All construction projects require a mixture of services, including planning, design, and construction. Construction project delivery methods provide different ways to organize those services contractually in order to execute a project.
While each project team generally consists of an owner, a designer, and a builder, how each project is executed differs. Choosing the right project delivery method is a crucial step before design begins, as it sets the tone for how the team will communicate and how payments will be distributed.
What does project delivery mean?
The Project Management Institute (PMI) defines a construction project delivery system as “the structure of the relationships of the parties, the roles and responsibilities of the parties, and the general sequence of activities required to deliver the project.” It defines how the parties are related to each other contractually throughout the progress of the project.
It may seem like the relationships between the project owner, designer, and contractor are easy to define and quantify, but many projects require these relationships to be adapted or changed to meet the project objectives.
For example, a fast-track project owner may go to contract with one party, either the designer or the contractor, in a design-build agreement. By contracting with only one entity for the project, they have simplified the payment process and allow the designer and contractor to work together from the beginning, shortening the overall project schedule.
Construction project delivery methods
Before choosing a project delivery method, there are a few things you should consider. This includes the owner’s budget, the scope of the project, the risks involved, the schedule, and the owner’s experience with similar projects.
The following will be a breakdown of six of the most common types of project delivery methods.
- Design-Bid-Build (DBB)
- Design-Build (DB)
- Construction Management-at-Risk (CMAR)
- Construction Management Multi-Prime (CMMP)
- Public-Private Partnership (PPP or P3)
- Integrated Project Delivery (IPD)
Design-bid-build — also called hard bid — is the most popular project delivery method, and it is thought to result in the lowest construction price.
The designer/architect and general contractor work directly for the owner under separate contracts, so this method provides a lot of opportunities for the owner’s input on the project.
The design team works with the owner to develop the contract documents: drawings, specifications, and other exhibits. Once the design is finished, it is sent out for general contractors to provide a bid on the project. It can take two to four weeks for contractors and subcontractors to price a project.
Then, the design team and owner evaluate the proposals from the GCs and select the one the owner wants to go to contract with. Once the contract is signed, construction can begin, and materials and equipment can be ordered.
There are some disadvantages to this project delivery method:
- The design phase can require the owner to spend a lot of cash before getting a firm price on the actual construction project.
- Depending on the quality of the design, the owner may be vulnerable to change orders, delays, and additional costs initiated by the contractor.
- The actual construction process doesn’t begin until the design is finalized, adding more time to the overall schedule of the project.
- The general contractor isn’t able to give feedback during the design process.
- Payments must flow through the layers of contractors and suppliers, delaying payment for the lowest tiers.
Design-build is becoming more popular in recent years — a recent report claims that this delivery method is now used on up to 40% of the US-based construction projects. DB creates a very straightforward process for owners, as they are only contracted with one firm. In this method, both the design and construction phases are covered under one contract with one company.
The entire project is handled by either the architect or the contractor from start to finish – drawing a stark contrast to the above design-bid-build project. In theory, when the design team and build team are rolled into one operation, the project becomes more efficient.
DB projects can be architect-led or contractor-led, depending on who the contract is with.
Architect-led agreements are generally used on projects that have a high difficulty of design, like new buildings, remodels, etc. Contractor-led projects usually don’t rely on complex design, and involve repeatable work, like infrastructure or road projects.
No matter which way the contract is written, the architect and contractor are usually contractually connected between themselves, and one of them is connected to the owner and takes point on the project.
DB projects allow contractors and subcontractors to have a say in the design, which can be beneficial when they have extensive experience. The process from start of design to completion of construction is usually shorter too, so it is often used for fast-track projects.
Some of the disadvantages of design-build delivery include:
- Conflicts of interest between the design team and the contractor. The contractor is incentivized to keep costs low, and the owner wants a high-quality finished product.
- Subcontractors are often selected ahead of time, so it is hard for new subs to get an opportunity to participate in these kinds of projects.
- There’s added liability for general contractors, who don’t usually carry design errors and omissions insurance coverages.
Construction Manager at Risk (CMAR)
With the Construction Manager at Risk method, a construction manager, similar to a general contractor, acts as the owner’s representative during both the design and construction phases.
Like the DBB method, the CMAR method separates the design and building processes. The construction manager is involved from the beginning with the design process, mainly as a cost controller, and also oversees construction like a general contractor would. The difference is that the CMAR accepts the risk for meeting the project deadline and owner’s cost requirements, which are usually expressed as a guaranteed maximum price.
If construction costs come in higher than expected, the CMAR is expected to absorb those costs, which reduces their overhead and profit. Of course, on the other hand, if costs are lower than expected, the CMAR will increase their profit, unless the contract calls for sharing the savings. Either way, the CMAR is invested in reducing costs and keeping the project on schedule, which helps the owner meet their project goals.
Construction Management Multi-Prime (CMMP)
In Construction Management Multi-Prime projects — also called multi-prime (MP) — the owner acts as a general contractor and goes to contract with each of the design team members and major trade contractors. This method is best for owners who have a lot of experience managing construction projects and want more control.
One advantage of this method is that subcontractors have a direct contractual relationship to the owner, and don’t have to wait for payments to filter through the tiers. This can lead to speedier payments and less paperwork for subs and suppliers.
Public-Private Partnerships (PPP or P3)
Public-private projects — also known as P3 projects — get to reap the benefits of both public and private projects. As their name suggests, the project is the result of a partnership between a private and a public entity.
Projects like affordable housing and infrastructure are often the result of these types of agreements. Like private projects, they are controlled by a private company which helps create efficiency and add expertise. Like public projects, there’s a steady project owner, decreased payment risks, and a project that will greatly benefit the general public.
Depending on who plays what role in the project, there are two facets of these partnerships that contractors and suppliers need to be aware of – whether it’s subject to prevailing wage provisions and how to protect their payment rights. Publicly funded projects are subject to federal or state prevailing wage regulations. Privately funded projects are usually not.
Integrated Project Delivery (IPD)
Integrated project delivery (IPD) is the most recent addition to the project delivery palette. In these projects, all the project team members are contractually connected with only one contract. All team members are selected before design begins, and they each play a role in the whole process, from design to construction.
IPD is gaining popularity because everyone shares the risk on the project equally. Also, this method creates the most innovative and collaborative approaches to projects. When combined with other construction methods, such as lean construction, they can greatly improve the efficiency of construction methods and shorten project timelines significantly.
Choose the best project delivery method for your project
Deciding which project delivery method is best for a project relies a lot on the type of project, how much control over the project the owner wants, the project timeline, and the budget.
Each method provides a different amount of control and ties the parties together contractually in a different way. Every project is different, so you’ll need to choose the right method on a case-by-case basis.