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Traditional Procurement v Design & Build Contracts: Which one is better?

A question we are often asked is, “Which is better: Traditional Procurement or Design & Build?” This depends on your building project, and your specific experience, goals and objectives. If you have never carried out a construction project before, you may feel that deciding between Traditional and Design & Build (D&B) is a huge decision to make, less so for experienced developers. 

Do you start off by appointing an architect or do you appoint a building contractor and trust them to deal with every aspect of the project? This is the choice often referred to by professionals as traditional procurement v design & build. Often potential clients approach us as a construction contractor with the classic questions of, “roughly how much and how long will it take”? This is without the full specification and any working drawings? We then routinely point them to the architects and engineers as the first stage process, as we believe ‘guesstimates’ are not worth the paper they are not written on!  Our ethos is that the client should appoint the core team they will need that will then allow us to provide a more accurate quotation. 

Lets look at the differences so that you can compare their pros and cons, and find out which one is better for your project. 

Traditional Procurement Contract

The majority of construction projects are organised in one of two ways. The first is often called a “traditional contract”. This traditional contract is the most commonly used procurement and has been used since the Victorian era. You hire someone (an architect) to design your new project commercial or residential or whatever it is. Then once you have planning permission, you or your project manager (who could be your architect) put out an invitation to tender for a building contractor. The architect will have also consulted with other designers and engineers to create the full specification and hopefully a really clear and and detailed tender package. Building contractors then put in bids laying out their prices for the work you have specified and sometimes they may comment of the specification and design, usually in a helpful manner for clarification. You choose a contractor, and they start construction work to your architect’s design and specifications.

Alternatively, you can opt for what is known as “design & build”. At the very start, you hire a building contractor (possibly again by invitation to tender). At this stage the contractor will only be able to provide preliminary costs until the full design is completed by the team they will employ. Once you have hired them, it is the contractor’s responsibility to make everything happen from that moment until they hand over the keys at the end. Which might sound simple, a huge weight off your mind… but we all know nothing is ever that simple. So let’s take a look at the decisions you have to make.

Match your priorities with your procurement route. What matters most to you as you view your project?

You will naturally want a beautifully finished building completed ahead of schedule at a cheap price. In the real world, meanwhile, you have to decide which one or two of these factors matters most to you or your business? Cutting corners will cost you later and may be sooner than you think even before the paint has dried. It is right at the end that you need your contractor to still be enthusiastically engaged when the end user starts to view the finished product. We often see projects that have unraveled due to early bad decisions, poor organisation and mostly because of cost and corner cutting on plans that started out with good design intent.  

 Revisiting your list of priorities again.

• Is design near the top and do you have a strong sense of how your project should look and feel? 
• Are you building to achieve a specification for an end-user or a commercial leaseholder who may have quite focused requirements fixed into the early design?
• Are you or your team inspired to collaborate with an architect so that they can capture the aims and specification, to bring your vision to life?
• Does being able to remain in control of what’s being designed and built for you matter more than just getting it finished as soon as possible?
• Are you a person or team with a project for whom details matter? 

Then the traditional method maybe be for you. 

Advantages

• You have a direct relationship with the person and team leading the design. 
• You retain control of the project.
• You can select the different professional consultants and other specialists who are working directly for you and have your interests at heart.
• Using the tender process to pick your contractor can allow you to either choose, based on the lowest price or the best quality or the combination of that fits your needs. 
• The brief for the building contractor will be much more specific, so their prices should be more closely alligned to  the work that needs to be done – with design & build you have to make a commitment to your budget before you have a chance to get a good understanding of how the project is going to unfold. This is one reason why traditional procurement is the most common option for more complex projects and those that need to finish close to the specification.

Trusting your contractor and being able to communicate in a transparent way is crucial. If the contractor is a big organisation and you’re a relatively small customer you might be treated with lesser priority when the going gets tough.

Disadvantages

• You will have to deal directly with more people (unless you hire your architect as project manager (PM) or have a separate PM. 
• You may have less certainty about final cost: each stage of your project will produce separate bills, as opposed to being covered by one initial quote. However, this process is seen as fairer to all concerned as construction has a multitude of hidden risks. The common myth that contractors will drag out a project deliberately is rare; there are usually genuine reasons for delays. 
• Waiting until you have obtained full planning permission before running the tender process can add weeks to the length of the project. However, you can proceed with strip out and demolition prior to the main works to mitigate this. 

Project management and what to consider?

