Selecting the best project delivery system
The design and construction industry continues to debate which project delivery system is best. Just pick up a trade magazine and you will often find an article addressing the selection of project delivery systems for a design and construction project. It is also common for project delivery systems to be a seminar topic.
So what is the “best delivery system” for a design and construction project? The answer is IT DEPENDS! There is NO silver bullet! There is NO best system! The “best delivery system” debate is wrong and misses a great opportunity for the design and construction industry. Selection of the project delivery system should be based on specific project requirements, specific characteristics and circumstances of the owner, and the successful formulation of the project team. The real opportunity for design professionals and the construction industry is to help educate owners regarding the available project delivery systems, and then assist owners in selecting the best delivery system for the specific project and circumstance. Selection should always benefit the owner while at the same time promote a winning opportunity for all project participants.
This paper is intended to present concepts and tools to help owners, design professionals, and the construction industry to select and set-up a “winning delivery system” for projects. This paper is divided into three areas and each of these areas is divided into three parts:
•Three Primary Project Delivery Systems—All project delivery systems can be derived from three primary systems.
•Three Key Project Delivery System Principles—These include the seven major roles required for all design and construction projects, the two types of agreements owners have with design and construction providers, and the allocation of risk for winning projects.
•Three Key Areas of Consideration for Project Delivery System Selection—Selection should include project, owner, and team building considerations.
Three Primary Project Delivery Systems
There are several good publications available that address project delivery systems. Four that are particularly helpful include:
•Client Advisor by The Associated General Contractors of Massachusetts (AGC) and The Boston Society of Architects (BSA).
•Handbook on Project Delivery by The American Institute of Architects, California Council (AIACC).
•Project Delivery Systems for Building Construction by Associated General Contractors of America (AGC).
•Selecting Project Delivery Systems by The Project Delivery Institute (PDI).
These publications tend to present materials without significant bias and in the spirit of benefiting the owner and creating a winning circumstance for all project participants. While there is certainly some general overall consistency presented in these publications, they do not, however, offer a consistent definition of what is a project delivery system or what are the available project delivery systems.
PDI, in their publication listed above, perhaps offers the best definition of a project delivery system. For the purpose of this paper, PDI’s definition has been adopted but slightly modified as follows:
•Definition of a Project Delivery System—A project delivery system defines the structure of the relationships of the parties, the roles and responsibilities of the parties, and the general sequence of activities required to deliver the project (PDI, 1999, p. 4).
The issue of defining the available project delivery systems used in the United States today can be simplified by first looking at the structure of the relationship and overall responsibility of the performing parties with respect to the owner. In examining the multitude of ways that design and construction projects are delivered, it is apparent that project delivery systems are structured in three ways. These structures include single source responsibility, dual source responsibility, and triple source responsibility. All project delivery systems can be derived from these three primary systems or structures. The number of subsystems available for each primary system is limited only by the creativity of the project team. Next let’s examine the structure and general sequence of activities for each primary delivery system. The roles and responsibility for each system will be examined in the next section.
Single Source Responsibility—Design-Build Project Delivery
Single source responsibility project delivery is accomplished by one entity that is responsible to the owner for delivery of both the design and construction of the project. This delivery system is often referred to as design-build or turnkey. The single source entity or design-build entity can be a variety of types of firms. Examples include:
•Integrated Firm—Performs both design and construction, but subcontracts specialty services and work.
•Construction Firm—Performs construction work, but subcontracts selected construction work to trade contractors and design services to a design firm.
•Design Firm—Performs the design services, but subcontracts specialty design services and construction work to a general contractor or to trade contractors.
•Developer Firm—Performs very little of the actual design and construction with own forces.
The sequence of activities for this delivery method is usually consistent with that illustrated in Exhibit 1. The degree of overlap between design and construction activities can vary substantially depending on specific project circumstances. The selection of the design-build entity can either be on a price bid or negotiated basis. For more complex projects, the owner may use an independent design entity to prepare 15 to 30% documents in order to provide enough definition to select and procure the design-build entity. This process is called bridging and is illustrated in Exhibit 2. The bridging design effort can be accomplished by the owner, an independent design firm, or under separate agreement to the design-build entity.
