CHAPTER 3

Project Delivery Methods

Prof. Dr. Nabil Elsawalhi

Professor of Construction Management

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• There are a number of models for the process of designing and constructing facilities.

• Several of these models have been in existence for many years and have been used with varying degrees of success, depending on the type of project and the skills required.

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• The project delivery methods include:

• 1. Design-bid-build (DBB) (Traditional)

• 2. The owner-builder

• 3. Design-Build (DB)

• 4. Turn Key contracts

• 5. Agency Construction Management

• 6. CM at-risk contracts

• 7. Lean project delivery

• 8. Public Private partnership (PPP)

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1. Traditional Designer-Contractor relationship (DBB)

Used for projects of moderate size and complexity▪ Two separate contracts are awarded: one to the

designer/consultant and one to the contractor.▪ The owner often employs a designer; ▪ The designer also acts on behalf of the owner to oversee

the project implementation during construction; ▪ The general contractor is responsible for the construction

itself even though the work may actually be undertaken by a number of specialty sub-contractors.

▪ Most frequently used type of project delivery.▪ These types of contracts are lump-sum fixed-price

contracts. ▪ Any variation or change during the construction needs prior

approval from the owner

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Traditional Relationship

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◼Owner

◼Contractor’s

labor

◼Subcontractors

◼Contractor ◼Designer

Advantages of using the traditional relationship

1. The most popular and easiest way to perform because of long experience in practice method.

2. Competitive bidding makes the owner benefit from reducing the cost of the project.

3. Project scope is defined and Project schedule is known.

4. Owner can monitor and control all the phases of the project;

5. The design team is impartial and looks out for the interests of the owner.

6. The system treats potential bidders fairly and improves the owner’s decision making ability.

7. Completed projects generally meet acceptable quality levels.

8. Low risk for client◼CM 3 ◼6

The disadvantages of the DBB1. No benefit from contractor experience while designing the project

2. The design, tendering and implementation takes longer period of time (long project life cycle)

3. The non-friendly relationship between the owner and the contractor makes a lot of claims

4. The non-friendly relationship between the consultant and the contractor enforce them to return back to the owner to solve the claims

5. A lot of changes in the projects makes claims that increasing the final cost of the project and increase the time of execution

6. There is increased risk for the general contractor and the possibility of a compromise in quality in order to lower the cost of the project.

7. Client must have the resources and expertise to administer the

contracts of designer and contractor.

8. If contract documents are unclear, it raises the unexpected costs drastically ◼CM 3 ◼7

2. Owner-Builder Relationship

• Owner perform both design and construction by their own team.

• This approach refereed to as “Force Account”.

• This approach can be linked to design and built except that the end product is utilized in-house.

• The Ministry of Public works was using this System.

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3. Design-Build Relationship DB

• DB projects accelerate delivery through concurrent design and construction activities

• A DB project is conceptualized by the owner;

• Planning and schematic design are carried out by the owner’s design professional

• The contractor is appointed based on an outline design or design brief to understand the owner’s intent of the project.

• The design builder continues the preliminary design to obtain a final design

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• It is a must that project definition is understood by the contractor to avoid any conflict in future, as the contractor is responsible for the detailed design and construction of the project.

• The DB organization initiates construction while finalizing the detailed design.

• This type of contract may also contain incentives for timely completion, as well as penalties for avoidable delays or cost overruns.

• Design-build has the potential to provide better quality,

• Since the contract with the design–build firm is awarded before starting any design or construction, a cost plus contract or reimbursable arrangement is normally used instead of lumpsum, fixed-cost arrangement.

