to YouTube.) Project-delivery methods are usually accompanied by a long list of acronyms, including DBB, DB, IPD, CMA, CAMR, CM, CMR, DAB, DBB W/CM, DBOM, GMP, IDIQ, MATOC, SATOC, JOC and BOT. This article covers the four main delivery methods.
First, let’s explain the difference between project delivery and project management. While they may seem similar, there are distinct differences. Quoting from the AIA document “Primer on Project Delivery,” “Delivery refers to the method for assigning responsibility to an organization or an individual for providing design and construction services. Management refers to the means for coordinating the process of design and construction (planning, staffing, organizing, budgeting, scheduling, and monitoring).”
Let’s start with design/bid/build (DBB). It is the traditional and most frequently used method of getting a project built. Three primary entities are involved: the owner, the designer and the contractor. DBB requires the use of two separate contracts. The owner first enters into a contract with a designer. When the design is complete (or nearly complete), the owner solicits bids and enters into a contract with one of the general contractors that bid the project. The general contractor then contracts with subcontractors for the various trades. The general contractor assumes the risk for the construction performance.
There is a common variation to this method called “multiple primes,” where the owner contracts directly with each trade rather than with a single general contractor. The owner can self-manage the project or hire a construction manager (CM) to run the work.
Construction management at risk (CMAR or CM/GC) is similar to DBB in that a general contractor is still responsible for the construction performance. The difference is that the general contractor acts as a CM who advises the owner during the development and design phases. Generally, the CMAR does not bid on the project. Instead, it negotiates a fixed price after the design is complete. The CMAR can then negotiate prices with the subcontractors or have the subcontractors bid the project.
Design/build (DB) differs from the previous methods because there are only two entities: the owner and the DB entity. DB gives the owner a single source of responsibility—and, from the owner’s perspective, only one contract. The DB entity can be led by the general contractor or the architect and can include many people. If a subcontractor executes the design for their trade, it also performs the construction for its trade. However, many times a subcontractor serves in a design/assist capacity, and the project is put out to bid.
Once again quoting from the “Primer on Project Delivery,” “In today’s project atmosphere one could argue the delivery of traditional design and construction services has devolved into an adversarial process resulting in inefficiency, mistrust, and commoditization of services.”
I couldn’t have said it better myself. I believe we have all experienced projects with hostile relationships between general contractors, subcontractors and owners. These kinds of projects are hard to manage and seldom earn the profits they should. The answer to this problem may be integrated project delivery (IPD). The theory behind IPD is that a team approach, with all parties working together toward a common goal, will result in a project with a better design, constructability and schedule. This method includes the use of a multiparty contract between the owner, designer, contractor and possibly the important subcontractors.
There are several pricing arrangements to go along with these delivery methods. DBB almost always uses a fixed price contract. CMAR, DB and IPD often use a pricing arrangement called guaranteed maximum price (GMP), which is a variation on the cost-plus method of pricing. A cost-plus contract would be based on the actual cost to build the project, plus a fee. A GMP contract is a cost-plus arrangement with a cap, or maximum price.
As estimators, it is important to understand where we fit in and what skills are needed for each type of project delivery. For instance, let’s say you’ve been a DBB estimator your entire career, always working on completely engineered drawings. Would you be able to prepare an estimate based on 50-percent-complete drawings? How about just a written narrative? If you cannot, gaining these skills may be imperative to your company and career. You have to know who’s on first.
About The Author
CARR has been in the electrical construction business since 1971. He started Carr Consulting Services—which provides electrical estimating and educational services—in 1994. Contact him at 805.523.1575 or [email protected], and read his blog at electricalestimator.wordpress.com.