“…bad things tend to happen when you divorce the people who take the risk from the people who understand the risk.”
-Keith Gessen, Author 2010
Discover the approach that aligns with your goals
40 - 28
27 - 15
14 - 0
What: Builder and architect selected prior to design based on character, competence, expertise, relationship, referral, and ingenuity.
Why: Provides highest potential for maximum value, team collaboration, value-engineering, efficiency, fast-track timeline, transparency, and positive owner experience. Up to 30% reduction (2) in opportunity costs and project timeline due to partially-concurrent building and design schedules. No assumptions on design and pricing; all details are fully and clearly communicated prior to construction. Limits the unknowns. Reduces probability of +10% cost variance between up-front bids, in the “low bid process” and the final cost (2).
What: Builder selected after design is partially completed, based on a composite score between the RFP and bid -- off of the current design definition: between 10% - 50%.
Why: Typically an attempt to get best possible pricing; however, partial design definition causes GC’s to make assumptions on design details, scope, and owner vision. Produces medium risk of project cost overruns (1.6% cost growth) (1) and opportunity costs with time consuming RFQ/RFP processes. Caps potential for collaboration, value-engineering input, and real-time budgeting.
COST ONLY APPROACH
What: Builder selected after design is completed based on one factor, the lowest “responsible” bid.
Why: Perceived as fastest way to achieve lowest-cost product. “Low Bid” price rarely matches eventual project cost. US-DOT’s study shows the “low-bid” approach has the highest risk of cost overruns (9% total cost growth) (1); and the highest opportunity costs due to a sequential – not concurrent – schedule (14% schedule growth in high complexity projects) (1). Strained or no relationship with construction team. Little to no value-engineering input. No GC budgeting input during design phase.
EARLY QUESTIONS TO CONSIDER
- Is the builder selected before, during, or after building-design?
- What is my realistic time-frame; is this a fast-track project?
- Do I want real-time budgeting during the design phase?
- Who will lead & manage my project: owner, architect or builder?
- How do I know everything is included in a proposal or bid?
- Will aggressive sub-contractor bidding occur?
(1) Wardani, Marwa A. El, John I. Messner, and Michael J. Horman. "Comparing Procurement Methods for Design-Build Projects." Design-Build Effectiveness Study. US DOT Federal Hwy Administration, Jan. 2006. Web. 22 June 2015.
(2) "Design-Build Effectiveness Study. Journal of Construction Engineering and Management J. Constr. Eng. Manage. 132.3 (2006): 230-38. Penn State Engineering. Penn State, 2004. Web. 22 June 2015.