Risk/Reward Comparisons

When comparing the risk and rewards of traditional, negotiated and Design/Build projects, it is easy to see the benefits of the Design/Build process.
Traditional (Design/Bid/Build) Risks and Rewards
  • More risk for owner/architect/contractor.
  • Relationship between owner/architect/contractor often adversarial.
  • Parties must protect self-interests.
  • Competitive bidding reduces cost to lowest common element.
  • Change orders are disruptive, not readily accommodated - Pricing to recoup initial low costs bid.
  • Contractor uninvolved/uninformed during planning stage.
  • Quality of budget dependent on accumulation of bids.
  • Only focus is on lowest price.
  • Assumes quality construction will be the result of strict documents, regardless of contractor ability.
  • Schedule is often adversely affected for price.

    Negotiated (Design/Construction) Risks and Rewards
  • Proper risk allocation is reflected in allocation of appropriate cost to various parties.
  • Relationships between owner, architect, and contractor are based on respect and trust, creating a team environment.
  • Owner, architect, and contractor are on even level, working for mutual benefit.
  • Owner can choose cost/quality trade-offs; more emphasis on value.
  • Changes are readily accommodated and priced accordingly.
  • Contractor involved in planning and implementation of project goals.
  • Early budget input from contractor's conceptual estimates.
  • Contractor/subcontractor selection based on successful performance and reputation.
  • Considers experience, quality, reliability, schedule performance, and creativity, along with price to calculate value.

    Design/Build Risks and Rewards
  • Architect/contractor design/build team established; focused on integrating owner into process.
  • Contractor involved in planning and budgeting. Conceptual pricing assigned to design ideas allows owner informed decision making.
  • Early definition of scope allows design/builder to establish Guaranteed Maximum Price (GMP) for owner's budget.
  • Time savings due to overlap of design and construction activities.
  • Implementation of a "fast track" process.
  • Changes are routine and readily accommodated.
  • Fees minimized due to centralization; no duplication; clear assignment of responsibilities.
  • Project costs minimized through the use of innovative and cost-effective solutions.
  • Better communication by involving all parties in all aspects of the project.
  • Cooperative spirit brings out the best ideas of all parties.
  • Realistic completion dates can be established and maintained.