A common misconception is that DBB is the most cost-effective approach to designing and building a public works project. A majority of this misconception comes from a comparison at a point in time on the project that may not accurately capture all aspects of the total project cost.
Guaranteed Maximum Price (GMP) vs Low Bid
A GMP from a CMAR delivery method cannot be compared apples to apples with the lowest bid process inherent in a DBB project delivery. With a GMP, the CMAR entity takes on the risk of identifying specific project gaps and then works with the owner and designer to fill them; hence an effective process that provides a better indication of the final project cost during the design phase. Conversely, the low bidder in a DBB scenario is forced to ignore project gaps to make sure their price is as low as possible after the design is already completed. For example, if the design team did not show lighting in a room then the DBB low bidder would not include the costs for those lights. Instead, the CMAR entity would identify the lack of lights, confirm their need with the owner, and allocate costs to purchase and install them prior to completing the design. In both scenarios, the cost of the lights remains the same. An important aspect when looking at a GMP vs a low bid using this example is that GMPs routinely return costs at the end of the project; the low bid can only increase in cost.
Below is a sample breakdown of total project cost buckets for CMAR and DBB.
Design-Bid-Build vs CMAR Project Cost Buckets
- Design and Administrative Costs – Using the CMAR delivery approach, the entire project team – owner, designer, and CMAR – work together through design and into construction to get the best possible outcome for the project. Working in collaboration with the CMAR entity, the design team can spend less time developing and coordinating documents, communicating the scope of the project, and answering RFI’s.
- Contingencies vs Claims / Delays / Change Orders – In a CMAR project, the project team works together to identify risks and develop a plan to mitigate or appropriately allocate costs for those risks. As well, the designer and the CMAR work collaboratively to find and mitigate scope gaps in drawing and specification. This creates an informed owner contingency (rather than a guess at claims and change order costs). In some instances on a CMAR project, the owner contingency is reserved for project scope clarifications / enhancements that the owner may need to make throughout design or construction. On a DBB project, the owner contingency must be allocated to protect the project from the risks of claims, delays, and other gaps or unknowns that are common with the DBB project delivery method.
- Construction Costs – Generally, 70 - 80% of a project’s costs come from subcontractors, material suppliers, and equipment manufacturers. This metric holds true whether the project is a CMAR or DBB project. When partnering with a CMAR entity, project owners are provided all the costs and bids the CMAR receives. This open and collaborative environment provides marketplace competition while also allowing owner participation in the project’s buying decisions. When engaged in these buying decisions, owners have better control over the quality and maintainability of their plant.
Below Budget ≠ Better Pricing
Often owners associate hard bids beating the budget as proof that DBB provides lower overall project cost. However, it is important to compare delivery methods on an equitable basis. Many DBB projects come in over budget – this scenario presents challenges when the design is complete and ready for construction. If a budget relied heavily on backward looking costs from projects that were developed during the recession, the budget may be too low when compared to current market conditions. When you hire a CMAR entity, they are giving you the best information based on current market pricing. The news may not always be what you want to hear, but it is best to discover a problem before design is completed.