Design/build contracting is a building process where a builder is involved with every aspect of a construction project from the very beginning of the design process. Meaning, in this arrangement, you don’t work solely with an architect to design your plans to completion and then go shop around for builders… that’s the older model sometimes called “design-bid-build,” and we generally prefer not to work this way
Design/Build Contracting is a relatively recent strategy, and has been a major boon to the construction industry, and for homeowners.
Conceptual drawing: the first step
In years past, a more traditional way of approaching a construction project entailed several disconnected steps, including: selecting an architect to draw your plans and specifications, then at a later date, beginning the daunting task of selecting a reliable builder to build your project according to these plans and specifications, and most importantly, to do so within your budget!
It is this final puzzle piece (staying within budget) that proves to be the elusive component of a construction project that is not built in the Design/Build arrangement. This older model (sometimes called “Design/Bid/Build”) leaves room for a potential disconnect between the customer, the architect, and the builder. This disconnect can apply to both the construction methodology of the project as well as, and very commonly, the actual cost of the project vs. the customer’s budget or cost expectations. This potential issue is where the Design/Build process shines: the design process is driven by the builder’s constant feedback to the home owner and architect regarding the products and systems and their costs.
Ultimately, the question you need to ask yourself is, “Do I want to design my house in its entirety and then present these plans to a handful of builders in a competitive bid process?” Or would you rather interview a handful of builders, then select the best candidate based on reputation, capability, and chemistry, and only then approach the design process as a team, identifying and optimizing the size, finish, and cost of the project?”
It is important to note that this does not discount or marginalize the important role of the architect or designer in this process; far from it. The key to the Design/Build process is to synchronize the efforts or the team members right from the beginning. So whether you bring your architect to us or utilize one of our architect associates, you’ll benefit from picking your team early in the process. We’ve worked with several architectural firms and are happy to make a recommendation for your project based on what your specific needs are.
Comparative Bidding vs. Negotiated Contract
Comparative Bidding is Inaccurate:
In theory, the three-bid rule was thought to work because it assumed everything else, other than cost, from the competing builders was equal. This thought process assumed that each builder had assessed and calculated the scope of work, blueprints, and specifications in the exact same way.
However, such assumptions are rarely, if ever, accurate in reality. Every builder and contractor, professional or not, analyzes a new-home project and estimates its associated costs differently; as a result, the three bids are not “apples-to-apples” comparisons. The differences can be subtle, but they certainly do exist. And those real differences render an unequal playing field for competitive bidding creating confusion and misunderstanding.
In addition to being inaccurate as a cost comparison tool, the three-bid rule reduces each builder to a number rather than considering his or her various skills, experience, personality, record of success, and ability to do the work. For this reason, an increasing number of the best homebuilders simply refuse to bid competitively, opting out of such opportunities because they know they are being evaluated only in terms of a cost estimate (that is inaccurate) rather than whether they are the best overall builder for the job.
The Negotiated Contract: A More Useful Approach
Many of today’s home buyers are utilizing a different approach to select their new home builder: the negotiated contract. In that scenario, a new homebuilder is selected based on his or her proven abilities for the specific project, personality and how they fit with the homebuyers. These are very critical and important considerations considering how closely builder and client will interact with each other throughout the pre-construction, design and actual construction of a new home.
The negotiated contract also takes the guesswork out of the project’s cost. The budget is shared up-front with each of the builders being considered based on what the buyers can afford, not what the builder (and his stable of trade contractors) thinks it will cost.
Sharing the budget not only removes assumptions and judging a builder’s worth based on price alone, but also begins to build trust between homeowner and builder. They can explore honest communication about actual costs and, if necessary, choices that need to be made to match the project’s scope with the homebuyer’s budget. That’s the “negotiated” part of the contract process.
The negotiated contract process is far superior to the three-bid rule in matching personalities between the homebuyer and the builder, as well as between projects and a building company’s skills and experience. By first narrowing and then selecting one homebuilder based on everything but the cost of the project, buyers can better make their decision on which builder is most likely to be on-budget and on-schedule and result in a beautifully finished home that meets (or ideally exceeds) their expectations.
As the homebuilding industry continues to evolve into an increasingly professional business, it requires new and more effective models and processes for conducting that business. The negotiated contract has strong advantages over the three-bid rule. This approach reflects the new age of new home construction to the benefit of every homebuyer.
