One of the most important decisions owners make in their construction projects is choosing the correct project delivery method (PDM). When the right PDM is selected, you’re able to reduce risk, promote efficiency, and maximize the likelihood of jobs being completed on time and within budget.
Many factors influence the selection of the delivery method, including the sophistication and size of your projects, the budget you have, and your team.
As an owner, it can be tricky to figure out the right PDM, so to help you do it right, the Construction Owners Association of America (COAA) recently held a webinar on this very topic.
The event brought together a group of experts familiar with the most common PDMs in construction:
Each guest shared their experiences with different PDMs and discussed the factors they consider when selecting a delivery method. Here is what we learned from their conversation.
Before going too deep into how to select a PDM, it’s worth reviewing some of the most common delivery methods in construction. They include:
Design-Bid-Build. This is considered the traditional PDM, and it involves three distinct phases. The design team designs the project, then sends it out for bidding and procurement. The project is then awarded and the construction team takes over.
With Design-Bid-Build, the architect typically oversees the project to ensure that the owner’s requirements are met. The design team reports to the architect and all subcontractors report up through a general contractor
It’s a solid PDM, though it can be cumbersome when changes take place. It can also create an adversarial relationship between parties as there’s no incentive to collaborate.
Design-Build. Then came Design-Build, which sought to eliminate some of the steps from Design-Bid-Build to allow projects to proceed faster. With this PDM, projects could be designed in a “just in time” manner so construction can begin sooner.
With Design-Build, the contractor hires the design team, which creates a different dynamic in their relationship. It also benefits the owner because they have a single point of contact throughout the different phases of the project.
The downside? Design-Build carries a higher level of risk because there’s no longer a separate party to oversee the work. That’s why choosing the right team is critical.
Construction Manager At-Risk (CMAR). CMAR is similar to Design-Bid-Build, but instead of the architect acting as the overseer, the construction manager (CM) assumes the role on behalf of the owner.
The CM selects the designer and works through value engineering to get to a Guaranteed Maximum Price (GMP). If the CM comes in under the GMP, they’re rewarded with incentives. And if the project goes over the GMP, they carry the risk.
Once the design is finished, the CM will bid the project and select the best contractors to deliver the owner’s requirements and stay under the GMP. During the construction phase, the CM acts as overseer to ensure quality.
With various delivery methods to choose from, it can be difficult to determine the right PDM for each of your projects. To shed light on how to navigate this process, Faye, Jessica, and Robert share the factors that they keep in mind when considering PDMs.
In some cases, the appropriate PDM boils down to the type of organization you are and whether or not you’re governed by regulations.
Ohio State University, for example, is governed by the State of Ohio, so it has to follow certain policies. According to Faye, prior to 2010, the only procurement method they could use was multi-prime which was a complex process. Fortunately, after 2010, legislation passed that allowed Ohio State University to use CMAR and Design-Build.
Meanwhile, a quasi-government entity such as the Nashville Airport has a bit more flexibility.
According to Robert, certain restrictions apply if a project is funded by the Federal Aviation Administration (FAA), but other projects aren’t as strict.
“If I have FAA funds, they pretty much require Design-Bid-Build. So on the runway work, that’s how we typically procure that. Other funding sources are more flexible and we don’t have those restrictions,” says Robert.
On the other hand, a private company like Prometheus Real Estate Group doesn’t have any PDM constraints.
“Because we’re private, we don’t have any restrictions on the delivery method that we use,” explains Jessica. “I would say that we primarily use the Design-Build method, though we’ve also been using Design-Bid-Build recently. We haven’t used CMAR yet, but we’re talking about doing it on a project that we have planned to start in about two years.”
Another important consideration is the size of a project and how much you’re intending to spend.
At Ohio State University, Faye says they usually choose CMAR for large, multi-million projects. “I would say for all our projects greater than 20 million, we’re probably looking at a Construction Manager At-Risk delivery method.”
They then look to other methods for smaller projects.
“Anything above $200,000 here in the State of Ohio, we have the public bid it. So anytime you get to projects between $200,000 and 4 million, those are likely going to use the general contracting method, where we design it, share it, contract it,” Faye explains.
As for projects under $200,000, Faye says they use the Design-Build method. “We don’t have to publicly bid these projects. Most of the PMs do those as a Design-Build method. We also have projects like lab renovations that still require drawings. So for these projects, we also use Design-Build. The contractor and the architect team up, and they can get those done at a pretty fast clip.”
Over at Nashville Airport, Robert says they use a method called Progressive Design-Build — a hybrid between Design-Build and CMAR. He’s a fan of Progressive Design-Build for larger projects because as the owner, it gives him and his team more control.
Design-Bid-Build comes into play for smaller projects or changes. “It really depends on the type of project and how much visibility it may have from the public and how much owner interfacing is required,” he says.
Owners also have to think about how involved they are in the project and whether or not changes will be made. These factors can also determine the best PDM to use.
According to Jessica, Design-Build tends to work well if the owner has a lot of involvement and is good at coordinating different components.
“I personally feel that the Design-Build approach has worked best, given the level of involvement from us being the owner’s reps and the construction management team. From the very beginning of pre-construction efforts, we communicate with the contractors and design teams and ensure that they know what the end result needs to be.”
Robert offers a similar view. “With Design-Build, you should really have the scope nailed down and make it clear to all parties involved what you’re looking for.”
The PDM method you choose can heavily influence team dynamics. Depending on the habits, disposition, and practices of your team members, some methods may work better than others.
“The delivery method matters, as it can change the dynamics of the team,” explains Robert. Based on his experience, he says that the traditional hard bid or Design-Bid-Build creates an “us versus them” mentality. On the other hand, he says that methods like Design-Build and CMAR promote teamwork.
Jessica agrees and has seen a similar shift in the private sector. According to her, the environment today is much less adversarial and team members are more inclined to work together.
She adds that in the case of Design-Build, the method allows owners to build stronger strategic relationships.
“The Design-Build method has enabled us as an owner to establish a lot of relationships through a prime contractor,” Jessica explains. “This is really important for us in the private development world, especially when it comes to future acquisitions and finding new properties.”
Meanwhile, Ohio State University has had better success using CMAR. According to Faye, when they were using multi-prime prior to 2010, “claims were the name of the game.” But when they moved to CMAR, she hasn’t had any claims at all.
Which PDM can help you complete projects faster? Based on Robert’s experience, Design-Build tends to be faster than other methods.
“We have used that specifically with all the major major projects. I’ve got a $400 million project that we just took a final GMP on. We take it to the board tomorrow. So it’s four hundred thirty-six out of a budget of four hundred forty-four. We saved at least six months — possibly even nine months — on the construction schedule by doing it Design-Build versus Design-Bid-Build.
Jessica has had similar experiences with Design-Build. “I’m seeing the benefit of the Design-Build element on a project that I’m on right now by the tune of about two and a half to three months ahead of schedule,” she says.
That said, she adds that how fast things get done also depends on the involvement of the owner, especially at the beginning of the project when conveying scope and objectives.
As for Faye, she hasn’t completely decided on which PDM saves the most time. Since the projects she handles need to comply with the State of Ohio’s regulations, her team has to go through a number of processes.
“In the end, I think the jury’s still out if there are time savings on one delivery method over another because of the items that the State of Ohio front ends make us do and requirements that we have to complete.”
At the end of the day, the best project delivery method comes down to your budget, team, and preferences. There’s no one best PDM for all owners, so it’s important to carefully consider your options on a case-to-case basis.