Design Build Contracts - Good Or Bad?

Old 05-01-05, 05:54 AM
Doug Aleshire's Avatar
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Design Build Contracts - Good Or Bad?

Is Design-Build really good or bad?

I frown on Design-Build when it "LIMITS" the ability of the Owner to obtain bids for a project. Contractors have advertised the "Design-Build" concept as a great thing! The words make the Owner's feel comfortable but there are hidden flaws to this misconception. Owners feel that Design-Build is a good thing...WRONG! Projected cost estimates for the project may seem ok to you and usually your budget is discussed with a Company representative. Problem is that once you lock into this contract, the designs are done and you like them, then you get the final contract, to your surprise the cost is above your budget. Worse, is that they knew this in the forefront but now you are stuck.

Most Construction companies prefer to "lock-in" the client with them from the onset and who would blame them? This totally disallows Owners the flexibility to obtain bids or shall I say they can get bids but to do the work is locked in by them. What is unfortunate, that Design-Build contracts **usually** (but not always - depends on what you have to pay up front to get permission to get out of this situation) have in them a clause that the Design work, Construction drawings are owned by them even though you may have gotten plans. You in fact may have paid them x amount of dollars for them to do the designs and construction drawings. They might have said "if you have them build it, they will deduct this amount from your total project cost." Is this a line? You bet it is because it is half truth and half lie. They didn't mention the "rest of the story" and it goes like this. If you try and go to another contractor, this will violate thier contract and then comes the "COPYRIGHT LAW".

This company has the right to sue you for copyright infringement if the designs are used in part or whole if you could not use them for obvious reasons. They were to expensive! If they see that you are building the project and it comes to their attention that it looks very similar to what they gave you, they can sue you.

Now if you are wondering how could they find out..think about this. A couple of years ago, the scenario described above happened to a contractor friend of mine who got the contract to build a project designed by a "Design-Build" firm. The permit was obtained...the set of plans that the City kept had the stamp of approval to be built by my friend. The plans were all done by the the "Design-Build" company. When the customer received the project contract, it was way too high...$15,000 over their budget and this was over the "padding" for incidentals. They turned the Design-Build company down. Bear in mind, the Owners paid $2,000 for drawings..reasonable fee for a small addition. The project was not started until a 1 1/2 year later. Bids received were better than expected and my friend got it. The original company found out that the project was being built. They checked with City guessed it...plans were theirs and stamped and approved to be built. This constituted a Copyright Infringment and the Owners were sued. They settled out of court..paid $5,000 to the Design-Build firm who didn't lift a hammer. The Owners were lucky for the Design-Build firm could have gotten MUCH more! Bear in mind that this kind of action by a Design-Build firm is not good for their reputation but in todays world, a "Contract" is a contract.

In general, it is always better to hire someone to do the Design and Construction documents seperate of a Design-Build firm unless you personally know them. Even then, the risks are high that you may not be able to afford thier services. You should be in control of the process. Having someone inconspicuously direct you into something that can be detrimental to you and your property is always a bad thing. If a Contractor says that he won't build a project because he want's accurate drawings and whatever excuse they can come up with is a story to be told to your grandchildren! Whomever you hire seperately to do your Design/Construction drawings should be a professional and as such, you should should check out their experience and references and past projects. The same applies to General Contractors. If you're in the business, you should be good. Hiring anyone not capable of doing the work, who is not reputable and lacks the necessary experience is a crime in itself. Residential Building Designers and Architects do what is required as the project and Owner dictates, meeting Codes and other standards to get a project constructed. Excuses given by Contractors is a way to "pad" their pockets and who benefits then?

Finally, there is the design/build alternative. The concept behind this relatively new approach is to integrate the design and construction processes. This approach can eliminate many of the problems people have had with architects in remodeling, and can often result in a less expensive design that is much more practical to build. Just as important is that when all the design and construction is handled by one firm, that firm is fully accountable for the entire project. This means problems can be addressed directly without a lot of time and energy taken up with finger pointing. These advantages have made the design/build approach extremely popular in recent years.

However, the design/build approach has its share of hazards, partially because it is a new and evolving methodology. There are half a dozen ways of operating what people are calling "design/build" firms.
In some cases, a contractor who does remodeling and was always interested in architecture simply starts calling his firm a design/build firm. At the other end of the spectrum, you might find an architectural firm that has decided to subcontract actual construction of the projects they design. Between the two are myriad options.

When talking to a firm, ask them about their design and construction expertise and find out exactly how the two are integrated. See if their approach makes sense for your project. As always with home services, the key to success is to choose carefully the firm you work with.

Just some thoughts
Old 05-03-05, 09:09 AM
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Bad!!!!! Design Build contracts are very bad!!!!

All of my experiences with design build have been pro builder and architect and ultimately con owner.

My worst experience was for the Church I belong to. I was approached to help with the process of building a 3,000 s.f. new building at a second location in town. The building commitee had been formed months earlier. Not one building professional was on the board prior to myself.

The architect had already been selected. He had already had a selection process for the contractor prior to my coming on board. Without any working drawings the Contractor had been selected based on his price of $400,000.00. With no plans all the "Real" builders had been more expensive. The church had decided on a design/build process and to use this low bid contractor.

In California you can either have Licensed Engineers design the elctrical/mechanical portions of a commercial project or contractors can provide as built drawings for their portions as professionals. Any drawings they submit can only be used by themselves.

To give an idea on how bad the gouging and pillaging was, the Architect recieved $100,000.00 for just the architectural portion on a 3,000 sf structure. If he were to meet A.I.A. guidelines then the $400,000.00 bid he pushed for would allow the Architectural Portion to be around $40,000.00. The subcontractors were selected by the contractor and the church then paid $14,000 for design/build drawings. Keep in mind only those subs who perform the drawings can be used. So as Doug stated once you have finished drawings then you get a price. So instead of using Engineers to place the project out to bid we used the design build process locking us into the Plumber, Hvac, and Electrical Subcontractors.

The architect was very willing to talk about placing the project out to bid during open meetings I was present at but behind closed doors he was telling them that they were committing the contractor's time and resources to the project and thus tying themselves to him. Ultimately as the costs escalated and the board told me I would not be allowed to place the project out to bid I stepped away.

The cost estimates went from $400,000.00 to $800,000.00 and now is over $1,000,000.00. Thus giving the Architect the right to charge such outrageous fees. The point I would make is that the Architect knew the price he was aiming for upfront and early on. He was not honest with the board as they were green. The board simply would raise more money (similar to government work). We as individuals would never stand for this but as a group who feels they have limitless cash I guess this process is fine.

My point to all of this is Design/Build contracts eliminate the ability to shop for the best price. You do not end up with a better product but you could easily end up with higher costs. Think about this..... 3,000 s.f. for $1,000,000.00 is $333.00 per foot. Imagine how intricate a home or building you would have for this price. Granite slab floors, marble columns, Italian furniture maybe. In this case what they recieved was a stained & sealed concrete slab, an ok sound system and run of the mill finish. an open space not much framing no kitchen, just a couple of baths. What a waste of money and time.

Buyer Beware on Design/Build Projects.

The project is still under construction and will be a sore subject for years. That another design professional would gouge innocent unknowing people gripes me. This is an everyday occurance and anything we can do to curb this is great.

Brian Garrison
General Contractor/Professional Building Designer

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