CONSTRUCTION L AW
Does One Size Fit All?
By Collin K. Hirschfeld
Optimal Construction Project Delivery
Much as anything else in life,
selecting a construction project
delivery model does not necessarily result in a right or wrong
choice. On paper, it may seem as if a certain project is better suited to one project
delivery model than another. But when the
rubber meets the road, often a construction project derails and never gets back on
track. Even when you may have had success with one model on a certain project,
you have no guarantee that you will have
that same success with the same model on
a similar project.
What Choices Do I Have?
You have several options when it comes to
project delivery models. Sometimes, anticipating upcoming issues, people modify
old methods or develop new ones to try
to address methods that did not work on
a previous project. However, mainly three
types of construction project delivery models are most common: design-­bid-­build,
design-­build, and at-risk construction
management.
■■
Collin K.Hirschfeld is a partner at McKercher LLP in Saskatoon, Saskatchewan, Canada. His
practice includes advice to and legal representation of local, national, and
international corporations, financial institutions, and professionals before
courts of general jurisdiction and various administrative tribunals in the areas
of construction, employment, professional negligence and misconduct, and
insolvency. He has a particular focus in construction litigation and dispute resolution, wrongful dismissal and termination, security enforcement, and professional discipline matters.
42 In-House Defense Quarterly Summer 2010
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© 2010 DRI. All rights reserved.
Design-Bid-Build Model
The design-­bid-­build model is the one
with which most people have familiarity.
It is often referred to as the “traditional”
method and has been used for a good part
of the twentieth century as the project
delivery mode of choice. People are familiar with it and its roles and responsibilities,
which are well defined, both from a practical perspective and a legal perspective.
There are three main players in the
design-­bid-­build model: an owner, a
designer, and a contractor. An owner has
separate legal contracts with each of the
other two. An owner first initiates a relationship with a designer, who assists the
owner by producing a complete set of drawings and specifications for the project. Once
these tasks are complete, an owner puts the
project out to tender so that contractors can
review and bid on it if they have interest in
it. A contractor is then generally—but not
always—selected on the basis of cost.
Once an owner and a contractor enter
into a contract, construction can commence. The designer continues to have a
role, supervising and administering the
contract and certifying the work completed
by the contractor. The contractor accepts
the risk and responsibility for the construction and how it is carried out. The contractor is responsible for the performance of
subcontractors and bears the risk associated with that performance.
Advantages of Design-Bid-Build
As mentioned, the design-­build-bid model
is the most familiar model of the three discussed in this article. As such, the roles and
responsibilities are well established and well
understood. Parties are not left to try to figure out what risk they bear or their roles in a
project. Standard form contracts have been
developed over many years for this model,
and key clauses have been litigated.
In the design-­bid-­build model, an owner
controls the design and construction.
Design changes easily can be made before
construction begins. An owner also controls the quality of design and construction. Because of this control, the project
scope is pretty much set. The only contentious questions that really arise are, is
something included in the contract, or does
the contract imply something?
The designer remains impartial throughout the process. Because the designer
created the documents upon which the
construction contract was based, it is in
the best position to reject work that has not
been performed according to those plans
and specifications. Further, the designer
provides a set of checks and balances to
measure the progress of construction and
the costs.
This model can work well with a small,
infrastructure construction project. The
model is also well suited to projects involving repetitive construction for long periods of work. Design-bid-build allows an
owner to spread such work out among several contractors.
Disadvantages of Design-Bid-Build
The separation of the design and construc-
tion phases creates difficulties. It slows
project timelines down and lengthens overall project schedules since it requires two
distinct phases with no overlap. The project design, from preliminary drawings
through the final design, has to be complete
before an owner can even seek tenders for a
project. Because of this time lag, projecting
n
Design-­build allows design
and construction to happen
simultaneously since the
two phases overlap.
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costs can pose difficulties before a contract
is awarded, and costs can increase.
Constructability and feasibility may be
overlooked because in creating a design,
a designer may not keep these aspects in
mind. Therefore, what may seem on paper
as if it is a wonderful idea could end up substantially increasing the cost of a project.
