How Owners Select Project Delivery Methods - Sachse Construction
Topics: Construction, Featured Post, Industry News

How Owners Select Project Delivery Methods

Long before the first shovel-full of dirt is excavated and the first screw is driven, a project’s owner must decide what project delivery method is best suited for the job. There is no shortage of options to consider, and although the project budget and scope certainly play into the decision, the culture and mindset of the owner and developer are paramount.

Design-bid-build (DBB) is the traditional model, but other methods, including design-build and integrated project delivery, are gaining traction.

Design-build, in which the design-build team works under a single contract with the owner, gets a project done 33% faster than other project delivery methods, said Lisa Washington, executive director and CEO of the Design-Build Institute of America. She attributes that efficiency to the overlap of design and construction.

The team, which frequently involves the owner, designer, contractor and key specialty trades, meet early on discuss how best to use the budget to achieve the owner’s goals while addressing challenges and constraints. This allows for more design flexibility that the more prescriptive design-bid-build approach.

“Building on the expertise of all the key players, including the owner, they find the best solution within the budget the owner feels has addressed their goals and challenges,” Washington said. “That’s where the innovation and collaboration in design-build really kick in and bring value.”

Washington said that management consulting and investment banking firm FMI Corp. research shows owner satisfaction is much higher in design-build environments because everyone creates a vision together.

Integrated project delivery (IPD) provides a methodology and process that allows for consistency and understanding of how to improve construction, said Stephen Powell, senior project manager for CBRE Healthcare. “It plays off of a lean construction mentality in order to get to IPD,” Powell said. “In that mentality, you look for ways to improve something that has room for improvement.”

He said the owner generally is the most important person in executing an IPD project. “The owner has to have an understanding of IPD in order to put it on the table,” he said. “I don’t know that it would work as strongly if it was driven by just one of the other partners.”

Clint Stancil, managing director of CBRE Project Management’s Global Leadership and Platform, agreed. “While a contractor might be able to recommend IPD as a delivery model, it can be harder for them to implement it if the owner is a little apprehensive or not as passionate about IPD as they are about another model,” he said. “It’s much easier to get all team members in line and engaged compared to when it’s suggested by the architect or general contractor.”

 Attitude factor

Nearly any delivery method can be used for any project, but it’s the owner’s attitude toward varying delivery methods that frequently dictates the direction.

“We really encourage owners to think about their internal culture and each individual project when considering design-build,” Washington said. “The project delivery discussion is among the most important decisions they’ll make and will drive how the team works together. If you’re an owner with a siloed culture and people who are not accustomed to working together and ingrained in the old design-bid-build approach, the process will not work because there’s a mental shift that goes along with the different method of contracting.”

Stancil sees owners relying on their education or past experience to determine the delivery method. “Any client we see going down the IPD route is generally more knowledgeable because IPD is a more complex model,” he said. “Clients often default to the way they’ve always done business when they determine a delivery system, which may or may not be the most efficient or appropriate model.”

Washington cited 2015 research from the Construction Industry Institute that suggests three elements can enhance collaboration on any type of project, regardless of the delivery method: Transparency and cost, early involvement of the core team and a qualifications-based selection process.

Contract details

IPD puts every entity involved in the same pot of risk and reward. “If the project fails, everybody fails,” Powell said.

The flip side of sharing the risk, however, comes in sharing the reward, which is why a key component of IPD contracts involve incentives. “You’re looking for some sort of incentive to offset the risk you’re asking the team to take on,” he said. “There are success metrics and factors you’ll want to put in place to prove that a reward is justified and success was met, which sometimes necessitates getting into the granularity of understanding the cost.”

Powell also said there might be an additional audit or accounting efforts to ensure the success factor score is validated.

Stancil added that sometimes executing the contract can pose  challenges because various legal parties and procurement departments must collaborate. “It’s not a situation where you’re just negotiating directly with an architect and then directly with a contractor or another provider,” he said. “You’re negotiating an agreement across all parties at the same time.”

Bidding process

When an owner puts forth a request for proposals, it has already decided on a project delivery method and at that point it’s up to the contractor to decide whether to submit a bid, Washington said, as opposed to the contractor having a say in the delivery method of a given project.

When deciding to bid, a contractor typically examines its chances of winning the job, which can be based on factors such as experience with similar work in size or building sector. A contractor might think about an owner’s ability to assemble a strong team, as well as consider how realistic the budget and schedule are.

“The contractor has a good idea of whether something is realistic because they do this every day,” Washington said. “The realism of the budget and schedule is a key factor.”

After an initial call for proposals, the owner decides on a shortlist, which the Design-Build Institute of America recommends should be no more than three, giving any one firm a 33% chance of winning the final project. “We highly recommend because of the cost and effort that goes into submitting a full technical proposal that owners need to shortlist to the three most highly qualified firms so their odds of winning are more palatable and attractive for them to bid on the project.”

Technology’s impact

BIM’s increasing popularity has contributed to more collaborative formats for design and construction, said Powell. “Almost every IPD contract would have a strong BIM utilization plan … providing a platform to share information and, if possible, reduce certain waste or risk that one of the partners might have for designing things that aren’t necessary. BIM is the perfect example of a gateway into helping IPD succeed.”

Stancil agreed: “As more collaborative technology like BIM continues to grow and get more efficient it will enable delivery systems like IPD to take a stronger hold. Without that, it’s much harder to collaborate.”

Likewise, BIM supports what already is a very collaborative environment in design-build. “BIM can be used throughout the entire design and construction cycle, starting with helping the owner visualize what they want,” Washington said. “But it can also be used for other things like cost comparisons. It allows for very easy cost comparison and swaps so you can see what Option A vs. Option B offers.”

BIM also helps contractors stay better attuned to what the other team members are doing and allows them to more effectively schedule work, she said.

Recommended Articles