In every construction development project you have to decide which construction delivery method you are going to pick to build and complete your project. The old traditional way was to go out a hire an architectural firm, tell them what you thought you wanted, and they try to interpret all that and produce a preliminary set of plans for you to review.
The dilemma with this system is that the project costs to build the project are usually not considered early on in the process.
You can spend weeks of months having plans drawn and revised, and spend a boat load of money before you have any indication of the costs and whether or not the design is even in your target budget range. In one of my previous posts What do I do first I discussed doing a market feasibility study as one of the first things that you need to do when you decide you want to expand. One of the benefits of the early Marketing Feasibility study is a market analysis to help determine the maximum development costs you can put into a location and still be profitable. Once you have this budget you can give it to you Architectural firm and they can use that as a guide while doing their design for the project.
Almost 70% of projects using this traditional method of plans first contracts end up over budget. The reason for this is that typically, in order for a contractor to bid on a project, very specific details relating to the methods and materials must be given to avoid any ambiguity and to make an "apples to apples" comparison of bids. This method tends to be a result of the budget disconnect to which many architects and other design professionals are prone to.
A popular and effective way to save money on the front end of your project and avoid this cost disconnect is to team up with a Design-Build Contractor to produce a preliminary design and early cost budgeting so that you can determine sooner, and with less upfront out of pocket costs, if the project will fit within your project budget.
The relationship with a Design-Build Contractor is one in which the Design-Build Contractor is your “go-to” source for every thing that you need from project evaluation, (market feasibility) to budgeting, obtaining approvals, construction and everything in between. They are your single contact resources each step of the way.
There are two types of Contractual Relationships with a Design-Build contractor.
1) Construction Manager (Design-Build Contractor)
(with no General Contractor)
In this relationship the Owner contracts directly with the subcontractors and Construction Manager. In this case you are acting as your Own General Contractor. The Construction Manager handles all of the day to day construction activities including scheduling, paper work related to the subcontractors and vendors, insurance requirements, pay requests and lien waivers but your contractual relationship is directly with the sub-contractors, no in between third party.
The Construction Manager oversees the project and acts as your “Owner’s Representative”. The Construction Manger is responsible to represent your “Best Interest” in the project. Basically, the Construction Manager is you Eyes and Ears.
2) Construction Manager (Design-Build Contractor)
(with a General Contractor)
In this relationship the Owner contracts with a General Contractor, the General Contractor hires and contracts with all the sub-contractors and vendors. The General Contractor provides a Lump Sum Guaranteed price for the scope of work they are contracted to do.
The Construction Manager oversees the General Contractor and acts as your “Owner’s Representative” but does not have any control or influence over the sub-contractors or vendors. The Construction Manger is responsible to represent your “Best Interest” in the project. Basically, the Construction Manager is you Eyes and Ears however, his contact and dealings are only with the General Contractor.
Each of these scenarios has its own set of advantages and disadvantages and based on your circumstances one may be a better fit for you the other. To investigate what the differences go to How Design Build can benefit me and find out which one would work better for you.
How Design-Build can benefit me?
In a previous article What is Design-Build I explained the concept of Design-Build and the two contractual relationships you can form using this method to develop your project. There are advantages and disadvantages to each method which I will discuss here.
Construction Manager (Design-Build Contractor)
(with no General Contractor)
In this case you are acting as your own General Contractor , you sign all the contracts with all the Sub-Contractors and your Construction Manager works on your behalf as Owner’s Representative. Some of the advantages of this method of contracting are:
- You can get early cost estimating in put from your Contraction Manager based on conceptual design ideas as they are developed.
- You have a single source to provide all the special services that you will need like a Market Feasibility study, value engineering, preliminary budget (just a few)
- The General Contractors Mark-up on sub-contractors is eliminated
- Construction Costs are kept to a minimum by the Construction Manager using the latest systems and methods that CM knows are cost effective.
- Chances of misunderstandings are minimized when the construction manager, design staff and Owner work together as a planning team.
- Project changes are implemented quickly and seamlessly due to Construction Managers direct line of communication with design staff.
- You get the best ideas from your Team members due to a cooperative team spirit.
- You get the highest value project for your money
NOTE:
When You select a Construction Manager – With No General Contractor you can save money, but you do take on more risk. The key to your success is the knowledge and ability of The Construction Manager you hire so be selective. Base your decision on his experience, and knowledge, develop confidence, trust, and a good relationship and rapport with him before you select him. Once you hire him let him run the project and control of all the sub-contractors and design staff, don’t get sucked in to being a referee between the parties.
Construction Manager (Design-Build Contractor)
(with a General Contractor)
In this relationship the Owner contracts with a General Contractor, the General Contractor hires and contr
acts with all the sub-contractors and vendors. The General Contractor provides a Lump Sum Guaranteed price for the scope of work they are contracted to do. Some of the advantages of this method of contracting are:
- You can get early cost estimating in put from your Contraction Manager based on conceptual design ideas as they are developed.
- You have a single source to provide all the special services that you will need like a Market Feasibility study, value engineering, preliminary budget (just a few)
- Construction Costs are kept to a minimum by the Construction Manager using the latest systems and methods that CM knows are cost effective.
- Chances of misunderstandings are minimized when the construction manager, design staff and Owner work together as a planning team.
- Project changes are implemented quickly and seamlessly due to Construction Managers direct line of communication with design staff.
- You get the best ideas from your Team members due to a cooperative team spirit.
- You will get a high quality project.
NOTE:
When You select a Construction Manager – With A General Contractor you will spend more money than a project with out a General Contractor due to their mark up on the Sub-Contractors. This method may be preferable for very large and complex projects.
The key to your success is the knowledge and ability of The Construction Manager and his ability to coordinate and communicate with you and the General Contractor. The Construction Managers skill will need to be slightly different than if you don’t hire a General Contractor, so again be selective. Base your decision on his experience, and knowledge and your rapport with him. Once you hire him let him run the project and control of all the General Contractor and design staff, don’t get sucked in to being a referee between the parties
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