What Are The Advantages Of Design & Build Contracts?

If you are looking at starting a large-scale construction project, you will likely have come across the terms ‘Turnkey’ and ‘Design and Build’ when reviewing prospective construction companies. However, some project owners are slightly confused about the offering of each project management service.

We will address what exactly we mean when we mention Design and Build when compared to other traditional management methods.

So, what are the advantages of Design and Build Contracts?

In essence, other project management methods, such as Turnkey Project Management, offer you more of a pre-packaged service, whereas Design and Build Project Management gets the project owner more involved in the process.

Design and Build allows for a more agile approach to potentially more technical builds. Unlike traditional project management, Design and Build uses a single contract, which includes detailed plans of the bespoke build, and then the construction team executes these plans to spec. One entity (the construction company) both designs and builds the project, saving time and money.

Let’s review exactly what construction contractors mean when they talk about Design and Build Construction, and we’ll offer you some top tips on what to look for when you are looking for a contractor which offers Design and Build services.

What is Design & Build for Construction?

‘Design and Build’ is a single contract between a project owner and a team of designers and builders for the purpose of creating a specified construction project for the project owner’s personal or professional needs. This may take the form of a new hospital, school, industrial shed, commercial property or even a house.

Design & build contracts can be structured in various ways depending on the level of involvement between the project owner and the construction contractor. There are also financial risks that need to be shared between the two parties.

There are three main types of Design and Build contracts:

• Cost-plus
• Fixed-price
• Guaranteed maximum price

It should be noted that both Fixed-price and Guaranteed maximum price contracts are becoming less preferred in the modern world of construction, as they often leave both the contractor and client in difficult positions due to inflation and the rising cost of materials and labour.

To assess why, let’s review each of these types of Design and Build Contracts to see how each differs from the other.

Cost-Plus Design & Build Contracts

Where Cost-Plus Design and Build Contracts are concerned, the owner pays the contractor for the actual cost of the project plus a fee or percentage of the cost. The owner assumes the risk of cost escalation and uncertainty.

It is the nature of construction projects to change and adapt over time. As such, the cost of materials and labour often changes, too. Since this isn’t the fault of the construction company in most cases, Cost-plus contracts are preferable to nearly all construction companies across the world.

Fixed-Price Design & Build Contracts

For Fixed-Price Design-Build Contracts, the contractor agrees to deliver the project for a fixed price based on the owner’s requirements. Depending on the contract, the contractor usually bears the risk of price increases for materials and labour.

Due to the risk involved in the Fixed-price method, construction companies rarely offer this sort of Design and Build Management style.
Guaranteed Maximum Price Design and Build Contracts

Guaranteed Maximum Price Design & Build

Contracts are used when the contractor agrees to deliver the project for a cost that does not exceed a certain limit. Both parties share the risk of cost overruns and savings depending on their agreement.

Each of the 2 contracts above offers differing levels of risk and involvement to both the Design and Build Team, as well as the project owner/ manager. This is one advantage offered by Design and Build over traditional project management systems, where these risks are solely taken on by the construction company.

Let’s take a look at the benefits of a Design and Build Project Management method over traditional project management methods, to see how it may bring value to your project.

What are the Benefits of Design & Build Project Management?

Price Certainty

As opposed to traditional project delivery methods, project owners know the fixed price upfront, ensuring the total cost for all stages (except where a Cost-Plus Design and Build Contract has been agreed). This allows project owners to calculate their ROI and reduce project risk accordingly.

Reduced Costs

While the individual bids of traditional project management may appear to be more appealing at a glance, the total cost may end up being more when time, change and alterations, and the potential increase of risk start to play a role in pushing costs higher between disparate entities, rather than within a unified business. Collaborative teams also mean higher efficiency performance, more often than not.

Improved Collaboration

Design and Build methods greatly reduce friction areas often seen with change management issues or change orders that may occur in traditional approaches.

This may be due to a lack of cohesion between the separate design and construction companies involved. In short, errors and omissions in design lead to construction change orders. As these areas are handled by a single entity, it is usually the case that communication is improved on an internal level with Design & Build.

