Construction Project Delivery Methods: Weighing the Pros and Cons
Anyone in the construction business knows that project delivery methods can make or break your project.
The project …
- Scheduling; and
… are all affected by construction delivery methods.
Are you wondering which method is best for your next project?
This article compares the pros and cons of the most common construction project delivery methods so that you can choose the best one for your upcoming project.
Table of Contents
- Flexbase: Providing Working Capital is One Part of Our Cash Flow Management Solution
- What Are Project Delivery Methods?
- What Are the Most Commonly Used Types of Project Delivery Method?
- How Do You Choose a Project Delivery?
- Start Your Construction Project Right With Cash Flow Management Solutions From Flexbase
Flexbase: Providing Working Capital Is One Part of Our Cash Flow Management Solution
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What Are Project Delivery Methods?
Wikipedia defines project delivery method as:
“A system used by an agency or owner for organizing and financing design, construction, operations, and maintenance services for a structure or facility by entering into legal agreements with one or more entities or parties.”
Construction project delivery methods come in a variety of types and the method needed will vary from project to project.
Why Is it Important to Choose a Construction Project Delivery Method Before Your Project Begins
Each one of the project delivery methods comes with pros and cons, but there’s generally one delivery method that will most optimally suit your specific project.
By carefully determining the correct method, you will be able to:
- Keep your project running smoothly
- Reduce overall risk; and
- Maintain a handle on your projected budget
What Are the Most Commonly Used Types of Project Delivery Methods?
The most commonly used construction project delivery methods include:
- Design-Bid-Build (DBB)
- Design-Build (DB)
- Construction Management at-Risk (CMR)
- Multi Prime (MP); and
- Integrated Project Delivery Methods (IPD)
Also coined “hard bid,” the DBB is the most traditional of construction delivery methods and tends to result in the lowest construction price.
Design-Bid-Build provides considerable opportunity for owner input since the designer/architect and general contractor work directly for the owner under different contracts.
How does it work?
The design team and owner work together to develop contract documents, including:
- Specifications; and
- Other exhibits
When completed, the design is opened to bidding from general contractors.
It usually takes around 2 to 4 weeks for contractors and subcontractors to price a project.
Once all the proposals are in, the owner and design team collaborate to decide which contract to go with, and the project begins.
Pros and Cons of DBB
What are the pros and cons of the Design-Bid-Build project delivery method?
- The designer oversees the work of the general contractor and subcontractors. This helps to ensure that the owner receives the end product they were anticipating.
- The owner may be required to spend a considerable amount of cash prior to getting a firm price on the actual construction project.
- Depending on the quality of the initial design, the owner may be asked to change orders, thus incurring additional costs.
- The construction process does not begin until the design has been finalized, adding additional time to the overall timeframe of the project.
- The general contractor does not have the option of giving feedback during the design process.
- Payments have to flow through the ranks of contractors and suppliers, which may mean delayed payments for the lowest tiers of workers.
Used for roughly 40% of US-based construction projects, the Design-Build method has become increasingly popular in recent years.
Design-Build is very straightforward in that owners are contracted with just one firm.
Both the design and construction phases of the project are covered under one contract, with just one company.
In contrast to the DBB project delivery method, the DB project is handled from start to finish by either the architect or contractor.
Ideally, this means that the project is more efficient overall.
Design-Build projects may either be contractor-led or architect-led, depending on the project needs.
Contractor-led projects generally involve repeatable work, such as infrastructure or road projects, that don’t rely on a complex design.
Architect-led agreements are most commonly found on projects having a high level of difficulty of design, such as new buildings or remodeling projects.
Pros and Cons of DB
The pros and cons of the DB project delivery method are as follows:
- Design-Build projects give contractors and subcontractors the opportunity to have a say in the design. This can be of benefit, provided the contractors and subcontractors have extensive experience.
- The overall start-to-completion timeline is generally shorter, as well. For this reason, the DB project delivery method is often used for fast-track projects.
- Since subcontractors are frequently chosen ahead of time, it can be difficult for new sub-contractors to get the chance to participate in Design-Build projects.
