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  • matt lutz

Why *NOT* Design-Build?

Updated: Jan 21, 2021



Most all residential contractors in today’s market sell their services as Design-Build.


Design-Build firms usually sell the following:

  • A cost-effective approach to construction

  • Enhanced ability to control the schedule

  • Single point of responsibility

  • Elimination of adversarial relationships

  • Open and transparent communication

But do these attributes really play out to a homeowner’s advantage in true custom, high-end residential construction?


We don’t think so.


The Design-Build contracting model has been around for a long time. It makes a lot of sense for industrial and commercial contractors or for residential builders focused on volume and revenue.


While working as a strategy consultant, I was assigned to multiple engagements with a wide array of contractors and almost every one of those engagements had our team working to craft a Design-Build strategy for our clients.


Why?


The short answer: Design-Build is a more profitable delivery model for the contractor.


On some types of work, Design-Build is imperative. Building large industrial projects that have functional or performance specifications as key project deliverables make Design-Build critical since the contractor is the one on the hook for the ultimate performance of the facility or system. Sometimes there are designers involved in these projects, but their work is quickly surpassed by the EPC (Engineering, Procurement, Construction) contractor who steps in for detail design, construction and commissioning.


Likewise, production oriented residential contractors rely on Design-Build to limit homeowner choices, carve out design professionals and focus on throughput/volume – hence the “promise”. If the homeowner can only choose one or two designs from the Design-Build contractor, then things go really well… for the contractor. This results in higher profits – for the contractor. This is often sold through a couple of ‘concept’ meetings or discussions between the homeowner and the contractor. From these few brief meetings a design concept emerges with a fixed price and a simple contract.


So go back to the original selling points of the Design-Build delivery model above – sounds like all the boxes are checked; so what’s the issue?


Design-Build delivery works well for production residential contractors.


However, the projects our clients build are not production and the use of a Design-Build model limits the ability of our clients and other project professionals from delivering an exceptional home that fits our vision of superlative construction based on world-class design.


Our direct experience shows that the Design-Build delivery model for truly high-end residential construction has the following four primary pitfalls:

  1. Design-Build does NOT leverage the superior talent of professionals dedicated and trained in architecture and design

  2. There is no opportunity to leverage the Project Development Phase of the project

  3. There are no checks and balances

  4. Design-Build delivery is by design, opaque and lacks real transparency and accountability


1. No Architects/Designers. Architects and designers are critical to the building process. Not only do these trained professionals come up with amazing ideas and designs for their clients; they are also educated in the latest materials and building sciences and are exposed to other contractors on other projects allowing them to bring new ideas back to our clients’ projects.


Most of our clients’ have deep experience with large, dynamic companies or have created their own successful businesses. One of the key factors in our clients’ success is often diversity of thought within their own businesses and teams.


Beyond social media accounts; Design-Build firms lack exposure to new ideas, techniques and tools. Design-Build firms tend to operate in a bubble, focusing on repetitive designs and construction techniques.


The fixed budgets rarely pan out as the rush to get things done and move to the next project often create rework and adds even more time and cost on the project – usually through opaque change orders. Leveraging the experience from other design and industry professionals can limits unforeseen challenges and bring new ideas to your home.


2. Bypass the Project Development Phase. The Design-Build model is designed to short circuit the Project Development Phase. Design concepts offered by Design-Build firms are often canned to fit the materials and construction techniques that can most easily be executed by the Design-Build contractor at the highest margin.


Design-Build contractors will say that the 2 or 3 concept meetings are intended to satisfy the Project Development Phase. However, this is not possible for most projects with any modicum of complexity.


The Project Development Phase often begins with conceptual designs from design professionals based on several hours working with the client and understanding the site and vision for the home. From there, the conceptual designs are used between the design professionals, the contractor and the client – all working collaboratively – to go through a value engineering process. This is a critical aspect of the Project Development Phase where all three parties work through the myriad of tradeoffs to arrive at a design, construction budget and schedule that the client can rely upon.


A well-structured Project Development Phase is much more energy intensive and impactful than 3 or 4 hours of sales meetings. As illustrated above, getting the design team together with the construction team very early in the process GIVE the client more control over the three main levers of construction – Cost, Schedule, Quality.


3. No Checks and Balances. Any seasoned executive can tell you that when things are going really smooth on any project - no friction at all – there is something lurking below.


Design-Build delivery sells a smooth and seamless construction process, since design and construction are intertwined.


But is friction-less delivery of your ‘forever’ home in your best interest?


The very nature of using separate design professionals and a general contractor sets the stage for friction. But this friction is actually very good for the client and the project alike.


This friction is the result of the ‘checks and balances’ that naturally occur between design and construction professionals.


When one party makes 100% of the decisions and the project goes along perfectly – then it’s time to worry.


4. Lack of Transparency/Accountability. This is an issue that has negatively defined the construction industry since the dawn of time.


The Design-Build mantra is to give the client a fixed price for the design and construction that is based on 3 or 4 hours of meetings. The price won’t change unless the client makes a change – change orders.


This all sounds great when the excitement is high and the project is just about to begin.


But what about when you break ground on your new home and the subsurface conditions are different from the plan; or you start the new kitchen remodel and you open up a wall and find asbestos wrapped pipes and a lot of rotten wet wood?


These are bona fide changes that were not part of the fixed price. However, in a transparent/accountable model, shouldn’t this have been highlighted and allowances set aside for such possibilities? Wasn’t the going in ‘price’ artificially low to get the sale?


Or what about a change in materials? What if the client wants to switch from the specified tile to a new tile for a master shower? Is this just a differential in the cost of materials or maybe even a discount?


Since Design-Build contractors are often fixed price or at best offer limited ‘open book’; the client will never know.


Conclusion. Design-Build delivery has its place. It is an excellent delivery model for projects with performance specifications, or for contractors focused on simplicity and volume to hit their top line goals.


However, the four best known pitfalls associated with Design-Build delivery for custom, high-end residential projects are:


  1. No Architects/Designers.

  2. Bypass the Project Development Phase.

  3. No Checks and Balances.

  4. Lack of Transparency/Accountability.


The presence of one or more of these pitfalls creates unwanted surprises for homeowners and contributes directly to the protracted development and professionalization of the construction industry as a whole.


While a large percentage of residential construction projects do in fact benefit from a Design-Build delivery model, experience shows that for unique projects, or for clients who demand and expect the best; a new accountable and data driven approach/process for home building is required.

In fact, leveraging proper project development and project management tools in a collaborative setting with other construction and design professionals often results in a cost of construction that delivers amazing quality, within budget and meeting the schedule – no surprises.




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