The roles, responsibilities and risks of the parties involved in a project vary considerably under different project procurement methodologies. Consequently, the selection of the best suited contracting strategy for procurement of design and construction services is a key component in the success of a project.The main principles and characteristics of the following widely used contractual models are described below:

Construction Management

Construction Management (CM) is a project delivery method whereby the CM works alongside the Owner’s team throughout design and construction, sharing his experience as the design evolves. The CM is selected based on qualifications, fees are negotiated, and the CM essentially serves as an extension of the Owner’s staff. The CM works with the design team to develop cost estimates, schedules, methodology and consult on value engineering. Because the Owner retains a large portion of the project delivery risk under the CM method – including design liability, design/construction interface, cost overruns and schedule delay – it is important that this is mitigated by the Owner having very experienced and competent project management to ensure these risks are managed during project delivery. The CM method has two important variations which relate to pricing and contractual obligations:

Construction Manager AS AGENT

The CM-Agency model, or “pure-CM”, is a fee based service whereby the CM acts as an extension of the Owner’s staff. CM responsibilities may include providing advice during the design phase, evaluating bids from trade contractors, overseeing construction, and managing project cost, schedule and quality. The CM is in effect a consultant to the Owner and has no financial risk in the delivery of the project. The CM may work with the designer or contractor to reduce costs but the Owner ultimately holds all subcontracts for the project and assumes all risk of cost or schedule overruns.

Construction Manager AS CONTRUCTOR (AT RISK)

The CM-at-Risk model is a delivery method whereby the CM holds all the contractor and vendor contracts, and takes on the financial risk of the project. The CM acts as consultant during the pre-construction phase and as the general contractor during construction. The CM is brought on during the design phase of the project and works with the architect or engineer in developing the final design. The CM acts in an advisory role, providing construction design reviews, engineering suggestions, construction estimates, and recommendations. At the end of design development phase the CM may provide the Owner with a Guaranteed Maximum Price (GMP) for construction and sets a target date for completion. The GMP is typically based on a partially completed design and includes the CM’s estimated costs of the remaining design, a CM fee, and construction contingency. The CM contingency comprises two parts; CM and Owner components. The CM element covers increased costs due to unavoidable circumstances while the Owner component will cover Owner directed or caused changes. Unused CM contingency can be returned to the Owner, shared, or retained by the CM depending on the contract. The CM then takes responsibility for constructing the project for the GMP and is responsible for any cost or schedule overruns.

Design Bid Build (DBB)

The Design Bid Build (DBB), or general contractor, delivery method follows a linear process whereby an architect/engineer is selected by the Owner and then a separate contract is procured with a contractor to deliver the project. The Owner engages the architect/engineer to prepare a design for the project, including construction drawings, and specifications. Once design is completed, a bid package is presented to interested contractors, who prepare and submit their bids for the work. The winning construction firm, usually selected based on lowest bid, then enters into subcontracts with firms under his control/direction.
In DBB the owner’s major risks are the design-construction interface and the potential for changes and claims. It is important for the owner to mitigate these risks by ensuring that design is truly complete and accurately documented and that contracts are absolutely clear prior to procuring the General Contractor. This requires the owner to have particular competence in design management and contract management.

Design Build (DB)

The Design Build (DB) delivery method streamlines the design and build by having only one party responsible for the design and construction of the project. In this system, the Owner contracts with a DB team to perform the complete design and construction of the facility, usually based on a statement of requirements, indicative design and output specifications presented by the Owner (usually prepared with the assistance of a bridging architect). Based on these requirements, DB proponents develop and price their own design during a competitive procurement process and offer a fixed price to complete the work. The DB contractor is responsible for completing the design, performing construction and the coordination between design and construction.

The DB model transfers a large amount of risk away from the owner, along with some control. However, in order to ensure that the owner actually gets the product that is required, it is important that the owner has particular skills and competence in procurement management so that the requirements are defined in such a way as to achieve the project objectives.