Another common complaint about this
system is that it is adversarial in nature. It
is essentially designed to provide an opportunity for the parties to stake a claim and
fight for it. As a result, an owner may have
to referee between the designer and the
contractor. Further, it offers little to no
opportunity to a contractor to make suggestions about effective alternatives, which
reduces the chance of adopting a teambased approach.
Additionally, the design-­bid-­build model
can place too much focus on the low bid to
the exclusion of other considerations. This
could lead to cost-­cutting measures such as
using poor quality materials or products to
secure the lowest price. Low bids can also
increase change orders.
Although an owner has control over
design in the design-­bid-­build model, this
also means that the owner is liable for
the design. Because the design is essentially final before the contract is awarded,
changing the scope of the project during
construction can prove difficult. When
changing the scope becomes necessary
due to design error, an owner bears that
cost because of its ownership of the design.
Design-Build Model
The design-­build model, although often
thought of as the new kid on the block, has
actually been around since ancient Mesopotamia, and later, the time of the ancient
Greeks. They employed what is referred
to as a master builder who was essentially responsible for the design and construction of projects. Over time—and in
part due to concerns of corruption—the
design-­build model was displaced and put
on the back burner. However, all indications in the last few decades have been that
design-­build has come back with a vengeance for good.
One source has reported that an estimated 30–40 percent of non-­residential
construction in the United States is carried
out by this method. Julie Sturgeon, Weighing the Design-­Build Benefits, College Planning and Management, July 2006. Some
have even predicted that it could account
for 50 percent of non-­residential projects
within the decade. Id.
The basic design-­build model generally
involves one contract between an owner
and a design-­builder. A design-­builder is
either led by a designer or a contractor and
can include more parties than two. HowDesign-Build Studies
• Design-Build and Design-Bid-Build in
the GTA, a thesis completed by Adrian
Greco, Feb. 2006, George Brown
College.
• An Empirical Comparison of Design/
Build and Design Bid/Build Project
Delivery Methods, a thesis completed
by Darren Russell Hale, Aug. 2005, University of Texas at Austin.
• Design-Build Effectiveness Study, prepared for U.S. Department of Transportation Federal Highway Administration
by Science Applications International
Corp., AECOM Consult, Inc., and the
University of Colorado School of Construction Engineering & Management,
Jan. 2006, available at http://www.
fhwa.dot.gov/reports/designbuild/
designbuild.htm.
In-House Defense Quarterly Summer 2010 43
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CONSTRUCTION L AW
ever, those entities form a single entity for
the purposes of contracting with an owner.
Design-­build allows design and construction to happen simultaneously since
the two phases overlap. It also allows for
construction input during the design
phase. Overall project planning and scheduling can happen prior to mobilization.
In awarding design-­build contracts, an
owner need not necessarily focus on cost.
In evaluating tenders, an owner can consider proposed solutions. Also, an owner
commonly will pay compensation to
unsuccessful bidders to defray some of the
costs incurred in preparing bids.
Design-­build also permits value-­based
project feedback. Design-­bid-­build projects require very specific details on the
methods and materials that a contractor
will use to avoid ambiguity. Design-­build,
on the other hand, gives an owner flexibility to change the scope of a project without
the need to re-bid the entire project. It also
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At-risk construction
management is particularly
suitable if a facility
needs to operate during
construction work.
Advantages of Design-Build
Under the design-­build model, the construction people and the design people are
on the same team. This helps remove the
adversarial stances that people commonly
take in the design-­bid-­build model. The
parties are not involved in finger-­pointing,
but rather focus on solving the problems
that arise. Because they are on the same
team, the construction team is motivated
to work with the design team to come up
with a design that focuses on constructability. The two teams can work together to find
ways to minimize construction costs without affecting function. Consensus on goals
and priorities is also easier to establish.
Because the designing and building steps
take place concurrently, this method allows the fast-­tracking of projects. The Construction Industry Institute conducted a
study of more than 350 projects across the
United States and found that the design-­
build model was 12 percent faster than the
design-­bid-­build model. David Bloxom,
Design-­Build: Ready to Meet the Economic
Challenges of 2009, Texas Construction,
Apr. 2009. A contractor is selected before a
tender is even submitted, which allows early
mobilization and construction activity: all
project phases intersect. Because a contractor becomes involved early, the contractor
starts construction with an understanding
of how the design has progressed. An owner
only deals with one entity in a design-­build
project, namely the design-­builder, which
helps facilitate communication and streamlines it. It also allows the owner to allocate
the risk for design and for on-time and on-­
budget performance to a single entity.
