Bid Like a Winner: The Master Builder’s Guide to Construction Bidding

First, let’s look at project delivery systems. There are four major methods for delivering construction projects. While they vary in approach, they share the common goal of helping owners build new structures on time, within budget, and in line with quality and performance requirements.

As a construction bidder, you will see that each method defines your role, responsibilities, and risks somewhat differently. Some methods share similarities.

Traditional project delivery also goes by the names design-bid-build (DBB) and design-tender and is the most common process for the construction of nonresidential buildings, especially government projects. In this approach, an owner hires an architect or designer independently from the contractor who manages construction.

The owner selects an architect who develops complete designs. Then, the owner solicits bids from contractors to execute the designs. The bid covers the total cost of building the structure, including any money for subcontractors who work under the general contractor. The bid also incorporates the general contractor’s costs, overhead, and profit. 

Some advantages of DBB are owner control of design and construction and ease of implementation. In addition, because an architect finishes a design before an owner awards a construction contract, it is easier to determine the cost of construction. The drawbacks of this particular project delivery system include that the owner must bring substantial expertise and resources, and also share responsibility for project execution. The owner is also at risk of dealing with increased contracting costs if there are any design errors. 

Multi-prime, also called multiple-prime, contracting is a variation on design-bid-build. Here, the owner contracts directly with all participants, including the architect, subcontractors, and a construction manager (either an owner staff member or a hired party). In this scenario, the owner acts as the general contractor. 

Owners turn to this method when they need to fast-track construction or when there are urgent considerations. Project managers can solicit bids for each of the project’s systems or specialties as soon as the project’s design is complete, which gives them greater control over the schedule. 

Multi-prime contracting also enables the owner directly to obtain materials for the project. Rather than obtaining materials through the general contractor, the owner can avoid markup and be certain that materials will be available when needed.

Multi-prime also works well when construction proceeds in phases. The owner enters contracts sequentially for each part of the job (for example, foundation would come first, followed by structure). 

There are several drawbacks to the multi-prime delivery system. The owner carries the heavier burdens of coordination and management as well as the resulting increased risks of work duplication or omission. The owner cannot confirm the final cost of the project until they’ve secured the last contractor. There is a higher potential for poor coordination, change orders, quality defects, and delays due to the number of project participants. Plus, multi-prime projects sometimes suffer from a lack of strong central authority and management among the contractors. In DBB, the general contractor would play the role of that strong authority figure.

In design-build, aka D-B or D/B, the owner contracts with one entity that handles both design and construction, and one price covers both phases. That entity goes by the title design-builder or design-build contractor.

The design-builder concept has its roots in the historic master builder, who in pre-Renaissance times was a highly skilled individual responsible for both the design and construction of a structure. During the Renaissance, the roles of designer and builder split, and each position became more distinct and specialized over time. 

Owners find design-build attractive because it streamlines the process of commissioning a new building, and it increases collaboration between project participants. The design-build firm usually contracts out some aspects of the project rather than doing everything in house, but all participants work together on the same team. Proponents cite this characteristic of collaboration as an advantage over traditional design-bid-build. This is because one of DBB’s greatest vulnerabilities is the potential for conflicts and disputes to arise among all the independent parties when things go awry. 

In design-build, the design-builder stands accountable to the owner for all aspects of the project. The Design-Build Institute of America says that when one person possesses sole responsibility for a job, owners experience better project delivery, including faster execution, fewer change orders, reduced administrative burdens, lower costs, and fewer disputes that result in litigation.

According to research by the Construction Industry Institute and Penn State University on 351 projects from 5,000 to 2.5 million square feet, design-build achieved 6.1 percent lower costs and 33.5 percent faster delivery speed when compared to design-bid-build. Having faster delivery also creates financial benefits since construction loans, carried while workers are building a structure, charge higher interest rates than those of permanent financing, which kick in when the project is done. 

Design-build has become increasingly popular. A 2013 DBIA study found that owners used this method on more than 40 percent of non-residential construction projects in 2010, up 10 percent since 2005.

Within design-build, there are different models. One of these models is contractor-led design-build (CLDB), also called builder-led design-build, in which the general contractor manages the project. CLDB accounts for most design-build projects. Recently, the architect-led design-build (ALDB) model, also termed designer-led design-build, has grown. In ALDB, the architect is responsible for delivery of the building. A 2005 survey cited by Architectural Record magazine found that 55 percent of design-build projects were headed by a contractor, 26 percent by an integrated firm with both design and construction expertise in house, and 11 percent by designers. 

A third design-build school of thought contends it does not matter which specialty holds the primary contract for the project; either can do just as well. Project-led design-build, in which the project team consists of a cohesive unit of all the job’s disciplines, always puts the project’s best interests first.  