Dual Source Responsibility—General Contracting Project Delivery
Dual source responsibility project delivery is accomplished by two entities that are responsible by contract to the owner but not to each other. One entity is responsible for design and the other for construction. The construction entity is usually a general contracting firm; thus, this system is often referred to as general contracting project delivery. Designer selection is usually accomplished by negotiations while the selection of the general contractor can be by either a price bid or negotiated basis. The method of selection of the general contractor impacts the sequence of activities as illustrated in Exhibit 3 and described as follows:
•When the general contractor is selected by price bid, the activity sequence is linear and is typically referred to as design-bid-build project delivery.
•When the constructor is selected by a negotiated basis, the general contractor usually enters the project nearly at the same time as the designer and provides input during the design process. The general contractor eventually negotiates a firm contract with the owner. This sequence also allows for overlap of design and construction. This system is typically referred to as negotiated team project delivery.
•When a construction management firm is used in lieu of a general contractor, this system is typically referred to as construction management at risk project delivery. The delivery sequence is similar to that of the negotiated team delivery system.
Triple Source Responsibility—Advisory Construction Management
Triple source responsibility project delivery is actually an adaptation of the general contracting delivery system with the difference being that a construction manager joins the designer and the contractor as the third party responsible by contract to the owner. The construction manager is an advisory to the owner and provides management services for the project. Thus, this system is typically referred to as advisory construction management project delivery. (Sometimes this system is called agency construction management. The difference is that advisors only advise owners while agents are legally permitted to act on the owner’s behalf without obtaining the owner’s approval.)
In some cases, the construction manager is hired first and assists the owner in hiring the designer. In other cases, the construction manager is hired during or after design. The owner either contracts for construction with a general contractor or, in most cases, with several trade contractors. In the latter case, the construction manager coordinates the construction activities.
Three Key Project Delivery System Principles
Principle 1—Seven Major Roles are Required on all Design and Construction Projects
There are seven major roles that must be filled on every design and construction project. These roles are the same regardless of the delivery system selected. The seven roles are:
•Owner Decision-Maker—This is the person or persons with the authority to make project decisions on behalf of the owner.
•Project Management—The guidance of project and project related activities from beginning to end through the application of knowledge, skills, tools, and processes in order to meet or exceed stakeholder needs and expectations from the project.
•Design—The solution to the owner’s project needs in the form of contract documents from which cost estimates can be obtained and the project constructed.
•Contracting—The arranging for or holding of the contracts with performing (trade) contractors.
•Construction—The hands-on work of the performing (trade) contractors who actually build the project with their own workforces.
•Construction Coordination—Directing of the performing (trade) contractors during construction.
•Construction Contract Administration—The servicing of contracts for construction held by contractors.
Exhibit 5 indicates which party is typically responsible for filling each of the seven roles for each of the three primary project delivery systems.
While actual role assignments can, of course, vary on specific projects (remember methods of project delivery are only limited by the creativity of the project team), each of the seven roles must be assigned to a responsible party in the project delivery structure. Without excellent performance in each of these roles, a project has limited prospect for unqualified success—at least from the owner’s perspective.
While it is the owner’s responsibility to assign a responsible party to each of these roles, many owners do not understand this responsibility or the available delivery systems and processes. Therefore, design professionals and the construction industry have an opportunity to lead owners through the project delivery selection process and to assist the owner in filling the seven essential roles.
Think of a project that you have been involved in that did not go well. Next study the roles and the typical assignments for the particular delivery system of your example. Can you identify one or more roles that were either not assigned or were assigned to a party that did not perform with excellence?
One of the most common failings in project delivery is in the project management role particularly in the general contracting and advisory construction management delivery systems. In the general contracting system, the designer often manages the services of the design, but neglects the management of the overall project. This does not suggest that the designer should manage the actual construction process, but rather the management of the design and construction as they relate to the delivery of the successful project. In the construction management delivery system, there is often confusion regarding assignment of the project management role between the designer and the construction manager. Design professionals have a great opportunity to provide project leadership in the project management role for many forms of project delivery.
Principle 2—Two Types of Agreements Owners Have With Designers and Constructors
Owners enter into agreements with various entities to perform design or management services and construction work. These agreements are of two general types. It is important to the understanding and selection of the delivery system to recognize the difference in performance responsibilities required by these two types of agreements. The two types, advisory agreements and contractor agreements, are defined as follows:
•Advisory Agreement—An advisor is expected to make all decisions to the benefit of the owner.
