Churches
planning to build should thoroughly investigate the different construction
delivery methods available and determine which one will work best for their
situation. The delivery method
establishes the contract relationship between the three members of the Building
Team - the Steering Committee, the Architect and the Contractor. The Steering Committee should decide on an
acceptable level of risk they are comfortable with and which delivery method
will provide the best balance of risk and reward for their church. Therefore, the committee must understand the
advantages and disadvantages of each of the various delivery methods.
There
are essentially four main delivery methods to consider. They are Design-Bid-Build,
Partnering, Design-Build, and Construction
Management. Each has advantages and
disadvantages and different levels of risk depending on how they are configured. At one time it was common for most churches
to use the traditional Design-Bid-Build
(DBB) delivery. This method is still used by most government
bodies and some churches, mainly because they believe it will result in the
lowest price and have the lowest level of risk.
In DBB delivery, the church first
selects an architect who develops the design and completes detailed
construction drawings and specifications.
Once the plans are 100% complete, they are provided to bidders for
pricing. After taking bids, the church
signs a fixed price construction contract with the low bidder.
In DBB delivery the architect is
responsible directly to the church for the design and contract documents. The architect administers the bidding and
provides construction contract administration, serving as the church’s
representative during construction.
The
contractor is responsible for the proper construction of the design for the bid
price, construction quality, and for methods and procedures. DBB
creates an independent relationship between the architect and the contractor,
with each being directly responsible to the church. This system of checks and balances serves to help
protect the church. Since the architect
acts on behalf of the church, he or she is able to protect the interests of the
church in obtaining a quality finished facility that complies with the design. At the same time the architect must also be
fair and impartial toward the contractor.
DBB is low risk if the
bidders are carefully screened and only the most qualified are invited to bid. However, risk is considerably higher when
bidding is open to anyone.
One
negative toward DBB is the
separation of the design process from the construction function. The architect must know the construction cost
of the project during the design. The
contractor is usually better informed about current costs but only enters the
picture after the documents are complete.
The contractor must bid on the drawings, exactly as drawn. During design the contractor does not have an
opportunity to provide input or propose cost saving alternatives. Cost savings and alternate design ideas are
only considered after the project is bid and then only if the bids are over
budget. If bids come in higher than the budget,
there can be a lengthy negotiation process wherein the low bidder is involved
in re-pricing and value engineering. Sometimes,
if extensive redesign is necessary, the bid process has to be repeated.
If
contractors are busy, they may be reluctant to agree to bid on a project. The only contractors that may agree to bid
will be the ones who need work the most.
Often the ones with the least amount of work do not have a reputation
for the best quality. Fewer church
projects are bid today because other delivery methods seem to offer many of the
advantages of the traditional design-bid-build method, with fewer
disadvantages.
Partnering combines the best aspects
of traditional Design-Bid-Build and Design-Build. With Partnering
the architect is under direct contract with the church and still represents the
interests of the church during design and construction. However, one contractor is selected after a
thorough screening process during the early planning stages. This contractor enters a pre-construction
agreement with the church, and this agreement eventually turns into either a
fixed price or a “cost of the work plus a fixed fee” contract.
Often
the cost-plus contract includes a guaranteed maximum price (GMP). Some cost-plus agreements with a GMP include
provisions that allow for a savings incentive.
If the contractor is able to reduce costs below the GMP, the savings is
split between the church and the contractor by a predetermined percentage share,
thus giving the contractor incentive to find ways to reduce costs and to finish
the job for a final price less than the GMP.
Some contractors will give the church 100% of the savings.
Partnering facilitates input from the
contractor during design for cost, constructability and construction
methods. Working as a team, the
architect and contractor can look for ways to improve the design while keeping
costs in line. The contract price is
negotiated between the church and the contractor with the assistance of the
architect. The church has reliable cost
information early on and therefore can better balance between design and
budget. There is no chance of “sticker
shock” on bid day because there is no bid day.
Risk
to the church is low because the price is developed in parallel with the design;
and if the price appears to be too high, the design can be adjusted before
detailed construction documents are completed.
Partnering can also speed up
the schedule and even allows for fast tracking. The fast track approach is
riskier but allows construction to start before design and final pricing are
complete.
Similar
to Partnering, Integrated Project
Delivery (IPD) is the newest method of delivery but has a more complex contract
structure. IPD is most appropriate for very large scale projects. It is another way to allocate risk and reduce
liability in return for potential cost and schedule benefits.
Design-Build (DB) combines the roles of designer and builder into a single
entity. Some churches prefer Design-Build because they like the
single point of responsibility for both design and construction. The single contract is directly between the church
and the DB contractor. In most cases the architect is under contract
with or employed by the contractor. In a
few cases the architect may be the lead, with the contractor working for the
architect.
