August 2020 – Trends come and go in the construction industry as much as any other, and the popularity of various agreement structures among owners, architects and contractors ebbs and flows. Of the three primary types of agreements (design-build, team, and design-bid-build), design-build is the one growing in popularity and proven efficacy.
First, a quick review of agreement types:
Design-Build
In this negotiated agreement, the owner contracts with a general contractor, and the general contractor subcontracts the architect or provides in-house architectural services. This structure offers the owner less risk, and the process often retains more focus on the owner’s budget.
Team
An alternative to design-build is the team approach, where the owner has separate agreements with the general contractor and the architect. This is a slightly more risky and labor intensive agreement for the owner, and the process can be focused more on design.
Design-Bid-Build
This traditional process begins with the owner negotiating a contract with an architectural firm to design the project. General contractors then submit fixed bids to complete the work based on the architect’s plans and specifications, and the owner selects one – most often based on the lowest bid. This is the most labor intensive and risky of agreements. The process tends to be less personal, but more importantly, the lack of collaboration with a general contractor early in the process can result in added costs (called change orders) once construction is underway.
Trends
The design-build approach was considered radical in the mid-1990s, but has steadily increased in popularity. According to Fails Management Institute’s 2018 Design-Build Utilization report, the project delivery method will comprise 44% of construction spending between 2018 and 2021.
Even governmental entities, long required to adhere to the design-bid-build process, have recently reversed regulations to allow the more interdisciplinary approach.
The Construction Industry Institute and Charles Pankow Foundation revisited their 1998 study and found that “after 20 years, [design-build] projects are still delivered faster and with greater reliability in cost and schedule performance.”
Where to begin
National Construction is experienced and adaptable to a variety of agreement structures, and our team stands ready to help you determine the best fit for your organization. Explore some examples of our work specific to the agreement type here, and contact us today.