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Design- build relationship

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◼Owner

◼Executing

contractors

◼Subcontractors

◼Design & Build

contractor

◼Consultant

◼Designers

The Advantages of Design and Build Contract

A. Possibility to benefit from the contractor experience during the design;

B. Reducing the total duration of the project due to possibility to start execution before finishing all designs. Fastest system

C. The relationship between the designer and the implementers is friendlier;

D. Possibility to reduce the total cost by reducing the changes to the minimum

E. There is an early cost and scheduling commitment.

F. For owner, the risk is transferred to design-build contractor

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The Disadvantages of Design Build Relationship

1. No allowance for the owner interference while executing the project.

2. Owner has reduced control over design quality.

2. Increase of the cost of construction due to high risk given to the contractor side

3. There is no method to ensure real competiveness of contractor

4. Prices Changes by owner can be expensive and may result in

heavy cost penalties to the owner.

5. Project quality cannot be assured if it is not monitored properly by the owner.

6. The designer does not represent the owner’s interest, but is responsible instead to the contractor.

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4. The Turnkey Contract(EPC)

• These are the types of contracts where, on completion, the owner turns a key in the door and everything is working to full operating standards.

• The owner employs a single firm to undertake design, procurement, construction, and commissioning of the entire works.

• The firm is also involved in the management of the project during the entire process of the contract. ◼CM 3 ◼14

• The client is responsible for the preparation of their statement requirements that become a strict responsibility of the contractor to deliver.

• This type of contract is used mainly for the process type of projects and is sometimes called engineering, procurement, and construction (EPC).

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• Client/owner has an input in the outline design or design brief to understand the owner’s intent of the project

• Client/owner contracts a designer/consultant (in case the in-house

• facility is not available) to decide design outline

• Detailed design is carried out by the design–build contractor (singular responsibility)

• Client/owner has to employ a team of professionals to perform supervision/management of the detail design, monitor quality, schedule, and cost

• Claims risk is higher

• Mainly suitable for building projects◼CM 3 ◼17

◼Client has an input in the output (operating capacity)

◼Engineering procurement construction (EPC) is a direct contract between the client and the owner to build the complete project to meet the agreed upon output

◼All project activities are carried out by the EPC contractor

◼Client/owner is not involved in the detailed design process, except in the

◼event of variation and quality procedures

◼Claims risk is lower

◼Mainly used for projects such as power plants, process industry, and oil and gas sector

◼Difference between Design–Build and EPC

Professional Construction Management

• Used When project is very large or complex

• Project management team consisting of :

– A professional construction manager

– Other participants who will carry out the tasks of project planning, design and construction in an integrated manner

– Contractual relationships among members of the team are intended to minimize adversarial relationships

– PCM is a firm specialized in the practice of professional construction management work with owner and the A/E firms from the beginning and make recommendations on:

– design improvements, construction technology, schedules and construction economy.

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• Propose design and construction alternatives if appropriate, and analyze the effects of the alternatives on the project cost and schedule.

• Monitor subsequent development of the project in order that these targets are not exceeded without the knowledge of the owner.

•

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The Advantages of Using CM Relationship

A. Use of professional persons in all stages of executing the project.

B. There is individual evaluation for the cost, schedules and implementation and amendments.

C. Continues coordination between the design process and implementation process.

D. Reducing the design and construction periods by using construction packages.

E. Possibility to reduce the cost by using competitions between contractors.

F. Possibility of using efficiently the value engineering concepts.

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The Disadvantages of Using CM Relationship

A. The start of execution is usually starts before finalizing the cost of the project. The Owner is at risk of final cost.

B. It is preferable to use the traditional relationship when the budget is limited

C. Multiple prime contracts increase paperwork and administrative time, and increase the potential for construction disputes and claims.

D. The success of the project depends on the experience of the construction manger.

E. No guarantee by the construction manager neither for the total cost nor for the quality

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Construction Management

• There are two general forms of CM:

• 1. Agency CM

• 2. CM at risk (CM-at-risk)

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5. The Agency CM

• Theis type is a management process type of contract system having a four-party arrangement involving the owner, designer, CM firm, and contractor.

• The construction manager provides advice to the owner regarding the cost, time, safety, and quality of materials/products/systems to be used on the project.

• The agency CM firm performs no design or construction, but assists the owner in selecting design firm(s) and contractor(s) to build the project.

• Agency CM could be implemented in conjunction with any type of project delivery system.

