Project Delivery Methods
Depending on our client’s needs, different project delivery methods are used to deliver a finished construction project. Let’s review the different project delivery methods, which include:
Construction Manager at Risk
In the CMR model, the construction manager is a direct member of the decision-makers. This delivery method necessitates a commitment by the construction manager to deliver the project within a guaranteed maximum price (GMP), which is based on construction documents and specifications, spelling out quantities and scope of work. In the most basic terms, a CMR contractor acts as an advisor to the owner, providing consultation and other professional services. More often than not, the CMR contractor is also involved in providing actual construction services depending on available bidders and their expertise. The risk comes into play partly with the CMR’s responsibility to work in the best interests of the owner, which includes managing and controlling construction costs. If costs go over the GMP then the CMR is financially responsible.
As a general rule, the CMR will offer the owner a GMP prior to the bidding process. Included in the GMP is a contingency line that covers bid overages, reasonably inferred cost items and other project-related costs that may arise during the construction phase. By giving the owner the GMP prior to the bid, the CMR assumes the risk of bids coming in higher, for he/she is bound by contract to deliver the project based on the plan’s specifications and any additional allowances as defined in the GMP.
In the Design-Bid-Build model (traditional low bid), the client bears the burden of most of the decision-making. The client first selects a design firm to create the contract documents that include detailed plans, quantities, and project specifications. The complexity of the project will determine what the design plans will consist of but usually are made up of civil, architectural, structural, mechanical, electrical, plumbing, and telecommunications specifications.
Once the design plans are completed, the job can either be advertised or delivered to companies to submit their bids. After the general contractors painstakingly go through each document and calculate all of the costs involved, they submit their bid to the client. Most bids have a specific due date. After the bids are reviewed by the client, in most cases they will choose the lowest bid. Considering the general contractor has all the necessary licensing, insurance, and bond coverage, the job will be awarded, a contract signed and the project should begin. Due to the fact that design plans are considered part of the contract, any and all changes (change orders) become the responsibility of the client.
Design-Build (the turn-key method) is a delivery system that focuses on a single point of responsibility is solely placed on one firm. This is to say that they are entirely responsible for the design and construction of a project, from beginning to end. The DB system, like the CMR delivery system, is meant to minimize risk for the client while decreasing the delivery time by combining the design element with the construction phase. Somewhat like the CMR system, the contractor takes full responsibility for the project.
Multi Prime is similar to Design-Bid-Build but with some key differences, one being that instead of dealing with one contractor and/or builder, the client contracts directly with multiple, separate specialized contractors for designated and specific aspects of a project. The MP delivery method involves the client, designer, and multiple general and/or specialty contractors. The second big difference between MP and DBB is the client has full control over the entire process. Note: Some states require this method to be incorporated for public sector projects. As of the date of publication, California still uses the lowest bidder wins method (source California Public Works Statutes, Chapter 9.2.2(b)).
Job Order Contracting
A Job Order Contract (JOC) is part of the family of indefinite-quantity contracts: JOC, WOC, DOC, SABER, IDIQ, and IQC. a contract for a fixed term or maximum dollar value, whichever occurs first, in which a contractor is selected based on a competitive bid to perform various separate job orders in the future, during the life of the contract. Procurement for this type of contract must still follow the requirements of California Public Contract Code sections 10500-10506; it is a contract, not a purchase order. Contract award is based on the bid adjustment factor which the contractor will multiply against “pre-priced” unit costs (compiled in a project task catalog) which is part of the contract. The adjustment factor represents all of the contractor’s costs (indirect and direct) and profit not included in the pre-priced unit costs. The adjustment factor is updated annually based on the Construction Cost Index published for the closest location.
The JOC scope is exclusive to the contractor. Job order contracts are typically used for well-defined, recurring or repetitive work where quick execution is essential, not for single projects. Using the JOC should not be an option among other options in deciding how to deliver a specific improvement. The decision about whether or not to use the JOC for a particular type of improvement project should be made when the JOC is issued, and it should be clear from the JOC scope whether or not the JOC must be used (or cannot be used) for a specific improvement. The most important decision in administering the JOC is therefore the drafting of the scope.
Also known as performance-based logistics (PBL) or performance-based acquisition, is a product and services purchasing strategy used to achieve measurable supplier performance. A PBC approach focuses on developing strategic performance metrics and directly relating contracting payment to performance against these metrics. Common metrics include availability, reliability, maintainability, supportability, and total cost of ownership. The primary means of accomplishing this are through incentivized, long-term contracts with specific and measurable levels of operational performance defined by the customer and agreed on by contracting parties. The incentivized performance measures aim to motivate the supplier to implement enhanced practices that offer improved performance and cost-effective. This stands in contrast to the conventional transaction-based, or waterfall approach, where payment is related to the completion of milestones and project deliverables. In PBC, since a part of the whole payment is tied to the performance of the provider and the purchaser does not get involved in the details of the process. Occasionally governments fail to define the requirements clearly. This leaves room for providers, either intentionally or unintentionally, to misinterpret the requirements, which creates a game-like situation. Recent studies highlighted that the shift from transaction-based to outcome-based relationship requires a business model innovation.
Performance-based approaches are widely used within the defense industry but can be applied across any spending category such as Clean Energy.