•Contractor Agreement—A contractor is expected to make decisions to their own benefit (improve the efficiency of construction) as long as such decisions are consistent with the terms and conditions of the contract and the plans and specifications.
Exhibit 6 indicates the type of agreement each party has with the owner for each delivery system. This is a tool owners can use in helping to select a delivery system for their projects. In the design-build delivery system, the single agreement is a contractor type agreement. In the general contracting and advisory construction management delivery systems, agreements are both advisory and contractor types. Some owners will have a greater comfort with certain types of agreements. The important thing is that neither type of agreement is good nor bad, but the parties holding each type of agreement have a different responsibility to the owner.
Principle 3—Allocate Risks for a Winning Project
It is often said that agreements (contracts) are only needed if there is a problem with the project and when lawyers get involved. While contracts are indeed important for dispute resolution, they are foremost important in establishing a “meeting of the minds” or “an understanding between the parties.” Meaningful contact negotiations cannot only lead to a meeting of the minds, but can also serve as an excellent tool in building project teams. The project participants often overlook this important benefit of contracts.
It is important to the success of a project that contracts create a win-win scenario for all parties. An important principle for accomplishing this through contracts is by the fair allocation of project risks to the all the parties. Exhibit 7 provides a few general rules for use in the fair allocation of project risk.
Three Key Areas of Consideration for Project Delivery System Selection
Project delivery system selection should also include specific project, owner, and team considerations that may be general in nature or specific to a particular project circumstance. In the paragraphs below, selected issues and associated questions and considerations are offered for each of these three areas. Conclusions directed at the selection of a particular delivery system are left to the reader’s judgment.
Every project has specific requirements that should, of course, be considered in the selection of the project delivery system. Examples of project considerations include:
•Scope—How well defined is the project scope?
•Schedule—Can the project be delivered in a linear sequence or is a fast-track approach needed?
•Cost—What are the costs limits for the project?
•Uniqueness—Is design a driver for this project? Are construction processes a driver?
Owners should not overlook considerations unique to their specific circumstance. Such considerations that should be considered in project delivery system selection include:
•Ability—What is the owner’s ability to participate in the project delivery process? What role or roles is the owner capable of filling?
•Experience—What experiences has the owner had with projects? What has worked for the owner in the past?
•Desire for Involvement—How much direct involvement does the owner want in the project delivery process?
•Desire for Control—How much control does the owner want in the project delivery process?
•Comfort Zone—Owner’s should not overlook their “gut” feelings. What feels comfortable to the owner?
Team Selection Considerations
Team selection should include factors such as:
•Laws—Do state or federal laws dictate methods of team member selection and procurement?
•Availability and Experience—What is the availability and experience of the design and construction community for the specific project at hand?
•Relationships—Does the owner have relationships with particular designers and/or contractors?
•Team Building—What team members will provide the best opportunity to build a winning team?
•Roles, Types of Agreements, and Risk Allocation—Use the tools presented above in this paper.
There is no best project delivery system except the one that is best for the project and for the benefit of the owner. Design professionals and the construction industry should take the leadership in educating owners in the available project delivery systems and help owners to select the most appropriate system for their particular project and circumstance. Owners, design professionals and the construction industry should consider the concepts, principles and tools presented in this paper; information presented in documents such as those referenced in this paper; and their own experiences in the selection process.
AGC/BSA Committee on Recommended Practices in the Building Industry. (1997). Client Advisor.
Dorsey, Robert W. (1997). Project Delivery Systems for Building Construction. Associated General Contractors of America.
Konchar, Mark, & Sanvido, Victor. (1999). Selecting Project Delivery Systems. The Project Delivery Institute.
Seminar 1997. Selecting the Best Project-Delivery System. College of Engineering, University ofWisconsin-Madison.
Seminar 2000. Design/Build Essential Tools. PSMJ Resources, Inc. The American Institute of Architects, California Council. (1996). Handbook on Project Delivery.
Proceedings of the Project Management Institute Annual Seminars & Symposium
September 7–16, 2000 • Houston, Texas, USA