Whitepaper: 11.19.2013

Choosing the Right Project Delivery Method Can Make or Break a Project

Alternative construction delivery methods – especially those that offer financing solutions – gain popularity
by Bo Calbert, McCarthy Southwest Region President

Construction delivery methods are constantly evolving and expanding. Staying on top of the latest evolutions to understand all options available when planning for the design and construction of new projects can be a challenge. As a general contractor, one of the most critical roles we play is working with our project owners to review about all options available when planning for the design and construction of new projects.

This is especially true when it comes to public projects like schools, water and wastewater treatment plants, roads and highways, and prisons where legislation enabling alternative delivery methods in the public sector is relatively new.

While public owners’ needs haven’t changed during the downturn – they are still serving an ever-growing population – what has changed is their ability to finance construction projects. Today, we have a number of construction delivery methods available to public owners that are well suited to bridge the gap between need and funding.

Design-Build-Finance: This is the most preferred mode of project delivery for an owner who acts as a third party responsible for providing the service. A common case is with municipal institutions that operate water and wastewater treatment plants, because it gives them a viable financing alternative without the huge capital investment typically associated with plant construction. Variations of this delivery method also include Design-Build-Operate and Design-Build. The latter is the basis of these integrated models, overlapping design and construction by hiring one design-build team to deliver the project requirements versus separately hiring an architect/engineer and contractor. This collaborative contracting approach solicits creativity from the industry by providing integrated design and construction solutions and providing price certainty early in the life cycle of the project. However, it can also result in difficulties for the owner to align the bridging documents and design-builder proposal documents to best meet end-user needs.

Public-Private Partnership (P3): A public-private partnership involves a contract between a public-sector authority and a private party, in which the private party provides a public project and assumes substantial financial, technical and operational risk in the project. In some types of P3, the cost of using the facility is borne exclusively by the users and not by the taxpayers, such as toll roads. Of all the delivery methods available today, P3 has the most potential to solve more problems and deal with the challenges associated with complex public projects. As states continue to develop legislation to enable and support these types of partnerships, it will become a more viable and attractive option for owners. P3 enables the public sector to harness the expertise and efficiencies the private sector can bring to the delivery of certain facilities that have been traditionally procured and delivered by the public sector. P3 is structured so the public-sector owner seeking to make a capital investment does not incur any borrowing. Rather, the P3 borrowing is incurred by the private-sector vehicle implementing the project. Therefore, from the public sector's perspective, a P3 is an “off-balance sheet” method of financing the delivery of new or refurbished public-sector assets.

Another construction delivery method public owners are capitalizing on in today’s economy is Job Order Contracting. Due to a reduction in workforce, smaller projects that may previously have been performed in-house are now being outsourced. Maintenance and repair work put on hold over the past several years can no longer be delayed, and Job Order Contracting offers public owners an efficient way to complete these types of projects with less red tape. JOC works best with projects that include work of a recurring nature, but with indefinite delivery times, types and quantities of work.

Integrated Project Delivery (IPD): One of the newest construction delivery methods available today is IPD. IPD combines ideas from integrated practice and lean construction to eliminate or minimize low productivity and waste, time overruns, quality issues and conflicts during construction among the key stakeholders of owner, architect and contractor. Rather than each participant focusing exclusively on their part of construction without considering the implications on the whole process, the IPD method brings all participants together early with collaborative incentives to maximize value for the owner. This collaborative approach allows informed decision-making early in the project where the most value can be created. The close collaboration eliminates a great deal of waste in the design and allows data sharing directly between the design and construction team, eliminating a large barrier to increased productivity in construction. The downside to this approach is that there can be murky legal conundrums involved with intellectual property, ownership of collaboration software files, and issues surrounding team conflict on project’s utilizing this delivery method.

Design-Assist: With design-assist projects, the contractor brings an expanded team to the project during preconstruction to augment the design team in their efforts. A primary focus of design-assist is for the trade subcontractors to work side-by-side with the design professionals to create the best solution to meet all of the owner's needs. In addition, through the use of virtual design and construction tools, contractors can enhance the sharing and transfer of information from design to construction, streamlining the process and provide cost certainty earlier.

Construction Management-at-Risk (CM-at-Risk): CM-at-Risk is a parallel model, where the designer and builder are separately contracted with the owner during the design phase of the project. The designer is contracted after a typical qualifications-based selection. The builder is separately selected and contracted, also based on qualifications. With this model, builders are integrated into the design phase, allowing the builder to provide constructive solutions that may be more cost effective, provide for a better delivery schedule, and provide for better long-term maintenance and operability of the facility. The builder also provides cost-estimating services that allow the team to manage design and construction to the project budget. The outcome of this contracting approach provides price certainty, utilizes best design and construction methods, and allows the end users to understand what they will receive when the project is completed.

Conclusion
Owners today want the flexibility to consider alternative delivery methods, and the design and construction industry is doing a much better job supporting these changes. We continue to work with owners on their options and work together in mastering the complexities involved in each delivery method. Fortunately, tools like virtual design and construction and an integrated lean culture are helping us take delivery methods to a higher level, facilitating true integration among all parties involved.

There is no “one size fits all” prescription when it comes to construction delivery. Each project is unique and often has a complex set of circumstances to consider before selecting a delivery method. It takes a lot of training, insight and experience to get it right. Owners should not be averse to opening up a dialogue with contractors and learning from their varied experiences – good and bad – with the wide array of delivery options.

For additional resources on construction delivery methods, check out our Insights That Build archives below or visit the Alliance for Construction Excellence housed within the Ira A. Fulton Schools of Engineering at Arizona State University or the Construction Industry Institute.

About the Author
Robert “Bo” Calbert is President of McCarthy’s Southwest Region located in Phoenix. In his 29 years with the company, Bo has amassed on-site credentials across a wide range of project types, including healthcare, semiconductor and water/wastewater plants, education and hospitality. Each experience has uniquely contributed to his strength as the leader of McCarthy’s presence in the Southwest. Bo has worked in four McCarthy divisions and held a variety of positions, including project engineer, project manager, project director and vice president, operations. Calbert received a bachelor of science in construction technology management from Southwest Missouri State University and a master’s degree in construction management from Pittsburg State University. 

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