Lean Construction – Overcoming decades of mistrust, lack of communication, and opposition between facilities owners, designers, engineers, and builders… possible?
Only two of the following construction delivery methods are LEAN. Do you know which they are?
Construction Project Delivery Overview & Comparison
Design-Bid-Build
Traditional design-bid-build (DBB) delivery process with design, bidding, and construction in separate, sequential steps. Construction contract is generally awarded to the lowest bidder and/or lowest qualified builder, who then utilizes the subcontractors included in his or her bid.
Advantages
- Process most familiar to public sector design and construction community.
- Owner controls the design, which is completed under direct owner-A/E contract prior to construction.
- Direct way to provide competitive pricing for entire construction contract.
Disadvantages
- Adversarial, change-order-oriented environment is common between owner, A/E, and contractor.
- Planning, procurement, and project delivery is inefficient and disparate.
- Time-consuming redesign and rebid, and over-budget, unsatisfactory outcomes are common.
- Project cannot be expedited with a collaborative fast-track process; drawings and specs must be 100% complete to bid (though latter rarely occurs).
- Construction contract may be awarded to low bidder, without consideration to qualifications.
- No contractor and limited A/E assistance with detailed estimating, plan checking, and constructability reviews during design phase.
- General lack of technical and cost visibility and transparency. Bid shopping can occur and actual overhead and profit amounts are unknown.
- Construction price is not fixed until after design and bid phases are completed, and original “lump sum” target cost is rarely met.
Design-Build
Design and build (DB) construction are provided under a single design-build contract initiated at the beginning of the project. A DB contract is awarded on the basis of price and/or qualifications.
Advantages
- Single point of responsibility for both design and construction of the project.
- A/E and contractor work together through all phases of the project.
- Guaranteed maximum price (GMP) is fixed early in design phase of the project.
- Construction contract is awarded on basis of design-build team qualifications and/or price.
- Project can be expedited with fast-track construction, which can also reduce costs.
- Generally less adversarial relationship between owner, A/E, and contractor.
- Change orders may be reduced versus DBB due to A/E-contractor collaboration and contractual relationship.
- Designer and builder have a greater motivation than DBB to ensure owner satisfaction when selections are based on qualifications and performance.
Disadvantages
- High initial set up costs make DB suitable only for major new construction
- Not a fully collaborative multiparty agreement. Owner can still be at odds with designers and builders.
- While high set up costs required larger projects, project types must be relatively straightforward, where requirements can be fully documented at request for proposals (RFP) stage.
- Major pre-planning effort is needed to prepare sufficient material for the request for quotations (RFQ)/RFP process.
- Owner has less control (vs. IPD or LEAN Job Order Contracting) of design process, with the A/E typically working for the contractor.
- Design changes can result in costly impacts to drawings or construction work in progress.
- Disagreements related to intended quality of work are not uncommon.
- Will generally not work any better than DBB if mutual trust relationships are not built.
- May not be allowed some states.
Construction Manager at Risk
Construction manager at risk ( CM@R) includes a construction manager who works with the owner and A/E through design and proposals and manages subcontracts to complete the work. The CM@R is required to complete the project within the agreed-upon amount, or else is at risk to cover the additional costs.
Advantages
- Project can be expedited with fast-track construction.
- Construction contract is awarded on basis of CM@R qualifications and past performance.
- Construction work is competitively priced through low bids of prequalified subcontractors.
- Change orders are may be reduced due to A/E and contractor coordination through the design phase.
- Owner controls the design, which is completed under direct owner-A/E contract.
- Suitable for complex building types.
Disadvantages
- Not fully collaborative.
- Contingency costs are generally higher due to high risk of construction manager.
- Fast-track construction presents risks related to incomplete construction documents.
- Design changes during construction are extremely costly.
- No process to assure mutual trust relationships built for all parties.
- Is allowed in some states.
Construction Management with Bid of Fees and General Conditions
Construction is performed through a CM, who is selected on the basis of the lowest bid of fees and general conditions.
Advantages
- A/E, owner, and contractor (CM)may work together through all phases of the project.
- GMP may be fixed early, during the design phase of the project.
- Project can be expedited with fast-track construction.
- Owner can control the design.
- Provides design-change flexibility for complex building types.
- CM fee and/or general conditions amounts set through bid process.
Disadvantages
- Lowest bid of fees and/or general conditions is not an indicator of CM capabilities or potential outcomes.
- No sure path to cost savings. Fee and/or general conditions savings are generally much less than the cost of CM process inefficiencies.
- Fast-track construction presents risks related to incomplete construction documents.
- May not be allowed in some states.
Agency Construction Management with Design-Bid-Build
Agency construction manager is hired as a consultant to help represent the owner’s interests during the construction phase of a DBB project.
Advantages
- Same pros as noted for DBB process.
