PROJECT DELIVERY

METHODS

(Refer to Chapter 4)
 INTRODUCTION
• A project delivery method is 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.
• Project delivery method describes
– how the participants are organized to interact, transforming the
owner’s project goals and objectives into a finished facility.
 INTRODUCTION (CONT.)
• The owner usually considers the following
factors to decide how project resources are
to be organized:
– Past practices, traditions, and experience;
– The advice of consultants;
– Funding sources and constraints;
– The effective use of staff and working capital;
– The interests of other project stakeholders.
 OWNER-PROVIDED DELIVERY

• Mostly applicable to projects where the

scope of the work is within the owner’s
range of skills, experience, and resources.
• Owners perform some or all of the design
services and construction work themselves.
– e.g. simple modifications to an existing facility,
projects with limited cost or complexity,
repetitive projects.
 DESIGN BID-BUILD (DBB)
• DBB has been the
most common method
of project delivery for
public projects, and
for many private
projects as well.
 DBB

• Design Bid-Build is effective on projects

– where the owner needs both professional design
services and construction services
– where the designer does not require detailed
knowledge of the means and methods of
construction.
 DBB
• DBB provides the owner with a high degree of
control.
• Preferred project delivery system for owners who:
– Wish to closely monitor projects
– Are public owners and must account in detail for
expenditures.
– Are obligated by statute to procure professional design
services by qualifications-based selection (QBS)
regulations and constructors by competitive bidding.
 DBB
• The owner
– defines project goals and objectives,
– secures the financing, and
– specifies the standards and contract terms.
• The owner may perform
– planning, conceptual design and full design, or may
engage an outside design professional (designer) for
some or all of these tasks.
• During this planning and preliminary stage, owner
and designer work as a team to obtain required
permits and conduct necessary site investigations.
 DBB
• The designer provides
– Complete architectural and engineering design services
– Complete construction bid documents
• Prospective contractors prepare their bids from these
complete and specific bid documents.
• The bidders submit their proposals to the owner (often
w/ designer) , who determines the most responsive
(typically the lowest) bid meeting project
requirements.
• In certain circumstances, owner may select a
contractor outright and negotiate contract terms
directly.
 DBB
• Advantages
– Known quantity to all parties
• Well-defined contractual relationship
– Firm fixed-price contract
– Contains considerable contractual protection to owner
• Insulated from many of the risks (e.g. cost overrun, labor
inefficiency, etc.)
• Disadvantages
– Quality of constructor may not be assured
– Usually more time consuming
– Lack of coordination among participants
CONSTRUCTION MANAGEMENT
(CM)
• Many owners engage construction managers
(CMs) to assist in developing bid documents and
overseeing project construction.
• CM:
– A professional or a firm trained in the management of
construction processes.
– Generally interposed between the owner and some or
all of the other participants.
 CM
• Two general types
– Agency Construction
Managers (ACM)
– Construction
managers-at-risk (CM-
at-risk)
 CM
• ACM acts as an agent of the owner and extends
the owner’s internal capabilities in performing
traditional owner responsibilities.
• The level of service by the ACM can range from
on-call advice to full project management.
• In some cases, the owner hires the ACM before
design begins and ACM may participate in the
selection of and contracting with the designer or
might even be the designer.
 CM
• CM-at-risk typically contracts with the owner in two
stages.
– Manages and undertakes services during conceptual &
preliminary design phases with the design professional.
– On completion of design, owner and CM-at-risk then agree
on a price and schedule for the completion of the
construction work.
 CM
• Advantages
– Reduced change orders and claims
– Owner approval of subcontractors
– Good communication among all parties
• Disadvantages
– Higher cost to owner due to reduced
competition
 DESIGN-BUILD (DB)
• A single entity to
provides both design
and construction
services.
• Contract may either be
negotiated with a
single design-builder
or result from
competitive proposals.
 DB
• Selection can be based on low price or on a
set of value criteria (experience, staff,
bonding capacity, etc.) or both.
• Provides the owner with a single point of
contact for project responsibilities,
eliminating the need to assist in resolving
designer-contractor disputes.
 DB
• Costs are typically defined and maintained to a
higher degree.
• Coordination of fast-track management to achieve
early completion is greatly simplified.
• Makes many decisions that owner would make
under DBB, due to delegation of increased
authority.
 DB
• Advantages
– Better communication among all parties
– Allows construction input early in design phase
– Easier incorporation of changes, if any
– A clear understanding and documentation of design-build
processes enhances the quality of design-build projects
• Disadvantages
– Initial cost may be higher due to increased contractor risk
– Lack of checks and balances
 CONTRACT TYPES
• Purchase of actual construction service
• Lump sum
– Single fixed price
• Unit price
– Price per unit of the different elements of the
construction project
• Reimbursable
– Cost plus fixed fee
– Guaranteed maximum price (GMP)
– Cost plus percentage fee
 DESIGN-BUILD VARIATIONS