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encourages continuous improvement and
refinement of a project.
The ability to fast-track leads to good cost
estimates. In fact, construction cost is often
known and fixed during design, offering an
owner price certainty. Because a contractor
has the most experience with, and therefore,
the best feel for the construction costs of
various alternatives, with the contractor’s
design involvement an owner can end up
with a design that is less costly than if the
contractor had not been involved.
The design-­build model can also challenge the mindset of in-house people, who
can become set on certain preferences or
on doing things the same way. Creativity
is encouraged with a design-­build model.
Performance can focus on outcome, which
can lead to smart and innovative ways to
carry out projects.
Disadvantages of Design-Build
At the outset in the design-­build model the
design documents are only preliminary in
nature and can change over the course of a
project. It is, therefore, not uncommon to
come across a contract that has been written to take unexpected events into account.
As a result, a final project price potentially can vary greatly from an original bid
amount. Design changes after construction starts can end up being just as costly
44 In-House Defense Quarterly Summer 2010
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in a design-­build project as in a design-­bid-­
build project.
Because design and construction overlap, time pressures could squeeze the
design phase, leaving little opportunity to
review completed plans and specifications.
This could be costly for an owner if a contractor fails to meet regulatory requirements because a design process took short
cuts that later call for change orders to remedy mistakes. It could also result in a poorly
defined scope of work.
Decreased accountability becomes a
concern as well. Obviously, the design-­
builder has a great deal of control over how
a project is configured and completed. Further, in a design-­build model, an owner
does not have a third-party observer to
administer the project or to advocate for
the owner, which could lead to the sacrificing of quality to pad profits or shave time.
The design-­builder is also often its own
judge regarding the quality of its work.
An owner may not have the expertise
to evaluate the quality of the work, and,
therefore, places significant trust in the
design-­builder to properly design and construct a project. Similarly, an owner may
not have the means to understand the contractual requirements to enforce the correction of work, leaving the owner with
little choice but to engage in some form of
formal dispute resolution, either arbitration or litigation. All of these points bring
home the importance of integrity, expertise, and competency as desired characteristics of a design-­builder.
An owner also needs a clear vision and
scope from the outset, otherwise it could
lead to confusion for and second-­guessing
by the design-­builder, and the owner may
end up with something that it never wanted
or even contemplated. The fact that the
owner has no direct control over design
details magnifies this possibility.
A contractor may decide to employ a
construction method based on economics,
while a designer has a duty to make design
decisions based on quality, long-term performance, durability, and low maintenance
objectives. As such, these two approaches
may not always align, resulting in potential
conflict on the design-­build team.
Design growth is another concern that
arises. Steve Panciuk, Design-­Build Prob-
lems—Design Growth (Canadian Design-­
Build Institute, 2008). A contractor may
have a guaranteed maximum price based
on the preliminary drawings. With the
design-­build model, only once a contract is
awarded are detailed drawings completed,
and they quite likely involve changes compared to the preliminary drawings. Further,
a contractor may need to expend additional
monies to implement those changes and to
cover the cost of the enhanced design. This
could lead to a confrontation among the
design-­build team members.
Another concern involves the costs of
preparing a tender for a design-­build project. A bidder has to invest a great deal of
time and resources in preparing a bid on
a design-­build project, particularly on the
design side. Because of this, the high cost
of preparing a bid could result in fewer bidders, thereby discouraging competition.
An owner could compensate unsuccessful
bidders, but this is an additional cost that
the owner has to take into account in deciding on a project delivery model.
At-Risk Construction
Management Model
Some view the at-risk construction management model as an attempt to try to deal
with the challenges of the design-­build
model. The at-risk construction management model shares some characteristics
with both the design-­bid-­build and the
design-­build models.
