Project Delivery Methods

Practical and Efficient Transactions Counsel

Contracts and project delivery methods are intertwinedContracts and project delivery methods are intertwined – but their relationship is often misunderstood. Thoughtful selection of the best delivery method for the project should come BEFORE contract negotiations. Each project structure has its pros and cons. Only AFTER the ideal delivery method is chosen should contract preparations begin.

Often developers and owners pick their project team and leap right to the selection of contract forms. They default into one of several possible project delivery methods. This is a missed opportunity. We can help you consider the best delivery method for your projects, and then negotiate a suite of interrelated contracts to help implement the delivery method you choose.

Why Are Project Delivery Methods so Important for Construction Projects?

Project Delivery Methods

There are many ways to structure a construction project. There is no “best” project delivery method, no “one-size-fits-all” option for all projects. The best delivery method depends on the kind of project and the goals of the project participants.

Sometimes, speed of project completion is key. Other times sticking to a strict budget is most important. Sometimes the quality of the finished building predominates over concerns for both cost and speed. In other cases, project owners are most concerned with single-point responsibility, and hire one party to both design and build the project.  

Owners and developers pick the project delivery method. Factors they should consider include the project participants, their strengths, relationships and experience working together, the tightness of the budget, the kind of project, whether it must be complete by a date certain, and the risk each party is prepared to assume.  

Contract Negotiations

Good contracts are essential. They promote dispute avoidance and met expectations. They are a roadmap for project success. As the project ‘desk reference’ they should be consulted often. Project participants can avoid headaches by understanding their contracts. 

This is often misunderstood. Contracts are not an annoyance or a necessary evil. While it is true that people with bad contracts tend to ‘lose’ in disputes, they are not something just ‘for the lawyers’ or to be ‘shoved in a drawer’ until a dispute arises.

The act of negotiating contracts is itself useful. It can get people on the same page. Early attention to issues like scope and fee, the roles and risks of project participants, and any foreseeable complications, can help avoid later disputes.  

Thoughtful contract negotiations – guided by experienced counsel, who pose the right questions at the right time – can help to align the parties’ expectations. This is where true design and construction counsel can backstop your usual attorneys, who likely bring important but different skill sets.

Helping You Structure Your Project

Project participants – particularly owners and developers – should consider the range of available project delivery methods before starting contract negotiations. Each method has its pros and cons. We provide counsel on the unique risks and rewards of various options for structuring projects, including these common delivery methods:

  • Design-Bid-Build:

    In this ‘traditional’ method the project owner enters into two separate contracts: one with the architect (or engineer) lead designer, and another with the contractor builder. The design plans are usually complete before the contractor is selected, so owners can obtain more accurate price estimates from the contractor – a real advantage for cost-conscious owners. Drawbacks include slower delivery time due to the sequential (rather than concurrent) phasing of the design and construction effort, and often a lack of contractor input during the design phase. The designer typically helps the owner administer (i.e., police) the interactions between the owner and contractor. This is a real advantage for owners who only occasionally build, and thus lack the knowledge to accurately monitor the contractor’s progress, the quality of its work, and what it should be paid each month. However, making the designer police the contractor puts them into an – intentionally – adversarial relationship which can lead to disputes.  

  • Design-Build:

    In this popular delivery method, the owner hires one party – the ‘design-builder’ – to supply both design and construction services. Anyone can serve as the design-builder. For example, the property owner can hire a developer, which can in turn hire both the designer and contractor. Or the project owner can hire a contractor, which can then directly hire the designer. And on designer-led design build projects, the owner can hire the architect (or engineer) lead designer, which can then hire the contractor. These are all ‘design-build’ projects because the owner contracts with just one party for both design and construction. Owners realize many advantages in design-build projects, including having a single party be responsible for both design and construction problems. This means no ‘finger pointing’ between the designer and builder. Design-build projects can usually be delivered faster due to the concurrent (rather than sequential) phasing of the design and construction effort. And, they often cost less. This is because designers and builders can realize certain efficiencies when they are on the ‘same team’ contractually.  

  • Construction Management:

    Project owners often hire construction managers, who can assist them in a variety of ways. The construction management (CM) delivery method is a spectrum of possibilities, not a single method of project delivery. Inherently flexible, it has many varieties. In the ‘CMa’ variant, the CMa serves as an agent and advisor to the owner, but the owner enters into contracts with its contractor builders directly. The CMa provides consulting, coordination, and management to the owner, all in exchange for a fee.  By contrast, in the ‘CMr’ or ‘construction manager at risk’ variant (which also known as ‘CMc’ or ‘construction manager as constructor’), the CMr provides early project advice, including during the design phase, to owners in exchange for a fee. Eventually, the CMr contracts with trade contractors directly, much like a general contractor. The CMr has much greater project involvement, collects a much greater fee, and has much greater liability exposure to the owner for cost, schedule, and quality problems compared to a CMa.

  • Multiple Prime Contracts:

    In this delivery method, the owner acts as its own general contractor and hires multiple trade contractors directly. The owner realizes savings, as it pays no general contractor a markup fee. However, the owner’s direct contractual relationship with various trade contractors makes it ultimately liable for management and coordination problems – risks often borne by general contractors. Claims that one contractor interfered with another, or caused its work to be performed less efficiently than planned, often lead to ‘extra cost’ claims against owners. Owners are rarely able to manage and coordinate complex projects successfully. The multiple prime contractor approach can be workable on small or simple projects, or when the owner is very sophisticated and has an experienced internal project team. In complex projects, owners sometimes hire a CMa to manage the multiple prime contractors. In very complex or expensive projects – like hospitals – the CMa might be comprised of a joint venture between companies with different specialties, like an engineering firm and a general contractor.

  • Many Other Variations

    Project delivery methods can be customized. Projects can be “fast-tracked” if speed is more important than cost and control. The owner, designer, and contractor roles can be filled by joint ventures, bringing further resources and experience to the project. Shared design responsibility is possible through bridging, design-assist, and value engineering approaches. For those not faint of heart, cutting-edge project structures – like integrated project delivery (IPD), in which the owner, designer, and constructor can all share risk and reward by signing a single three-party contract – are options. Project delivery methods are flexible and limited only by the creativity of those who structure projects.  

Jeremy can provide valuable insights – earned from involvement in many projects, big and small, and in resolving myriad design and construction disputes – to help you select an advantageous delivery method for your project.  

To learn more, contact Baker Law today.

Project owners and developers should consider the range of available design and construction project delivery methods before starting contract negotiations.

Project owners and developers should consider the range of available design and construction project delivery methods before starting contract negotiations.