• Funding Option Variations

• Turnkey
• Developer Financed Projects
• Turnkey Variations
 Funding Option Variations
• Private capital and developer participation offer
private owners several variations on design-build.
• Lease-develop-operate arrangement:
– The owner gives a private operator a long-term lease to
use, operate, and expand an existing facility.
• Public-private partnership or wrap around:
– Ownership of or fiduciary responsibility for a project is
assigned to a private party.
– That party designs, builds, and may even own, operate
and maintain the new facility.
 Turnkey
• Turnkey adds to the design-builder’s
responsibilities the operation and/or maintenance
of the completed project.
• Turnkey delivery has the potential for bringing a
new project on line more quickly.
• Three forms of turnkey project delivery:
– Design-build-operate-transfer
– Design-build-operate-maintain
– Design-build-own-operate-transfer
 Developer-Financed Projects
• For highly specialized projects and
circumstances, financing from a private or
public developer or other third parties can
offer additional variations on design-build
and turnkey project delivery, each with new
roles for owners, designers, and contractors.
 Turnkey Variations
• Variations on turnkey add financing as a key
component. While financing arrangements are
unique for each project, developer financed
projects generally resemble one of the turnkey
delivery methods:
– FDBT (Finance, design, build, transfer)
– FDBOT (Finance, design, build, operate, transfer)
– FDBOOT (Finance, design, build ,own, operate,
transfer)
• In each case, the transfer of the project occurs only
after the developer’s interests and financial
obligations have been satisfied.
 FAST-TRACKING
• Fast-track approach compresses the schedule by
sequencing the start of construction on underlying
project elements (e.g. foundation, basic supporting
structures) before final design is complete for interior
or adjacent elements.
• Fast-tracking is not a method of delivery, rather, it’s a
management strategy within delivery methods.
• While often successful in achieving schedule
reductions, problems on fast-track contracts can create
a domino effect on follow-on contracts for the project.
• Fast-track is more successful on projects that are
straightforward and have a high level of predictability.
 Flowchart of Project Delivery
Design-Bid-Build

RFQ or RFP Architect's

City City IFB f or City
f or Design Design and
Determines Selects Construction Aw ards to Construction
Services Specif ications
Need Architect Advertised Low Bidder
Issued (100%)

Alternative Design/Build
Delivery
Methods
Considered RFQ or RFP Design/Build D/B Firms
Select Aw ard to D/B Firm
f or Design RFQ or RFP Prepare Design
Design Best Value Completes Construction
Criteria Documents and
Prof . D/B Firm Design
Prof essional (30%) Proposal

City
Determines
Delivery Construction Manager-at-Risk
Method

RFQ or RFP Architect

City
f or Design Completes
Selects
Services Design and
Architect
Issued Architect's City and Specif ications City/
Design and CM@R CM@R
Construction
Specif ications Negotiate Select
RFQ or RFP (75%) GMP CM@R Subs.
City
f or Solicits
Selects
Construction Bids f or
CM@R
Mgr. Issued Subcontractors

City has ability to make changes in Changes in scope and quality of

scope and quality of project. project reflected in change orders.
DB vs. Standard Process
 Current Trends
• DB is the predominant
delivery method in
Europe and Japan
• Steady increase in
United States and
Canada (graph)
• Contractor-led has
95% of the market