As in the design-­bid-­build model, the atrisk construction management model has
three players—an owner, a designer, and a
construction manager. Two contracts are
involved, one between the owner and the
designer and one between the owner and
the construction manager. The construction manager and the designer do not have
a contractual relationship.
From the design-­build model the at-risk
construction management model inherits
overlapping design and building phases,
which allows fast-­t racking. A construction manager is generally hired during
the design phase, much as a contractor is
hired during that phase in the design-­build
model. The overlapping phases beneficially
permit the construction manager to obtain
bids from trade contractors sequentially. In
other words, a construction manager can
obtain separate bids for each construction
phase as it comes up.
The phrase “at-risk” in the term “at-risk
construction model” can typically have one
of two meanings in the construction industry. In some instances, it means that the
construction manager holds the trade contracts and as such takes on the performance
risks involved in construction. Other times,
at-risk can refer to the existence of a cost
guarantee or guaranteed maximum price.
The first definition is encountered most often, but sometimes when the term is used,
both definitions are meant at the same time.
In this model, a construction manager
oversees project management and building
issues, areas of expertise of the typical construction manager. A construction manager provides preconstruction services,
such as a constructability review, bid climate development, and bid management. A
construction manager also advises on time
and cost consequences of design and construction decisions, scheduling, and cost
control, coordinates contract negotiations
and awards, knows how to purchase critical materials and long-lead-time articles in
a timely manner, and organizes construction activities.
Advantages of At-Risk
Construction Management
At-risk construction management can lead
to excellent project coordination, reduce
claims, and lead to early project delivery.
It has the checks and balances that the
design-­build model does not have since an
owner retains the construction manager.
This can also result in a strong allegiance
to an owner’s needs.
Having a construction manager involved
early in a construction project helps ensure
that a design is practical and affordable.
An early review during the design phase
also helps reduces surprises—such as
change orders, delays, and increased project costs—down the road. A construction
manager can identify these issues during
Resources Available
The following tools have been developed to assist individuals to choose among project delivery methods.
Canadian Design Build Institute Methodology Assessment Matrix
The Canadian Design Build Institute has prepared an assessment matrix to help assist in
evaluating a specific project against the various project delivery methods. A copy of the
matrix is included with this article as Appendix A (page 47). As noted in the preface to the
matrix, an owner should consider not only the individual criteria, but the sum of the same.
This list is not meant to be exhaustive, but it definitely covers the significant areas to consider and provides a useful tool.
Project Delivery Publications
Numerous publications provide guidance in choosing a project delivery option. The internet
obviously makes accessing these tools much easier than in the past. Information about two
follows:
1. Tim Mearig, Project Delivery Method Handbook (State of Alaska Department of Education and Early Development, 2004), http://www.eed.state.ak.us/facilities/­publications/
project_delivery_handbook.pdf. This material provides a fairly thorough review of the
various methods and criteria to use in choosing one. The handbook discusses some
unique legislative criteria requirements of Alaska, but it still represents a very good tool to
help guide you through the thought process.
2. Charles Thomsen, Project Delivery Processes (3D/I, Apr. 2, 2006), http://web.
archive.org/web/20061015160052/http://www.3di.com/rnd/Files/Essays/
Project+Delivery+Strategy.pdf. This paper provides a very detailed review of the different project delivery methods available, including commentary on additional methods or
hybrids. Again, it has a lot of useful information and commentary on the methods, their
strengths and weaknesses, and considerations in making the choice.
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design, as opposed to during construction,
when changes can be and often the most
costly. Challenging constructability issues
can be dealt with early as well.
At-risk construction management is
particularly suitable if a facility needs
to operate during construction work. As
mentioned, a construction manager can
complete work easily in phases and can
coordinate it with an owner or the facility’s users to minimize operation interruption due to construction. Construction can
begin prior to design completion as well,
which allows relatively quick completion.
Further, at-risk construction management processes can frequently encourage openness. For example, a construction
manager often will share subcontractor bids with other involved parties. A
construction manager may also assume
responsibility for some of the design errors
discovered during construction, particularly if the construction manager was
involved in the design review.
Disadvantages of At-Risk
Construction Management
In at-risk construction management, the
design team and the construction manager can sometimes provide overlapping
design review services. Conversely, gaps in
services can also exist. Therefore, clearly
defining the roles and responsibilities of
the designer and the construction manager is critical.
