Interested to hear people's thoughts as to why design build isn't used more frequently on development projects.
From my experience working on design build projects it appears that it would provide developers a lot of benefits: early cost certainty via GMP, fast tracked construction resulting in faster delivery of product to market, better coordination due to early trade partner involvement etc. Of these benefits, I think that the early cost certainty provided by the establishment of a GMP during the preconstruction phase would be very attractive to developers compared to the traditional design bid build method which generally requires more pain to bring to budget. I also imagine the benefit of early cost certainty from the GMP/early risk transfer would offset the cost of preconstruction fees paid in order to have the DB team assemble the GMP.
Why would developers not use DB if they can lock in their construction cost during design and transfer the risk of cost overuns to the GC via GMP?
Second question:
What delivery methods are you utilizing most frequently and why? CM at Risk, Traditional?
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Bringing in the GC early is great for coordination and design-phase pricing. But it removes the leverage you as the developer have over the construction pricing. The GC won't feel the same pressure to provide a tight bid if they already know they have the job.
Your best bet is probably to bring in the GC as early as possible on complex, unique projects, and as late as possible on cookie-cutter projects.
I know of a national retail tenant that builds every one of their stores in existing inline strip mall space. They pick locations with the same physical characteristics every time, and they have the store design down to a science. For each fitout, they get hard bids from a preselected handful of GCs based on full CDs directly before construction. Best way to keep it competitive. There's no reason to involve them early, since every detail is already worked out. On the other hand, if you're building a skyscraper on friction piles in downtown Chicago, you would be a fool not to involve a GC during design.
Thanks for the insight. That's a good point about the spectrum of project complexity being a litmus tests for DB delivery.
Regarding leverage over the contractor, I have frequently seen DB contracted in two phases. The first phase being design/preconstruction services resulting in a GMP at which time the owner is presented with the contractual option of not signing up the DB team for Phase two (construction services) if the GMP/DB experience is not living up to expectations. If the owner chooses the off ramp many choose to take the project to a CMAR delivery method with a different team.
How does an off ramp for the owner after design/preconstruction change your response if at all?
My 2 cents...I think a lot of people think that GMP's lock in their costs in totality. That's not the case. I have not seen projects with negotiated GMP contracts perform any better than lump sum projects on average. Most of the painful additional cost is from unforeseen conditions in the ground, material escalations, procurement delays etc. GMP's, in my opinion are better for complex projects where you need a true early Design Development budget, and then the GC plugs estimated costs in line items that are more unknown...then over time as drawings go from 25% to 50% to 75%, the budget is updated and refined each time, replacing Estimated Cost line items (based on take off and unit pricing) with actual sub feedback once the scope shows up on the drawings. This allows the design team and owner to refine the design as they see fit with complex projects (I am thinking hospitals, large retail/office etc). I work in industrial RE where the benefit of that coordination is just not there. We want to get to market as quick as we can, so hey lets just shit out a drawing package as fast we we can, slap some contingency on it, and as long we are mostly right, ownership does not want to wait until we have all the risks 100% in a box. More like 75%. The rent growth is too insane to be slow these days.
+1 on this, GMPs absolutely do not lock you in on a price. It only locks you in on a price based on the existing drawings; IE if your drawings and current design are ass, you're gonna pay for it either way.
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