Considering the alternatives: To save time, money and headaches the industry is taking a closer look at nontraditional methods of project delivery.

THEY ARE THE PROBLEMS that keep capital program planners awake at night: cost overruns, late-breaking changes, delays, quality breakdowns and contract disputes.

In recent years, the industry has introduced an array of increasingly sophisticated construction and project management tools. But the pressures of time, cost and quality still challenge virtually every construction project.

Now many key players – from owners and developers to architects, engineers, financiers and builders – are re-evaluating the most basic approach to delivering architectural, engineering and construction services. With each approach, the relationship between the key players is redefined, and good working relationships are key to streamlining decision making and conflict resolution.

“Certainly, we have seen a trend in the industry toward the use of alternative methods of project delivery,” said Clay Paslay, who managed capital development projects at Dallas/Fort Worth International Airport for 25 years.

“Owners need speed, flexibility and cost savings,” said Paslay. “Depending on the requirements of a specific project, owners can and should select the delivery approach that best meets their objectives.”

a traditional method

To understand those innovative new methods, let’s first take a quick look at the traditional design-bid-build (DBB) approach.

The cornerstone of DBB is the separation of design and construction, with the lowest bidder winning most elements of the job. This traditional approach provides a degree of flexibility and gives owners control over design, scheduling, material procurement and other variables.

But with DBB, owners must take on considerable risk and administrative work. The competitive nature of DBB can reduce prices but also adversely affect working relationships. Change orders can increase the final cost, and the low-bid strategy can and does affect quality. Low bids, if not closely qualified, can result in either inferior installation methods or numerous change orders that not only increase the final construction cost but also increase the owner’s administrative cost. Most observers say DBB is best suited to straightforward projects where the owner wants control of the project and a competitive initial price.

In today’s increasingly complex environment, there are times when this traditional approach may not be the optimum method of delivery. Owners can and should consider alternative delivery options on jobs that are very large and complicated, on jobs with tight schedules and budgetary constraints, and in situations that call for innovative designs and building methods.

design-build

Owners at Goya Foods did precisely that when planning the company’s newest distribution and office facility in Houston, Texas. Goya specializes in food distribution and marketing to the Hispanic community in the United States and Mexico.

“We have several building projects under way, and we have used both the traditional design-bid-build method and the designbuild approach,” said Evelio Fernandez, a vice president with Goya Foods.

“The Houston distribution and office facility was on a structural slab that required a different approach, and we knew that new ideas would come up as the project developed,” Fernandez explained. “So we opted for the design-build approach.”

Under the design-build approach, design and construction are managed within a single contract. Because there is a single point of accountability, this method can reduce the owner’s risk and internal administrative costs. By distancing the design from the end user, this method helps prevent expensive design changes.

Design-build can reduce the final price of a project because suppliers are selected for best value, and costs are negotiated and fixed earlier in the process. Construction can start before the design is complete, accelerating time-sensitive projects. The design-build method also allows maximum flexibility in the use of innovative designs, materials and building techniques.

Design-build contracts can, however, be more complex in their terms and conditions, and tend to give owners less control over the final design. Smaller design firms and contractors may not be able to handle larger design-build contracts, and some stakeholders may not adjust well to this approach. Designbuild is perhaps best suited to projects that are larger, more complex and time-sensitive, where the owner does not have internal resources to manage the traditional process, desires a turn-key facility, or prefers to avoid risks related to budgets, scheduling, design and construction. Design-build is also a good method for small projects if aligned with smaller contractors and A/E firms.

“In this day and age, when clients are heavily focused on their core business, they really look to builders to provide a more comprehensive solution,” said Keith Dalton, president of Kingham Dalton Wilson, Ltd. (KDW) in Houston, Texas, which delivered design-build services on the Goya Foods distribution and office project. “We take the design-build approach one step further to provide a number of upstream services such as site selection and programming,” Dalton explained.

Jacobs Carter Burgess provided comprehensive architectural and engineering services on the Goya Foods Houston project, which included a 140,000-square-foot warehouse and 8,000-square-foot office facility. Opened in June 2006, the facility serves as a strategic distribution hub to support the expansion of Goya Foods’ operations in Mexico and the Southwest United States.

Managed under a design-build arrangement, the project allowed Goya to meet its time and budget objectives, and to utilize the specialty foundation that enabled the company to build on a preferred plot of land.

“The design-build method required more work from us because we had to stay on top of the project,” said Fernandez. “But this approach also allowed us to complete the project fairly quickly and to control our costs. Overall, the design-build approach performed well for us on this project. We would do it again.”

construction manager at-risk

Another alternative to traditional delivery methods is the construction manager/general contractor approach, which is also known as construction manager at-risk.