The fee for construction managers often
is not competitively bid. Rather, selection is
based on reputation, expertise, and experience. This in turn impacts the suitability of
at-risk construction management for certain projects, as it adds another layer of cost
that small projects may not be able to bear
and another level of bureaucracy, which
also can result in additional cost.
Further, the lines of communication
between a designer and an owner may
become hampered. Rather than checking with the owner on design issues, the
designer may check with the construction
manager first, since a construction manager is on site and perhaps more convenient
than the owner to deal with.
Finally, the right mesh of personalities
is also important. A construction manager and designer are not on the same team
in the at-risk construction management
approach, and, therefore, the personality
mix becomes important, just as with any
project delivery option.
How Do I Choose?
Factors to Keep in Mind
Essentially, when choosing the best delivn
Some jurisdictions may
have laws or regulations
that prohibit or restrict the
methods necessary to one of
the project delivery models.
n
ery method for a particular construction
project, you will want to keep nine factors
in mind: the market, the local laws, the
budget, the design function, scheduling,
risk, in-house expertise, the project type
and size, and the likelihood of changes.
The Market
Regardless of which approach someone is
considering, being aware of the construction market is important. The cycle that the
market is in can affect who is available to
design and construct a project. It can also
obviously affect the cost of construction,
and it is important to try to assess who
should bear risk or who is in the best position to bear it.
Local Laws
Some jurisdictions may have laws or regulations that prohibit or restrict the methods necessary to one of the project delivery
models. It is important to be familiar with
the laws of whichever jurisdiction that you
will work in prior to deciding on a project
delivery model.
Budget
Budget is likely one of the most obvious
considerations. You will build nothing
unless money is in hand or financing is
in place. A budget is generally determined
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before design to try to evaluate the feasibility of a project. Once the budget is set, an
owner will want a project completed for or
for close to that amount without excessive
cost overrun.
Design Function
An owner is also concerned that a facility will function as envisioned. An owner
wants the facility’s design to successfully
fulfill the needs of the end users, whether
the owner or someone else. Therefore, a
design team needs to be well qualified to
design the type of project that is planned.
In turn, the end users’ needs must be
clearly conveyed to a designer. Further,
design documents also must reflect something that can be built, and they must be
complete and coordinated.
Scheduling
Scheduling is another important factor to
consider when choosing a construction
project delivery model. The completion date
of a project can be critical, whether in terms
of generating revenue or whether in terms of
providing an essential, functional space by a
certain deadline. This requires realistically
assessing sequencing and project duration
early in the planning process. Scheduling
is something that needs to be monitored
throughout design and construction, which
is something else to keep in mind.
Risk Assessment and Allocation
Risk assessment should also be kept in mind
in examining the choice of a project delivery model. All projects entail many risks,
ranging from design risks to risks associated with scheduling, budgeting, and cost.
An owner should have a good understanding of the risks involved in potential project
delivery models and should then make conscientious decisions about allocating those
risks among the various parties to the project. An effort should be made to allocate
risks to the parties that have control over
corresponding aspects of a project.
In-House Expertise
Another consideration relates to an owner’s level of expertise. Familiarity with
the building process, or lack thereof, has
to be considered when deciding how to
Construction Project Delivery  page 66
Appendix A
CDBI Methodology Assessment Matrix
The descriptions of the project performance criteria are an expression of the level that can be achieved, noting that for each individual project the actual results may vary. The various criteria are interdependent, for example a highly qualified owner’s team will usually produce clear,
accurate and thorough user requirements, which in turn will result in higher quality contract documents. Higher quality contract documents will
generally result in better quality design, which in turn will likely produce better quality construction. The appropriate budget and time must be
allocated to achieve a high quality project. When an owner places restrictions on one of the criteria it will likely cause negative impact on other
criteria. When selecting the most suitable delivery method the owner should consider the sum of the criteria as well as the individual criteria.
Project Performance Criteria
For what project complexity is the delivery method best suited?
To what extent must user requirements be defined prior to tender?
What level of design quality is characteristically
achieved with the delivery method?
