One of the most critical decisions you make when building a new self-storage facility is the design and construction-procurement method. There are two widely used approaches to consider: the traditional design-bid-build method, also known as “plan-and-spec,” or design-build.
Under plan-and-spec, the developer hires the design team to create the project plans and specifications. He then takes those drawings out to bid and hires a contractor. Ultimately, the owner holds a separate contract for each design as well as construction. This arrangement creates independent goals among the various members of the development team.
Design-build is an alternate method of project delivery in which a single team works under a single contract, directly with project ownership, to provide turnkey due diligence, design and construction services. There’s one flow of work from initial concept through completion. This method has become significantly more prevalent in private construction in recent years, as it has been proven to provide faster timelines, reduced risk, lower overall cost and lower burden to ownership.
So, how does design-build accomplish all that? There are several factors that go into it. First, it’s important to look at the total development timeline and see where your risk lies.
The Timeline
A design-build timeline looks different than plan-and-spec. This is because it allows project steps to happen simultaneously. For example, front-end construction tasks like shop drawings, material procurement and manpower planning can take place while the final project drawing is being created. A plan-and-spec timeline, on the other hand, requires full completion of design before any construction-related activities can occur.
In plan-and-spec, the owner first hires a design team (architect, mechanical, electrical, plumbing, structural engineer, etc.) and works with that team to develop complete and coordinated construction documents. Then he separately solicits bids from general contractors, selecting a contractor and price based entirely on those documents. If pricing comes back higher than expected, time and money are spent to redesign the project and get costs in line. The time spent on redesign is one of the hidden delays that reduces the project’s internal rate of return and pushes opening dates.
If using design-build, the owner can solicit a turnkey price before spending significantly on design. With a site plan, survey and soils report, the design-builder will be able to complete conceptual design in-house and provide a firm price for the total construction before documents are ever started. This allows the owner to mitigate his hard-cost risk. Savvy developers are able to work due diligence, site planning and the solicitation of design-build pricing into their land-option period, giving them a clear picture of total project cost before committing earnest money.
The Risks
No matter which method you choose, understand that you’re at risk of fluctuations in hard costs until a firm project price is established. After that contract price has been set, it’s important to understand your risks during the construction period.
In a plan-and-spec scenario, owners accept more responsibility for complete and coordinated drawings because they have procured those documents directly. They frequently find themselves caught in the crossfire between their general contractor and drawings that were mis-coordinated or perhaps didn’t include adequate detail. Then they’re exposed to change orders throughout the build.
In design-build, the client is at risk for additional costs only if he chooses to increase the project scope. There’s no finger-pointing between a contractor and design team when they’re a single contracting entity. The design-builder is held to a performance specification in the contract, not a set of drawings. The result is no change orders due to design or code issues during construction.
Historically, the design-build method has 5 to 10 percent lower unit costs than the plan-and-spec method. Because of the efficiencies created in an integrated design-build team, it’s 35 percent faster.
Both design-build and plan-and-spec serve a purpose for different types of projects. One isn’t overwhelmingly better for every type. It’s important to examine your project, the resources on your team, your understanding of the building experience and your budget. For owners building a simple or predictable project, plan-and-spec could be right the right choice. For those who don’t want to risk change orders or need an accelerated timeframe to market, design-build could be the way.
If you plan to take the design-build route, it’s best to involve the firm as early in the process as you can. Then, the company will be able to drive design decisions that can reduce the overall budget. It’ll help manage all the necessary pieces to reach the firm project price, and it can maintain a thorough understanding of every variable. This understanding allows the firm to deliver the whole project as opposed to one phase at a time.
Eric Fleps oversees business development for ARCO/Murray Design Build in Dallas, which has more than 25 years of experience. With a background in engineering and project management, he brings a unique understanding and perspective that allows him to guide clients through the development process and foster strategic partnerships nationwide. He’s skilled in cost control, design, and project and sales management. For more information call 214.377.6681; visit www.arcomurray.com.