- Agency CM can provide industry experience and estimating, scheduling, and project management expertise for the owner’s benefit.
Disadvantages
- Same cons as noted for DBB process.
- Agency CM has no direct accountability for the success of the construction process.
- Owner must pay the fees of an agency CM in addition to the contractor’s fees for the construction work.
- Agency CM must be committed to representing the owner first… as a result, same potential antagonistic environment as DBB.
Multiple Prime Contracts
Multiple direct owner-contractor prime construction contracts that are bid for various trades, or groupings of trades, as needed to complete the entire scope of construction.
Advantages
- Construction method required by the procurement law in certain states.
- Can reduce markups of general contractors.
- Can be preferred by some established subcontractors who have prime contracts with the owner.
- Project can be expedited with fast-track construction.
Disadvantages
- Construction is awarded to multiple low bidders, without consideration of their qualifications.
- No single point of responsibility for the construction of the various trades related to the project.
- The owner is responsible for conflicts and inefficiencies between the multiple prime contractors.
- No contractor assistance with estimating, plan checking, and constructability reviews during design.
- Bid shopping can occur and actual overhead and profit amounts are unknown.
- Adversarial, change-order-oriented environment common, similar to DBB.
- Construction price is not fixed until after the design and all bid processes are completed.
- Time-consuming redesign and rebid is common, as is late, over-budget outcomes.
- Is not legal in some states.
Job Order Contracting
Job Order Contracting is a fully collaborative indefinite delivery, , indefinite quantity, long-term (one year, with up to four option years) construction method with general contractors and/or trades/subcontractors who are selected through a fee markup (co-efficient/factor) bidding process using an selected detailed unit price book (UPB), and who perform multiple projects through work orders. Based upon location, projects may include repair, renovation, and new construction.
Advantages
- Expedites projects by eliminating project-specific bid phases and reducing design documentation requirements.
- Properly employed, JOC is a highly collaborative environment that can consistently deliver quality, on-time, and on-budget outcomes.
- Allows for construction price “negotiation” based on an established construction cost unit-price book. (Note: prices are non-negotiable, however, quantities and selection of line items can be revised prior to acceptance of contractor proposal).
- Fully collaborative relationship between owner and awarded design/builder.
- Can be utilized with single or multiple job order contracting (JOC) contractors.
- Bid shopping is not allowed.
- Performance-based reward system.
- Fully cost and technical transparency.
- Robust, proven, auditable, and compliant process.
- Support, training, and technology for implementation and management is readily available.
Disadvantages
- Owner must possess requisite leadership skills and technical competencies.
- Organization must be committed to collaborative process that mutually benefits all parties.
- Not suitable for major new construction. Works best on the typical numerous and ongoing repair, renovation, sustainability, and minor new build projects.
- Allowable JOC total annual JOC Program size and individual JOC project size may be limited by jurisdiction procurement codes.
- May not be allowed, or be limited in some states.
- JOC vendors basing their services upon a percentage fee of total annual JOC construction volume can provide highly costly.
- JOC can be inappropriately simply speed project procurements and/or approve projects that otherwise would not have been approve via traditional methods.
Disadvantages
- Owner must possess requisite leadership skills and technical competencies.
- Organization must be committed to collaborative process that mutually benefits all parties.
- Not suitable for major new construction. Works best on the typical numerous and ongoing repair, renovation, sustainability, and minor new build projects.
- Allowable JOC total annual JOC Program size and individual JOC project size may be limited by jurisdiction procurement codes.
- May not be allowed, or be limited in some states.
- JOC vendors basing their services upon a percentage fee of total annual JOC construction volume can provide highly costly.
- JOC can be inappropriately simply speed project procurements and/or approve projects that otherwise would not have been approve via traditional methods.
Integrated Project Delivery
Integrated project delivery (IPD) is a fully collaborative, environment supported by multi-party agreement. The owner, the design team, and the primary contractor and subcontractors collaborate for the design and construction of a project on an early and ongoing basis. The goal of the collaboration is to minimize conflict among participants and steer the project to a favorable outcome for all participants. A sharing of project risk/reward is a key feature of IPD.
Advantages
- Expedites projects by assuring early and ongoing information sharing among all participants and stakeholders.
- Can significantly reduce project costs and improve other outcomes for all participants.
- Fully collaborative relationship between all parties throughout all phases.
- Focus upon process improvement.
- Overall cost savings.
Disadvantages
- Owner must possess requisite leadership skills and technical competencies.
- Organization must be committed to collaborative process that mutually benefits all parties.
- High initial set up costs make IPD suitable only for major new construction projects.
- Additional work required from all parties.
- May not be allowed in certain jurisdictions.
A thorough understanding of this Construction Project Delivery Overview & Comparison is a first step towards consistent achievement of best value outcomes for all participants and stakeholders.