Improved Delivery Speeds

Due to the increased collaboration between teams, projects generally reach sign-off and completion sooner than with traditional construction methods. As the Design Team can sign off on items or tasks internally, the build team can begin to start work even before the final designs have been signed off. This is certainly true for the procurement stage, as prices and inventory can be accrued before sign-off, getting the ball rolling sooner than if multiple entities were to be involved.

Overlapping services like this is a key way in which Design and Build can be a faster method than traditional construction methods.

Consistency of Quality

Standards are more consistent throughout every stage of the project when utilising a Design and Build Methodology. Design and Build puts performance and quality above the minimum requirements of the project, and this is often felt at every stage of the build process.

Reduced Responsibility and Litigation

Responsibility is either solely with the project owner, the Design and Build company, or shared between the two in some cases. In either case, there are fewer entities responsible for scheduling, costs and results; there is often less friction in these areas with a Design and Build method.

What are the Disadvantages of Design & Build Project Management?

Whilst Design and Build is a great construction method for some, it isn’t the ideal method for all construction projects.

For some, Turnkey Project Management may be better suited for the project. Turnkey allows for a more hands-off approach. It also offers an approach which is more “oven-ready” than Design and Build, with much less involvement by you, the project owner, at an operational level.

Before you sign with a Design and Build Contractor, you may need to take the following factors into account before deciding on the details of the Design and Build Contract. These considerations include:

• The complexity and uncertainty of the project.
• The level of involvement and risk-sharing you desire.
• The qualifications, reputation or previous work of the contractor.

The Complexity of the Project

If the project has many unknowns or variables, you may prefer a more flexible and collaborative contract model. Design and Build is flexible in its approach; however, as the project is built and designed by a single contractor under a single contract, their approach may be more rigid than if you were to involve other design, procurement and build teams. For instance, an architect may be preferred for a particularly detailed design, where a construction firm can’t be secured under a unified contract.

The Level of Involvement

If you want more control over the project or to share more of the risks and rewards with the contractor, you may wish to opt for a different contract model. This may be the case if you already have an architect in mind, or you are restricted due to commitments, which means that you won’t be available to oversee the project suitably.

How to Find a Design & Build Contractor

When looking for the Design and Build Contractor for your project, you may want to consider their experience, services and location.

Services on Offer

It may seem obvious, but many construction companies specialise in certain areas, whereas others may specialise in other areas. It stands to reason that if your chosen construction partner has a good track record with appropriate skills and resources in your particular area (healthcare, education, industrial, commercial etc.), then they may be a better partner than a company that is new to that particular industry. For instance, a project which is planned for a school, college, or university may require someone on-site to hold an advanced DBS status.

Previous Work Portfolio

It’s crucial to select a contractor with established experience in Design and Build projects, a detailed and on-point portfolio with references, and a compatible culture and vision with yours.

Most construction companies list a portfolio of work, complete with case studies, costs and their level of involvement with the project. Like with most things, experience is key, so ensure that your chosen partner is capable of handling your project by viewing their portfolio of work before you sign a contract.

Proximity to the Project

If your project is far away from the Design and Build Company, then you may end up paying for the travel and accommodation of the construction team. This isn’t always the case, but it stands to reason that a business which operates regularly in your area may have these aspects already in place.
It would be preferable for everyone to work within a commute of their head office, procurement site and workers’ homes. Ensuring the operational areas of your chosen firm could save you costs and reduce delivery times significantly. Proximity of the delivery teams also ensures the supply chain is well aligned with the main contractor.

Design & Build Construction in Summary

In summary, Design and Build Construction is an integrated approach to construction management that takes full responsibility for the most crucial aspects of the project. This streamlined approach allows your project to benefit from a well-integrated, collaborative team working together, reducing friction points and ensuring efficiency.

Utilising this approach ensures a harmonious project, executed precisely to the architect’s plans, as they are familiar with the capabilities of the construction team. Similarly, the Build Team are familiar with the architectural requirements, and they are more likely to be familiar with the technical requirements of the design.

Build & Design Services from Jarvale

At Jarvale, our Design and Build Teams harmonise perfectly. After 50 years in the industry, and with strong family connections running through each section of our team, we think that we would be the perfect partner for your large-scale construction project.

Review our services to see how we can add value to your construction project, or give us a call to speak with our Project Management Team directly. For everything else, please complete the contact form below, and we’ll reach out at your earliest convenience.