Under this approach, an owner engages a construction manager who oversees project management and building technologies, and who accepts the risk of completing the project. Construction management services might include the administration of costs and scheduling, negotiation and awarding of construction contracts, materials purchasing and overall construction coordination.

Construction managers typically also provide important pre-construction services, including design and constructability reviews, validation of engineering estimates and quantities, preparation of work plans and alternative schedules, and evaluation of local labor and material markets. The selection of contractors is generally based on qualifications within certain cost parameters, and those selections typically take place early in the design process. Construction managers frequently provide a guaranteed maximum price (GMP), usually negotiated at 80 percent of the design.

By involving the contractor during the design phase, the construction manager atrisk approach can decrease costs, accelerate schedules and improve overall constructability. Owners enjoy the best of both worlds, retaining ultimate control over the design while receiving optimum contractor input early in the process. Owners also gain the certainty of a GMP and the security of transferring design and construction risk to the construction entity.

master agreement

Corporate property managers, who usually coordinate long-term capital programs within an annual budget cycle, can often benefit from working with limited consultants and contractors who become familiar with their programs. This familiarity creates more stable and predictable methods of project delivery.

A master agreement can provide engineering and construction solutions that are responsive, reliable and cost-effective. Under a master agreement arrangement, a corporate property management unit might sign contractual agreements with a limited number of architectural, design and construction providers. Within that pre-qualified universe, where many terms and conditions are well established, the owner can then manage individual projects on an adjusted design-bidbuild basis.

Master agreements allow corporate owners to plan and launch projects more quickly and easily, with known and predictable design and contractor support, and with a higher degree of flexibility throughout the process.

a design alliance

The design alliance is also particularly well suited to corporate development needs.

Under the alliance approach, owners typically sign multiyear independent contracts with sole providers of engineering and/or construction services. This longer term relationship tends to create more positive, collaborative bonds among the owner, the designer and the builder. Alliances create synergies, and encourage designers and contractors to focus on delivering long-term benefits to the client. As the alliance partners gain experience and familiarity, they can tackle projects more quickly, more efficiently and at a lower overall cost. Part of the deliverable in this type of contract is the continued improvement of the project delivery process.

Jacobs Carter Burgess has been a member of AT&T’s Design Alliance for six years, providing comprehensive architectural and engineering services for infrastructure replacement and facility expansion and consolidation projects throughout the Midwest and in California. In a typical year, Jacobs Carter Burgess works on approximately 300 projects for AT&T, with a construction value of about $80 million.

“At any given time, we have a significant number of projects at various properties and locations, and the alliance approach gives us a number of benefits,” said Ruben Alvarez, AT&T’s director of planning, design and construction in the Midwest region.

By not issuing RFPs on every single project, AT&T gets faster implementations, according to Alvarez. The same Jacobs Carter Burgess designers work with AT&T’s internal team, resulting in an alliance that has amassed a wealth of shared knowledge that translates into speed, efficiency and cost savings.

“The first time you build a certain kind of structure, you expect a lot of questions and discussions,” Alvarez explained. “But after you have built 20 of those structures together, you gain a lot of efficiencies. That’s what we get from our design alliance.”

a method for every project

On some projects, particularly those involving public financing, program delivery is prescribed by statute or regulation. But on most other projects, owners can and should select the delivery method that best meets their need for economy, quality and scheduling.

“Traditional delivery methods can foster an adversarial relationship between the owner and the contractor,” said Paslay. “That’s why design-bid-build is sometimes called the design-build-litigate approach. And in reality, when you deal with the lowest bidder, your costs often end up being higher.”

Paslay and others agree that traditional DBB delivery is still appropriate in many cases, but that owners are increasingly receptive to the idea of alternative methods of project execution.

“Alternative delivery methods can help create a more collaborative team effort,” said Paslay. “By communicating more effectively in the early stages of a project, you can work together to meet the needs of the owner. I think that is where our industry is headed.”

John Fisher, P.E., serves as vice president and managing principal in Jacobs Carter Burgess’ Corporate Headquarters in Fort Worth, Texas. Mr. Fisher is currently involved in the leadership and management of all Federal Programs within Jacobs Carter Burgess. John has more than 36 years of experience in the planning, design, construction, construction management and program management of nuclear power plants, airports and rail transit and has worked on several overseas assignments.

Deirdre Jimenez, AIA, ASID, serves as vice president and managing principal in Jacobs Carter Burgess’ Detroit office.With more than 20 years of facility management experience, Ms. Jimenez has facilitated value engineering, TQM,re-engineering, and value driver analysis initiatives to achieve continuous improvement in the service delivery systems created for her clients.

John Thoreen, AIA, serves as senior project manager in the Building Programs division of Jacobs Carter Burgess.With more than 22 years of experience, Mr. Thoreen has extensive experience in architectural and interior renovation, recreational, educational, commercial and government facilities.