Chapter 5: Project Delivery Methods

The University of Missouri intends to make the best and most cost-effective use of construction funding and to build high quality facilities respective to functionality and appearance. Regardless of the delivery system, the university awards design contracts through a qualifications based process and awards construction contracts to the lowest, responsive, responsible bidder or bidders based on pre-established criteria. The university project managers consider several factors in selecting a construction project delivery system including the following.

Design/Bid/Build is the University’s preferred construction delivery method. Prior to pursuing Design-Build, Construction Manager at Risk, or Construction Manager Agency for any project, a justification for the delivery method must be approved by the Executive Vice President. For all Curator level projects, the proposed (and approved by the Executive Vice President) delivery method and justification shall be included in both the BOC Project Approval Summary and Backup documents.

Project Factors
 

• Schedule requirements; or the cost of a linear schedule versus the cost to accelerate the schedule, or overlap the project phases.
• Clarity of the project scope; is a longer planning phase needed.
• Cash flow or funding cycles funding the project budget; when is cash available.
• Need for early establishment of the contract for construction cost.
• Potential for scope changes during construction phase.
• Desire to encourage innovation and/or contractor input during design.
• Special financing; developer-led project, etc.
• Unusual budget restraints.
• Unusual quality or design control requirements.

Owner Success Factors

• Desire to control design content/quality; ability to define and verify the program and to take responsibility for the design.
• Experience with particular delivery system.
• Internal resources to manage particular delivery system: ability to manage multiple contracts for a single project.
• Desire to control contingency budgets and to what extent.
• Desire to eliminate responsibility disputes between contractors and designer.
• Tolerance for change orders and flexibility to allow changes during construction.
• Desire to control the project risk and contingencies.

Construction Delivery Methods

The University of Missouri System uses the following primary construction delivery methods. Others may be considered with approval of the contracting officer.

Design/Bid/Build 

This method, also referred to as Low Bid or Competitive Bid, is the one with which most Public Owners are familiar. It is a linear process where one task follows completion of another with no overlap possible. Plans and specifications are completed by the architect and then bids are issued. Contractors bid the project exactly as it is designed with the lowest responsible, responsive bidder awarded the work. The design consultant team is selected separately and reports directly to the owner.

BEST SUITED FOR: Projects that are budget sensitive, but are not especially schedule sensitive and not subject to change. Owner can completely control the design.

Advantages:

• Familiar delivery method.
• Simpler process to manage
• Fully defined project scope for both design and construction.
• Both design team and contractor accountable to Owner.
• Lowest price proposed and accepted; pricing, including contractor fee and overhead, developed competitively: “best price”.
• Creates the most bidding opportunities for general contractors and subcontractors.

Disadvantages:

• Linear process means longer schedule duration than other methods.
• Price not established until bids are received; may require redesign and rebid if bids exceed budget.
• Quality of contractors and subcontractors not assured.
• Cost estimates change during design process.
• Fosters adversarial relationships between all parties; increases probability of disputes.
• No design phase input from contractor on project planning, budget or estimates.
• Not optimal for projects that are sequential, schedule or change sensitive.
• Change orders and claims may increase final project cost.

Design-Build
The contractor and architect are one entity hired by the Owner to deliver a complete project. A guaranteed maximum price (GMP) or lump sum price is provided by D/B early in the project, based upon design criteria prepared by the school and a moderately developed design by the architect. The contractor/architect then develops drawings that fulfill the criteria and complete the design, while staying below the furnished GMP. The contractor then receives proposals from and awards subcontracts to subcontractors.

BEST SUITED FOR: New construction projects that are highly time sensitive and less complex projects with smaller user groups or reduced need for user reviews and mid-course design changes.

Advantages:

• Single point of responsibility for design and construction.
• Selection of contractor based upon qualifications, experience and team.
• Contractor provides design phase assistance in budget and planning.
• Faster project delivery than traditional bid, slightly faster than Construction Manager at Risk (CMAR); fast track construction possible.
• Guaranteed price possible earlier in process.
• Price tends to match quality (also a disadvantage!).
• No change orders written for consultant errors and omissions- covered through allowance in GMP. Owner still responsible for other types of changes.

