On March 3, 2021, Bilzin Sumberg hosted its annual South Florida Redevelopment Conference. During one of the sessions, the leaders of our firm’s Construction Law Group, Joy Spillis Lundeen and Felix X. Rodriguez, were joined by Brad Meltzer, Chairman and CEO of Plaza Construction, and William O’Donnell, Managing Principal of Desimone Consulting Engineers, to discuss the various construction delivery methods for construction projects. The panelists discussed the different delivery methods and pros/cons of each, focusing on the following: (1) Design-Bid-Build with a Guaranteed Maximum Price; (2) Design-Assist; (3) Design-Build; and (4) Delegated Design.
Design-Bid-Build with a Guaranteed Maximum Price
The Design-Bid-Build (DBB) format is the most traditional type of project delivery system, wherein the owner retains the services of a project designer to develop drawings that are thereafter put out to bid. The DBB format allows the owner complete control of the design and the guaranteed maximum price allows control over price subject to change orders. However, owners should be cognizant of the drawbacks of the delivery method on projects with a compressed schedule. As Meltzer pointed out, “With GMP agreements, it’s all about price and time. In fact, once the construction starts, the biggest arguments are not over price, but rather over delays that affect the delivery timeline.”
For less experienced developers and projects with a tighter schedule, Design-Build offers alternative benefits. In a Design-Build, owners engage a single entity to serve as both the designer and the builder. As outlined by my colleague, Felix X. Rodriguez, “Design-Build is akin to a ‘one stop shop’ for developers. They give up some control over design, which can be worth it if they need to move quickly on a project for a type of asset they are not too familiar with.”
Design Assist/Delegated Design
Expertise from a specialty subcontractor can provide benefits to owners, designers, and contractors. As explained by my colleague, Joy Spillis Lundeen, “The use of Design-Assist for complex steel structures has grown significantly over the past few years.” Design-Assist requires a collaborative effort where a specialty subcontractor is engaged early in the design process (pre-bidding) to assist in finalizing the overall design of a complex structure. A specialty subcontractor’s early involvement in the design process provides owners with more certainty as to costs and predictability regarding potential issues once construction has started. “In addition to potentially minimizing change orders, Design-Assist allows owners to start conversations about financing with investors and lenders earlier since there is more clarity on costs earlier in the process,” Meltzer said.
Conversely, delegated design is where the design responsibility for a certain aspect of a project is shifted entirely from the project designer to a specialty contractor who is generally more familiar with a given construction system. For delegated design projects, the owner must perform significant due diligence to avoid miscommunication of design responsibility. As O’Donnell explained, “In my experience, delegated design has most value for post-stress tension work. But the developer has to be highly selective and organized for delegated design.”
In this delivery method, the construction manager acts as the agent (the “CM Agent”) of the owner but has no actual construction liability. The risk falls to the owner and to the sub-contractors who have a direct contract with the owner. This method requires a high degree of working trust between the owner and the contractor selected as the CM Agent and is only recommended for highly experienced developers who are comfortable with “directing the traffic” of the construction process.
Regardless of the delivery method selected by an owner for a given project, owners must be careful to outline the contractual obligations and manage the contract appropriately. “An owner should never have a mentality that a construction contract is so good that they can forget about it after signing. Owners need to manage the contract, particularly following up on milestones. If not, then you get the problem of ‘course of dealing’ where the terms of a contract are implicitly changed because of the behavior or lack of action by a party.” Rodriguez said.
Bilzin Sumberg remains available to assist our clients in determining the best delivery methods. If you have any questions, please contact us.