Which delivery method provides multiple design
proposals for owner consideration?
Design
How complex is the design review process for the owner?
To what extent can the delivery method accommodate
scope/design changes during construction phases?
To what extent does the delivery method inherently minimize changes?
To what degree do the owner and user have direct contact with
the designer and are they able to directly Influence the design?
To what extent can the delivery method achieve accelerated
delivery, or ensure delivery to specific schedule?
Schedule
Ability to accommodate early construction start?
Potential to obtain an early cost commitment?
To what extent does the method accommodate adjustments to
scope during construction to achieve final costs within budget?
To what ability can the delivery method reduce
Cost
claims/cost for changes and delays?
Ability to manage cash flow?
To what extent does the method permit the owner to influence systems,
materials and construction methods to minimize life cycle costs?
To what extent is the required design and construction
experience and knowledge available for the method?
Ability to prequalify the prime contractor on publicly funded projects?
Ability to prequalify the prime contractor on privately funded projects?
Contracting
To what extent does the method employ a simple
bid evaluation and selection system?
What level of construction quality can be achieved
with the applicable delivery method?
To what extent does the method permit the owner to transfer the
Risk
liability for design errors and omissions, delays, construction errors
and omissions and nonconformances to contract documents?
To what extent do owners have the experience and
General
knowledge required to employ the method?
Design-BidBuild
low to high
well defined
Construction
Management
Design-Build
low to moderate low to moderate
not fully defined well defined
high
high
high
no
possibly
yes
moderate
more complex
simplified
low
high
low
moderate
moderate
high
high
high
low
low
low
moderate to high
high
moderate
moderate to high
low to moderate
high
low
high
moderate
low
moderate
high
low
high
low
high
high
moderate
high
moderate
low
low
high
moderate
moderate
high
high
high
moderate
low
higher
higher
higher
low
low
high
high
low
low
low
Canadian Design-Build Institute Practice Manual
Document 205 ‘Methodology Assessment Matrix’—Revised 2007
In-House Defense Quarterly Summer 2010 47
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Construction Project Delivery  page 46
best deliver a project. In-house management and design capability, or, again, the
lack thereof, can significantly influence the
amount of outside assistance needed during a project and will, in turn, influence the
choice of a project delivery method.
Type and Size of Project
The type and size of a project should also
be examined. The level of complexity and
uniqueness of a project will dictate the
appropriate degree of control that an owner
should maintain, which varies among the
project delivery models. As the size of a
project increases, so does the likelihood of
the need for outside assistance.
Likelihood of Changes
The likelihood of changes should be contemplated as much as possible. There may
be instances in which an owner is aware
that its requirements during a project may
change significantly. The potential costs
of such changes should be considered in
choosing a project delivery model.
Other Considerations or Goals
Other considerations or goals that will
affect your choice include:
• Lowest cost consistent with quality and
performance objectives
• Initial cost versus life-cycle cost
• Shortest schedule for overall project
delivery
• Meets overall expectations
• Promotes innovation and value
engineering
• Limits the cost of design changes
• Limits the risk of cost and schedule
growth
• Provides necessary control over design
decisions
• Controls construction quality
• Best limits impact on current operations, safety, and security
• Restricts construction “aggravation”
• Limits demands on owner resources
• Minimizes number of contractual entities and points of responsibility
Maurice R. Masucci, Project Delivery Systems: Pro vs. Con—Design-­Bid-­Build vs.
CM@Risk vs. Design-­Build, (Construc-
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tion Management Association of America, Southern California Chapter, undated).
In reviewing the above goals or considerations, an owner should prioritize them
by importance and then match priorities to
the strengths and weaknesses of each project delivery method. No single method will
meet all of these objectives so you should
simply find the project delivery method
that provides the best balance for these
conflicting interests. Id.
Concluding Remarks
As indicated at the outset, there are no
perfect solutions to construction project
delivery, and one size does not fit all. Each
project has its own unique circumstances
that will influence the selection of a project
delivery mode. Even when projects appear
similar, evaluating each individually can
lead to different conclusions on the best
project delivery model. I hope that I have
at least offered you some tools and food for
thought to help guide you in choosing the
right method for your project.