Disadvantages:

• No check and balance between contractor and architect; Owner left to fend for himself versus the contractor, creating potential for reduced quality and increased potential for conflict between Owner and D/B team.
• Difficult for Owner to determine whether the best price has been achieved for the work.
• Initial costs likely higher than traditional bid due to increased contractor risk, reduced competition in pricing of contractor overhead, fee and sub-contract costs.
• Changes difficult and expensive to make once construction begins, due to phased construction and cost driven, inflexible budget.
• Considered “sophisticated”: Owner must have a clear idea of scope and concept before selection.
• Owner has no input on selection of proposed design team.
• Over-emphasis on price may compromise quality.
• Increased speed and fewer reviews increase potential for mistakes, missed items, etc.
• Staff and users required to make quick decisions and have reduced time for reviews and input.

Construction Manager at Risk
Construction Manager (CM) at Risk allows the Owner to interview and select a fee-based firm, based upon qualifications and experience, before the design and bidding documents are fully completed. The CM and design team work together to develop and estimate the design. A guaranteed maximum price (GMP) is provided by the CM, who then receives proposals from and awards subcontracts to subcontractors. The final construction price is the sum of the CM’s fee, overhead, and contingencies and the subcontractors’ proposals. Any unused contingency at the end of the project reverts to the Owner. The design consultant team is selected separately and reports directly to the owner.

BEST SUITED FOR: Large new or renovation projects that are schedule sensitive, difficult to define or subject to potential changes; also for projects requiring a high level of construction management due to multiple phases, technical complexity or multi-disciplinary coordination

Advantages:

• Selection of contractor based upon qualifications, experience and team.
• Contractor provides design phase assistance in budget and planning.
• Continuous budget control possible.
• Screening of subcontractors allows Owner and contractor quality screening.
• Faster schedule than traditional bid; fast track construction possible
• Ability to obtain GMP earlier in process; earlier than traditional bid, later than D/B.
• Theoretically, more teamwork between design firm and contractor.
• Provides more ability to handle change in design and scope.
• Theoretically, reduced changes and claims once in construction.

Disadvantages:

• Difficult for Owner to evaluate the GMP or determine whether the best price has been achieved for the work.
• Costs more than traditional bid due to reduced competition in pricing of contractor overhead, fee and sub-contract costs.
• A/E fees higher due to additional packages.
• Costs often increase due to “details” not in the GMP.
• CM may expand budget to create future savings.

Construction Manager Agency
A professional construction manager, which might be a construction management, construction program management or construction company with a CM practice, is selected as a professional services provider at or before the selection of the AE to confirm the budget, program, and schedule. The CM then acts as advisor to the University and the University’s AE on constructability, construction operations, schedule and cost, with interim estimates at design milestones and manages the construction on behalf of the University. The CM’s compensation method would usually include incentives for the CM to control both cost and time.

BEST SUITED FOR: Similar to CM at Risk, but used for projects where it is not deemed beneficial for the CM to provide a GMP and hold subcontractor’s contracts.

Advantages:

• The CM (either a professional CM or a construction company offering CM services) comes on board early in the design process to advise the owner and its architects and engineers on constructability issues, cost effective selections of materials, methods and systems, and continuing feedback on construction cost information and scheduling issues as the design develops.
• With the CM being compensated by a fee and acting as the owner’s rep in the trade contracts, the adversarial relationship between owner and builder are greatly reduced.
• Total construction costs to the owner should be less than in most other methods, though it is almost impossible to verify that.

Disadvantages:

• No truly enforceable contractual obligations by the CM for the project completion date.
• The owner never really has an “up-set” cost assurance for the full project.
• Multiple contracts for the various trades increases the owner’s exposure to claims and the number of parties that may end up debating the responsibility for design and/or construction flaws discovered at the end or after construction.

Master Construction Agreements
Often referred to as Job Order Contracting (JOC), the Owner procures a Master Construction Agreement through a competitive bid process. Price, qualifications, and quality of service are evaluated to determine the best proposal. Prices are generally determined by having a discount from a given pricing index such as the Means Estimating Guides. Master Construction Agreements are annual agreements and may be renewed for a maximum of five years. Individual projects shall not exceed $3,000,000. Plans and specifications are completed by an architect and given to the Master Contractor for pricing. The design consultant team is selected separately and reports directly to the owner.

BEST SUITED FOR: smaller projects that are schedule sensitive. Owner can completely control the design

Advantages:

• Familiar delivery method.
• Simpler process to manage.
• Fully defined project scope for both design and construction.
• Both design team and contractor accountable to Owner.
• Design Documents do not have to be developed to a competitive bid level.

Disadvantages:

• Cost not established until price is received; may require redesign if price exceeds budget.
• Premium cost for construction.