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Design–Agency CM Contracts

• This is often done on the basis of a lump-sum or fixed-price contract.

• CM may act as an agent of the owner, contracting directly with all the trade contractors.

• The CM prepares bid packages that are priced competitively by the trade contractors, and reviews these bids to select the most appropriate ones

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• Advantages:

• 1. Fewer management resources are needed.

• 2. Participants’ roles are clear and widely accepted.

• 3. The process is well established and universally understood.

• 4. This is a fixed-price contract based on complete documents with little room for change orders.

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• Disadvantages:

• 1. Contracts are awarded based on the low bid regardless of past performance.

• 2. Construction starts after design work is complete and approved.

• 3. Design quality may suffer from a lack of input from contractor(s) and sub(s).

• 4. The designers’ fees may increase as change orders increase.

• 5. Changes in the scope (i.e., design, unforeseen conditions, timeframe, etc.) will generate change orders.

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6. Construction Manager-at-risk

• The construction manager-at-risk is responsible for the on-site performance and actually performs some of the project works. CM-at-risk type of contract has two stages.

• The first stage encompasses preconstruction services and, during the second stage, the CM-at-risk is responsible for performing the construction work. The CM-at-risk project delivery system is also known as construction manager/general contractor (CM/GC).

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CM-at-Risk Contracts• CM at-risk is a delivery method which entails a

commitment by the construction manager to deliver the project within a Guaranteed Maximum Price (GMP). The construction manager acts as a consultant to the owner in the development and design phases (preconstruction services), and as a general contractor during construction.

• When a construction manager is bound to a GMP, the fundamental character of the relationship is changed. In addition to acting in the owner's interest, the construction manager must control construction costs to stay within the GMP.

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CM-at-Risk Contracts• The construction manager assumes the risk of pricing, and

contracting directly with the respective trade contractors.

• In general, CM-type contracts are not as amenable to quality initiatives as DBB and DB contracts.

• Construction Management at Risk (CM@Risk) is increasingly being used by the U.S. public sector.

• Like design-build, it facilitates improved quality through a selection process based on factors other than the low bid.

• A scoring system is used to consider the previous performance of a contractor, based on various criteria.

• It is best used where there is uncertainty

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• Advantages:

• 1. Early cost-commitment gives the owner project cost security.

• 2. The at-risk entity is responsible for managing the construction process and has more influence over subcontractors.

• 3. The CM contractor can reduce the owner’s burden in the management of large or complicated projects.

• 4. The CM contractor reviews projects for constructability, cost, and schedule, potentially reducing change orders and delays.

• 5. Fast-tracking and multiple prime contracts may speed construction.

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• Disadvantages:

• 1. The management role of the CM contractor is an added cost.

• 2. The CM contractor may provide reduced building features than are available with a bid approach, in order to protect the margin of profit.

• 3. There is a potential conflict of interest with having one entity serve as both construction

• manager and contractor.

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7. Lean Project Delivery• A new way to design and build capital facilities.

• Lean theory, principles, and techniques jointly provide the foundation for a new form of project management.

• It uses production management techniques to make significant improvements particularly on complex, uncertain, and quick projects.

• Performance is optimized at the project level. Whereas current project management approaches reduce total performance by attempting to optimize each activity level.

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• Lean applications in design and construction are continually evolving. The most successful applications have been observed with forms of contract that reward cooperation and collaboration between the parties that are actively involved in delivering design and construction.

• The Integrated Form of Agreement (IFOA) is one form of contract that has been successfully applied to lean construction.

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• The following Figure represents one interpretation of lean project delivery, namely Integrated Project Delivery (IPD).

• The team comprises the GC/CM working closely with designers and the primary subcontractors. The team members have relational contracts between them, as delineated by those entities encircled by the dotted line; these are described as “Single pact.”

• The right-hand box (at-risk pool) “rescues” any individual firm that encounters financial difficulty; by the same token, team behavior is likely to leave a surplus in the account.

• This surplus is shared between the members of the integrated team.

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