The design-bid-build method is known as the traditional method of project delivery in the construction industry. In this video, Jim describes this method and discusses its linear and progressive nature, which involves bidding work out to general contractors after the plans and specifications have been completed.
- [Tutor] Let's start by reviewing what I said earlier I would call the traditional method of construction project delivery; the design-bid-build system. If you've been in the construction industry for a while, this method is probably very familiar to you. It's the way the majority of construction projects are still delivered today, and it's the way that the vast majority of the subcontracts are let out by the general contractor to all the different trade contractors. This is an easy one to break down. The roles are well defined and the responsibilities are generally understood by each of the different parties.
In addition, since this method does have so much history, there tends to be a great deal of case law dealing with design-bid-build, and that gives each party a way to research their ultimate risks and responsibilities. Again, this method follows a very linear path of progression that begins with the owner hiring a designer to develop plans and specifications for the project that they want built. Typically, this means the owner will have a contract with an architect who is selected primarily on a qualifications basis.
The process for hiring an architect typically begins with an owner interviewing architects or architectural firms to develop a shortlist of designers who have the qualifications, and the experience that the owner feels suits their needs. From that list of qualified designers, the owner will make a final selection in a process that only then will include discussion about fees and fee structures. The owner will work with the designer to develop a set of plans and specifications for the project, really relying solely on the design team to develop that set of construction documents, that are then going to be used to price and build the project.
Let's go ahead and take a moment to hear from an architect about how this process unfolds. - Getting work as architectural firm happens in number of different ways depending on the type of project, so we'll start with public work. Public work has to be advertised and then what you'll do is you'll put a team together, and in Arizona it varies by state. In Arizona they can only select professionals including architects, based on qualifications. So there's no bidding, there's no discussion of the fee during the selection process.
So you'll normally put together a written proposal that responds to their request for proposals. That'll be reviewed and scored by a panel that's put together by the owners group, and then they'll do what's called a shortlist and pick three to five firms that then come in and do an interview. A lot of times you'll get specific questions for the interview, sometimes it'll be wide open and be more of a conversation. But then after the interview the panel reconvenes and through a point process based on qualifications will select the firm that's best suited for that project.
Then you'll enter into fee negotiations and if you, if the most qualified firm can't meet the required fee, they'll then go to the next qualified. There are public projects in other states where a fee is a part of that proposal and it often becomes the prime part. For private projects, they are more typically done either through reputation because you're an expert in that project type, so whether it's apartments or gas stations. Or they're referrals, they're people that have worked with us or worked with our clients and have talked to our clients, and our clients have referred us.
Or they're friends of ours or people that we have created relationships with. - Once these design documents are complete, the owner will then put the documents out for bid, typically to multiple general contractors in an attempt to get the best possible price. Now this bid process has all kinds of variations. On a public project, it may be a sealed bid process where any general contractor who meets the listed requirements can generate a bid, or a price, which is submitted as a sealed document.
In this scenario, the sealed bids are typically opened in a public forum and the project is simply awarded to the low bidder. On a private project, the owner may elect to negotiate with a smaller list of general contractors to arrive at a final price, or an owner may use a process where they pre-qualify a select list of general contractors, who then submit a bid and are most often still chosen based on price. The key characteristics of this method of project delivery, are that the owner has two distinct and separate contracts - one with the architect for design and another with the general contractor for construction - and the general contractor is not hired until after the design documents are completed.
The driving factor for awarding the contract for construction under this method is typically price, and the goal of this method is to get the lowest price for the project based on those design documents. To be successful, this method really requires the design documents, those plans and specifications, to be complete before the project goes out to bid so that the pricing received really represents what it's going to cost to build the project. Again that pricing may be based on unit prices which is a method you might see used on street projects, or it might be based on a single lump sum price.
For example I bid $4,270,000 to build this office building. Again, this delivery method is very traditional. It's very familiar to most design and construction professionals, and it's widely used. Let's continue on though and take a look at a few different approaches.
- Payment and procurement methods
- The design-bid-build method
- The design-build method
- Construction manager at risk (CMAR)
- Integrated project delivery (IPD)
- Selecting a project delivery method
- Procurement laws
- Delivering the best value to the owner
- Qualifications-based selection
- Changes in the way you are paid