- A conflict-of-interest may occur between the contractor and the design team since the contractor’s incentive is to keep the cost low, and the design team’s goal is a high-quality finished product.
- If the general contractor does not carry design errors and omissions insurance coverage, there may be an added liability.
Construction Management at Risk (CMR)
If an owner is needing a defined price and completion date, Construction Management at Risk may very well be the best choice of project delivery methods.
With the CMR method, a construction manager acts as the representative to the owner throughout the design and construction phases.
The construction manager is involved from the start, including during the design process where they act mainly as a cost controller.
They also oversee construction just as a general contractor would.
Pros and Cons of CMR
What are the pros and cons of the Contract Management at Risk project delivery method?
- Since the owners who choose CMR work directly with their designers, they have earlier awareness of cost, as well as faster project delivery. They are able to get locked in on a final construction cost earlier in the process.
- The Contract Management at Risk is invested in keeping the project on schedule and reducing costs. This in turn helps the owner meet the project goals.
- With the CMR method, the owner still maintains liability for completeness and accuracy, as well as the details of the design plans. Any disagreements with the designer or CMR manager may mean scheduling delays, an increase in costs, and possible litigation.
- In the event that construction costs come in higher than expected in a CMR, the contractor is expected to absorb those costs. This of course reduces their profit and overhead.
Another of the construction delivery methods is Construction Management Multi-Prime, also known as Multi-Prime.
In this method, the owner is the general contractor.
A Multi-Prime project is divided into three phases:
- Engineering; and
With this project delivery method, the owner has separate contracts with the professionals in each of the three phases.
MP is best suited for owners who have plenty of experience managing construction projects.
Pros and Cons of MP
The pros and cons of this type of construction project delivery method include:
- Owners have good control over their projects.
- Since subcontractors have a direct contractual relationship with the owner, they don’t have to wait for payments to filter through the layers of employees.
- Faster payments and less paperwork for subcontractors and material suppliers.
- It can be stressful being your own general contractor.
- It can be difficult to have a good grasp on the final cost until a project is completed due to the need to coordinate all the prime contractors.
- Communication can be tricky since there are so many providers included in the process.
- It is difficult to direct the contractors’ schedules.
Integrated Project Delivery Methods (IPD)
The final of the most common project delivery methods is the IPD or Integrated Project Delivery Method.
Newer to the scene, this delivery method contractually connects all project team members under one contract.
Team members are selected prior to the beginning of the design process, and each plays a role in the entire process, from start to finish.
Pros and Cons of IPD
What are the pros and cons of the IPD construction delivery method?
- If well-organized, all contrasted participants are available to the owner prior to the groundbreaking of the project.
- Everyone involved shares the project risk equally.
- IPD tends to create the most innovative and collaborative approaches to construction projects.
- When properly executed, IPD greatly improves the efficiency of construction methods as well as shortening project timelines by a significant margin.
- IPD can sometimes be expensive to implement up-front.
- Getting the IPD contract right from the start of the process can be time-consuming, due to the number of stakeholders involved.
- Owners choosing the IPD method must be comfortable in their initial decisions regarding how well team members will work together.
How Do You Choose a Project Delivery?
Each project delivery method offers a varying level of control and different contractual ties between parties.
Since there are pros and cons to each method, you’ll want to select the best method for the project on a case-by-case basis by taking into consideration:
- Risks; and
- Company experience
Start Your Construction Project Right With Cash Flow Management Solutions From Flexbase
When shopping for the best cash flow management system for contractors you’re bound to come across many options — but not all are created equal.
It’s common for contractors to pay for multiple subscriptions and software platforms in order to get exactly what they need.
But not any longer.
The Flexbase app is designed to streamline the invoicing process to ensure contractors get paid sooner, meaning** far fewer cash flow problems.**
But, we also know that in the construction industry working capital is needed to …
- Fund materials
- Pay for labor; and
- Initiate any project
… which is why we also automate the construction loans process.
What are you waiting for?
Schedule your live Flexbase demo today.