Choosing the Right Procurement Strategy for Your Construction Project

When embarking on a construction project, one of the most critical decisions for owners is selecting the appropriate procurement method. The procurement strategy you choose will have a significant impact on the project’s timeline, cost, quality, and overall success. 

Factors to consider when deciding on a procurement option include the project’s complexity, budget, risk allocation, level of owner involvement, and the desired level of control over the design and construction process. Getting the procurement strategy right from the outset can save owners time, money, and headaches down the line.

In this article we will examine 5 common procurement methods and their pros and cons.

1. Design-Bid-Build (DBB)

The Design-Bid-Build method is a traditional procurement strategy that separates the design and construction phases. In this approach, the owner first appoints an architect, engineer and other consultants, to design the project. Once the design is complete, the owner then solicits bids from contractors through a tender process, to build the project based on the completed design drawings, documents and specifications.

Pros: 

• Well-established and widely understood method.
• Clear delineation of roles and responsibilities between the designer and contractor.
• Design is fully completed before tender, making it easier to evaluate tenders.
• Better control on design and quality.

Cons:

• Longer project duration as more front-end time is needed to prepare the full design.
• Tender competition is on price only, since the design is fix.
• Potential for disputes and change orders during construction.
• Owner bears the risk of design errors and omissions.

2. Design & Build (D&B)

The Design-Build method is an integrated approach where a single entity, the design-builder, is responsible for both the design and construction of the project. This procurement strategy offers several benefits, including a single point of responsibility for the entire project, increased collaboration and communication between the designer and contractor, and the potential for faster project delivery and cost savings.

However there are several drawbacks too; this method is usually useful in projects of a simple and repetitive nature, where time and cost are a priority over quality.

Pros:

• Single point of responsibility for the entire project.
• Contractor bears all the risk.
• Potential for faster project delivery and cost savings through fast-tracking (design can partially overlap with construction).
• Contractor may propose more economic solutions and the competition is in both price and design.

Cons:

• Reduced owner control over the design details
• Less transparency in pricing, as design and construction costs are combined
• Requires a well-defined project scope from the outset, as changes can be costly
• Potential for conflicts of interest, as the design-builder may prioritize cost savings over quality
• While it’s generally understood that this method would lead to cost savings, Contractors may also price in risk and hidden costs

3. Construction Management

In the Construction Management method, the owner appoints a construction manager to provide management services for the project. The construction manager acts as the owner’s representative and is responsible for managing the various trade subcontractors, coordinating their work, and overseeing the project until completion.

However, the construction manager is not a contractor and does not bear any direct responsibility for the construction work itself. Under this arrangement, the owner enters into separate contracts with each trade subcontractor, taking on greater risks compared to other procurement methods.

The construction manager’s role is to provide expertise in project management, scheduling, cost control, and quality assurance, ensuring that the project is delivered on time, within budget, and to the required quality standards.

Pros:

• Owner has greater control over the selection of trade subcontractors
• Construction manager’s expertise can help optimize project management and coordination
• Potential for cost savings through effective management and competitive bidding of trade packages
• Construction manager acts as the owner’s advocate throughout the project

Cons:

• Owner assumes greater risk by directly contracting with trade subcontractors
• Increased administrative burden for the owner in managing multiple contracts
• Construction manager’s lack of direct responsibility for construction work may limit their influence on quality control
• Potential for disputes and coordination issues among trade subcontractors
• Construction manager’s fee adds to the overall project cost

4. Management Contracting

In the Management Contracting method, the owner engages a management contractor to manage the project and all work trades for a fee. The management contractor is responsible for selecting and contracting each subcontractor, coordinating and supervising all works, but is usually not directly involved in the construction itself.

Pros:

• Management contractor brings expertise in project management and coordination
• Allows for flexibility in the selection of subcontractors
• Potential for cost savings through effective management and coordination

Cons:

• Owner has less direct control over the construction process
• Potential for disputes between the management contractor and subcontractors
• Management contractor’s fee can add to the overall project cost
• Management contractor does not have any own resources to mitigate defaults or failures from any of the subcontractors

5. Design-Build-Operate

The Design-Build-Operate method is a partnership between a public agency and a private sector entity to design, build, and operate a public infrastructure project. In a DBO arrangement, the private sector partner is responsible for the design, construction, and long-term operation of the facility, while the public agency maintains ownership and oversight.

Pros:

• Allows for private sector expertise and innovation in design, construction, and operation.
• Transfers certain risks to the private sector partner.
• Can provide long-term cost savings through efficient operation and maintenance.
• In some cases the project is financed by the Contractor himself who makes a profit by operating the facility.

Cons:

• Complex procurement process and contractual arrangements
• Requires a long-term commitment from all parties involved
• Reduced public sector control over the facility’s operation and maintenance
• Potential for conflicts of interest between the private sector partner’s profit motive and the public interest

Selecting the right procurement strategy is a critical decision that can have far-reaching consequences for the success of a construction project. Owners must carefully consider factors such as project complexity, budget, risk allocation, and desired level of control when choosing a procurement option. 

While each strategy has its pros and cons, understanding these trade-offs can help owners make an informed decision that aligns with their project goals and objectives.

It is important to note that navigating the complexities of procurement strategies can be challenging, particularly for those new to the construction industry. In addition to the methods discussed above, there are other procurement strategies and hybrid forms that may best suit your project’s specific needs. 

Seeking guidance from qualified professionals, such as architects, engineers, and construction managers, can help owners make the best decision for their project. These experts can provide valuable insights and advice based on their experience and knowledge of the industry, ensuring that owners are well-positioned for a successful construction project.