There are obvious advantages in having the architect as PM with certain sized projects assuming they are good at this distinct role. They have an intrinsic detailed knowledge of the project and have been involved from its inception. However, remember they need extra time to manage, and they will need to be paid specifically for that role, it’s not a minor extra. A separate PM can be the prefered route and may be essential in very complex or larger projects and the PM will with larger projects be a distinct team. The contractor will have their own project manager in any case as in reality they will be on-site virtually every day, unlike the other professionals. It can seem like the client is paying for project management multiple times for different reasons. The Quantity Surveyor (QS) can sometimes bridge the gap as they will monitor the progress of the project and authorise stage payments based on the works. The QS role is pivotal once the project is underway acting essentially as the project accountant. The QS has to ensure an appropriate flow of funds to the contractor as starving them of funds may lead to a spiral where the project slows or grinds to a halt. Together with the architect, the consulting engineers and the contractor, there may be sufficient management expertise and feedback for an experienced client to not require a specific Project Manager. It all depends on the project size and the clients experience, available time, funds and trust in their team. 

Design and Build Contract 

Over recent years D&B has become the main alternative to traditional procurement for developers and individuals commissioning construction projects.

When should you use design & build for your project?

• Are the two top slots occupied by cost and timing and not specification and finish? Most clients will want everything but inevitably there are trade-offs.
• Is your project a fairly simple one on a plot that is unlikely to have hidden surprises?

Then the characteristics of design and build procurement might suit your needs.

Advantages

• One company is taking all responsibility for delivering your project.
• You should have greater certainty about how much you are going to spend – but don’t take that as meaning you’ll know exactly how much it will cost you from the start. In all construction projects, unexpected things happen. 
• Because your contractor can be planning the build at the same time as the design process is going on and may get on-site as soon as planning permission and building regulations approval are granted, this method should be quicker. Nevertheless, you can still choose a trusted contractor early and reduce this assumption. 

Advocates of design & build claim that because building contractors are involved in the design, the project should have greater ‘buildability’. That assumes architects don’t take into account how practical their designs will be to build? The contractor will still employ an architect and it may be the same architect and engineers as the client would have employed so there will be no cost savings and the contractor will add OHP to those costs. 

Disadvantages

• Although you are handing over responsibility, you are also relinquishing control. If you are busy you can have the surprise of checking up on your project at some point down the line and finding out that what is being built only bears a resemblance to what you wanted. 
• Some clients believe they can still retain control in a D&B and change everything as the project proceeds. This usually leads to alot of conflict with the contractor whose price was for a fixed plan. Disputes in D&B are common, but they can be resolved providing the client is pragmatic and realises that variations and changes have to be paid for.     
• Contractors will usually try to stick to their original quote – but they also have to make money. If there are any delays or unexpected costs, the contractor has an incentive to cut quality either in the choice of materials or the amount of care and attention their team pays to your project.
• Lack of flexibility – you and the contractors are essentially agreeing the disposition of the project at the start. It has less chance to evolve. And often most projects have to evolve – if the planning authority, client or end user asks for significant changes, for instance. At this point, you lose some of the advantages of design & build. 
• The number of building contractors with a full in-house design team able to truly carry out full design & build work is very limited and those that do charge highly for taking on that burden. The idea that is often promoted that D& is cheaper is often wrong. You are handing over control, you will have less to do, but that comes at a cost.  So, you will have fewer options, and might end up with a contractor you are not happy with. Most smaller D&B contractors will simply employ more or less the same team the client would have paid up front in the traditional model. 
• It is unrealistic to expect the contractor to pay for unforeseen costs and there have been legions of D&B projects stalled when it becomes obvious that the contractor is forecast to suffer heavy losses. Delays, whilst lawyers (at further cost) trawl over a contract, are more costly and catastrophic to a project and the client’s costs, than coming to a quick resolution and pressing on. Disputes can derail a project and the enthusiasm lost is an important factor that is often forgotten.   

Footnote

Building and Construction is a complex process with lots of competing pressures and a long supply chain often with unpredictable forward costs. In construction, more than other fields, you get what you pay for. It has to be undertaken with sufficient funding and realistic timescales. Having a contractor who provides good, transparent and honest advice is extremely important.  A good working relationship underpinned by a well defined contract that is fair to both parties usually leads to the best outcomes. 

Beware of the unrealistic lowest price temptation, as this is a common early inducement dangled in the construction and building industry during competitive bidding. The true cost will be argued later for sure when the client is deep into the project. Having a trusted contractor is more important than the designers at this point as it is the contractor who ultimately has to deliver. 

Steve Halford

BSc Hons - BA Hons