DB has none of the checks and
balances found in more conventional contract arrangements. The disadvantages are related to the lack of
an architect or advisor who is directly responsible for the interests of the
church. In some situations, the committee
may never even meet the architect. Additionally,
many design-builders prefer to build from familiar prototype designs or build
using pre-engineered structures. This greatly
limits design options for the church.
DB is sometimes sold on the
basis that it will result in lower overall project cost, provide a guaranteed
price, allow for speedier construction and reduce risk. Cost may be easier to estimate if the builder
has previously built the design, but that is no guarantee of lower cost. A previously built or prototype design may
require less design time, allowing the project to start sooner. Some
pre-engineered structures can be built faster and for less cost than
conventional structures. The church must
determine if the best way to meet its facility needs will be with a prototype
plan or a pre-engineered structure. There
is no one to advise the church during construction concerning payments, work
quality or changes. In some cases, the
church may have to accept a lower standard of quality.
Sometimes
churches are led to believe that these sacrifices are required to reduce construction
cost below other delivery methods. The
sales pitch for design-build is cost reduction and time savings. But does the
church really benefit from these so called cost and schedule benefits? DB
contractors will insist that risk is less because of the promised
guarantees. The problem comes in
enforcing the guarantees. DB has the potential for high
risk. In my opinion, the only delivery
method with potentially higher risk is Construction
Management.
Construction Management (CM) comes in several varieties. With CM
delivery a construction manager performs most of the duties of the contractor for
a set fee. The construction manager is a
person with a great deal of construction experience and who acts in the
capacity of a paid advisor or manager working directly for the church. In some respects, the church is essentially
acting as its own contractor. On larger
projects the construction manager may be part of a full service construction
company. The advantages include the
church having expert pricing and construction advice early in the design
process, resulting in potential cost savings. During construction CM can reduce the cost of conventional contractor
overhead and profit. The architect is
under contract to the church and carries out the same duties and
responsibilities as with DBB and Partnering.
The
biggest disadvantages are increased liability and financial risk to the church
and the lack of a guaranteed maximum construction price. With the church being its own contractor,
there is no separate party to accept overall responsibility for construction
defects. If a problem arises after
payment is made, the church, the architect, and the CM advisor may not have the clout to induce the offending sub-contractor
to fix the problem and make the necessary corrections. If defective work has to be removed and
redone, the church may end up absorbing the cost. Under CM
delivery, the church incurs relatively high risk in exchange for the possibility
of lower cost.
Which
delivery method is right for your church?
It depends on how much risk the church is willing to accept in return
for “promises” of lower cost, faster schedule, or better quality. The level of risk associated with each delivery
method is a matter of much disagreement in the construction industry. It depends on one’s point of view. Consider the following risk chart:
Lowest
risk •Design-Bid-Build
(DBB) with invited bidders
Lower than average risk •Partnering cost plus-guaranteed maximum
price
Medium risk •Design-Build
(DB) with access to architect
Above average risk •Design-Build
(DB) with no access to architect
High risk •Construction
Management (CM)
Highest risk •Design-Bid-Build
(DBB) with open bidding
This
risk chart is my own opinion, based on my 42 years in the construction
industry. However, it is not that simple.
In theory, with enough built-in enforceable guarantees, the amount of
risk can be mitigated for even the riskier methods of delivery. The lowest level of risk for Design-Bid-Build is achieved by
carefully pre-screening and selecting the bidders. But the level of risk is considerably
increased if the bidding is open to anyone.
Open bidding, with no discrimination on the experience and
qualifications of the bidders, should be considered higher risk even than CM.
Partnering provides an overall good
risk-reward balance, allowing a carefully selected contractor to provide a very
good level of construction quality for a reasonable price. The only thing given up over bidding is the
guarantee of the lowest possible price. Is
it not better to get a well designed and properly built facility for a fair
price than trying to be certain of the lowest possible price?
The
risk inherent in Design-Build can be
reduced to some extent if the design builder will allow the church to have full
access to the architect, as well as allow the architect to provide construction
phase services and site visits. Another seldom
used option is for the church to hire an independent architect or construction
expert as an advisor.
Even
the risk of Construction Management can
be reduced by using “CM–At Risk,” a system in which the construction manager
takes on financial responsibility for the construction cost. However, you must be certain that the
construction manager has the financial backing to make good on the guarantee. There are highly reputable and financially
sound CM contractors with excellent
track records, with whom the risk level may indeed be lower. I have observed many small first unit
“mission churches” built partly by volunteers and managed by an experienced
construction manager, with excellent results.
The
Steering Committee should learn as much as possible about the expected risks
and rewards of each delivery method by talking to churches experienced with
each method. They should obtain legal
advice concerning the construction contracts used with the delivery methods
they are considering. They should discuss
these delivery options with construction industry professionals, lenders and
their denominational leaders. Once fully
informed of the advantages and disadvantages of each, the Steering Committee should
be able to determine which delivery method is the most appropriate for their
church.
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