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High-Stakes Decision is No Simple Call

Wednesday, August 6, 2014

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Choosing a project delivery system for bridge or tunnel construction can be a multimillion-dollar decision. So which one is best?

Conventional design-bid-build? Trending design-build? Owner favorite Construction Management-at-risk?

The answer, according to a new report: All of the above.

The fact is, each model offers distinct pluses and minuses for architects, owners and contractors—and in the high-stakes world of construction deliverables, the savvy project team had better learn the ins and outs of each.

Perot Museum
McGraw Hill Construction

The $95.6 million Perot Museum of Nature and Science in Dallas used a CM-at-risk contract—a system that owners like more than architects and contractors seem to realize.

That's the bottom line from McGraw Hill Construction's new study, Project Delivery Systems: How They Impact Efficiency and Profitability in the Buildings Sector.

The free, 68-page analysis explores facts and trends behind project delivery systems: "one of the most fundamental ways in which project owners can impact efficiency, productivity and profitability."

The report looks at both commercial and institutional building projects and public-works infrastructure.

What's 'Best'

For a decision that carries "potentially powerful implications for the ability of the project to be delivered satisfactorily, on schedule and on budget," the survey of architects, contractors and owners turned up suprisingly little agreement.

Indeed, the study authors reported "far more differences than shared opinion."

With one exception: "There is a consensus among owner, architects and contractors that design-build has the best impact on schedule," McGraw Hill said in a release.

SF Bay Bridge
© BrokenSphere / Wikimedia Commons

Design-build contracts are rapidly gaining favor with bridges and other public infrastructure projects, the McGraw Hill Construction study found.

Otherwise, all bets were off on a "best" system for project cost and client satisfaction, said the study, which focused mainly on three systems:

  • Design-build: One entity delivers both design and construction to the owner;
  • Design-bid-build: Owners hold a separate contract with the design firm and contractor on a project; and
  • CM-at-risk: The owner contracts with a construction manager during design, who works collaboratively with the design team in the final design stages and offers the owner a guaranteed price for the final completion of the project.

The report also takes a brief look at two emerging systems: Integrated Project Delivery (IPD), which is generating new interest; and the less-popular Design-Build-Operate/Maintain (DBO/M).

Highlights and Trends

"Project delivery greatly varies depending on what is actually being delivered," the report notes.

Design-bid-build has been the dominant construction model since the early 1900s and remains the most widely used delivery system today for all types of projects, the report says. But that is changing.

About one-quarter of contractors also report being engaged in projects using design-build and CM-at-risk.

Use of design-build and CM-at-risk are both expected to spread, at the expense of design-bid-build, according to "a high percentage of" owners, architects and contractors.

In the public sector especially, the report said, 69 percent of architects and 48 percent of contractors foresee an increase in CM-at-risk use.

Chobani plant
McGraw Hill Construction

Design-build allowed delivery of the new Chobani plant in Twin Falls, ID, in 10 months, the team reported.

Design-build is a "fast-growing project delivery system being used on roadway, bridge, railway, waterway, port and airport projects," the study found. A 2011 study found that design-build was being used on about 40 percent of nonresidential construction projects in the U.S. in 2010, a 10 percent increase since 2005.

System Benefits

The study cited several "clear trends" about the benefits of using any established delivery system:

  • Strong cost performance, with 90 percent or more owners reporting projects delivered at or below costs, regardless of the system. The highest percentage of owners who reported project savings used CM-at-risk.
  • Finishing ahead of schedule, which was reported by 20 percent of owners using design-build; 13 percent of owners using CM-at-risk; and seven percent using design-bid-build.
  • Fewer change orders was a benefit of all systems noted by architects and contractors.

Perceptions: Drivers and Concerns

Each system had its strong perceived drivers and concerns, the study reported.

Fans of design-bid-build were most motivated by maximizing their project budget and reducing cost. They were most concerned about checks and balances, higher-cost contracts and longer-term contracts.

ProjectDelivery-Architects ProjectDelivery-Contractors
McGraw Hill Construction

The study revealed more differences than agreement by project principals on the advantages of three main delivery systems.

Proponents of design-build aimed to maximize their budget, but expressed significant lack of familiarity with the system and concern over risk, liability and the project schedule.

Backers of CM-at-risk sought most to improve project quality, followed by budget concerns. The chief obstacle, again, was lack of familiarity and a concern over too few checks and balances.

Making It Work

The best way to mitigate risk is to select the system that fits the particulars of the project, the study says.

"That means identifying the project's sensitivities and identifying which delivery system allocates risks to the parties that are best able to control for them," the authors say.

What is important is that each member of the team understand not only each system, but also understand how other members of the team view that system, says Harvey Bernstein, vice president of industry insights and alliances at McGraw Hill Construction.


The 68-page report is available as a free download.

Architects and contractors, in particular, are not fully aware of how owners perceive the drivers and obstacles for each system—a critical gap, because the owner selects the system, the study notes.

For example, 60 percent of owners reported being highly satisfied with their CM-at-risk projects, although architects and contractors felt that system was the least likely to satisfy a client.

Says Bernstein: "Architects and contractors definitely need to consider how their clients regard the performance of these delivery systems, but owners also need to factor in how the project team members regard the impact of delivery systems, because their approach to a delivery system can impact the performance of projects in terms of cost, schedule, quality and other benefits."


Tagged categories: Architects; Bidding; Building owners; Construction; Contractors; Contracts; Design; Design build; McGraw-Hill; Specifiers

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