While design-build has compelling data on speed and cost, construction experts say that it also has disadvantages. The design-builder’s very incentive to reduce speed and cost can impact quality and put the owner at the mercy of the contractor, who may or may not act with integrity and expertise. Also, because the architect works for the design-builder rather than for the owner, the architect does not represent the owner’s best interests. (In DBB, the architect does work for the owner and therefore represents their best interests.) Moreover, because there are so many unknowns about the future of a building at the beginning of a D-B project, owners must define more of the project’s requirements, objectives, and materials before soliciting bids. 

With no construction documents yet to work from, design-builders also assume risk in cost estimating because the scope of work is not well defined. Contracts on design-build projects can address how to handle unexpected developments without financial penalty to either the owner or the designer-builder. 

Construction manager at risk (CMAR), also called construction management at risk, CM at risk, CM@R, construction manager/general contractor, and CM/GC project delivery, is another alternative to traditional design-bid-build and has a track record for reducing cost. 

Like design-bid-build, in the CMAR method, different firms handle design and construction. Unlike design-bid-build, however, the construction manager joins the project at the start before the architect designs the building; the construction manager may even help choose the architect. The CM and the architect work together during the design phase. The construction manager acts as a consultant to the owner during the design and construction phase and often handles some of the construction itself.

The construction manager transitions to a general contractor when construction begins. You use this method primarily for complex projects and choose the construction manager on the basis of expertise and qualifications, not lowest price.

The construction manager’s bid to the owner is a guaranteed maximum price (GMP) representing the total of pre-construction services, actual construction, and the construction manager’s fee and contingencies. According to an article by Tommy Brennan, Business Development Manager for Ulliman Schutte Construction, most CMAR projects require the contractor to provide the GMP when the design phase is 60 to 90 percent complete. 

When the design is complete, the construction manager solicits bids from subcontractors to execute the project. The construction management firm takes on the risk that bids may come in higher than the GMP.  

In the CMAR method, you shift some of the project risk to the construction manager because if actual costs exceed the GMP, such as through higher subcontractor bids, change orders, or imprecise forecasting, the owner does not bear that burden. If the construction team builds the project for less than the GMP, the owner may receive the savings, or the owner may have an agreement to share them with the construction manager.

The benefits of this approach for owners include greater cost control, reduced risk, and superior project management. The construction manager can work with the architect and the owner during the design phase to make sure that the construction team can build the plans within budget, and the owner knows upfront what the project will cost. The project may also move faster because you may be able to start construction before the design phase is complete. 

The construction manager acts on behalf of the owner and manages the project with the owner’s best interests in mind. In addition, the construction manager brings expertise regarding value and constructability. These attributes translate into fewer burdens on the owner and ensure a high quality outcome. 

On the negative side, the owner must cede some project control to the construction manager, and, as both a contractor and a project manager, the construction manager may face some conflicting priorities. 

CMAA, the national organization for construction management, has training and resources for both owners and construction managers on the types of projects best suited for this method.

The general consensus among construction professionals is that CMAR saves time and money compared to design-bid-build, but not compared to design-build. However, quality can be higher with CMAR than with design-build, and CMAR is a better match for larger, more complex projects than design-build is.

Integrated project delivery (IPD), sometimes called integrated team, is the newest of the major project delivery methods. This method sets up the owner, the architect, and the contractor as a team that shares risk equally. Often, they become legally bound in a single contract, and this may expand to include other consultants and subcontractors. 

This approach strives to increase efficiency through collaboration and integration. The United Kingdom’s Office of Government Commerce estimates 30 percent of construction costs can be saved when integrated project teams work together and seek continuous improvement across a series of construction projects. Single projects with integrated teams can save two to 10 percent. 

Early participation of the general contractor and continued active involvement by the owner are hallmarks of IPD. This closer cooperation drives the advantages of IPD, and project participants generally have fewer disputes, claims, and conflicts. Therefore, the absence of litigation and arbitration offers another source of cost savings and efficiency.

Because the architect and contractor participate in the project entity equally, they are a jointly accountable. In discussing the advantages, IPD specialist firm gkkworks notes, “Experts in design and construction contribute to ALL phases of the project.”

However, there are some drawbacks: Finalizing project criteria and reaching a contract can be difficult and time consuming, the CMAA says. In addition, the smooth management of the team may depend most on the individuals involved, and team selection can be challenging. 

The method works well for complex private projects, projects with tight deadlines, or those where the scope is not well defined. Government entities usually are barred from IPD because it lacks competitive bidding. The American Institute of Architects has compiled an in-depth guide to implementing IPD.