Delivery Methods and Contracts

Navigation: delivery-contracts | index

Understanding delivery method is critical because it determines who holds design risk, how estimates are used, and what your contractual obligations are.

---

The Four Major Delivery Models

Method	Who Designs	Who Builds	Price Format	Estimator’s Role
Design-Bid-Build (DBB)	Owner’s A/E firm	Separate GC (low bid)	Lump sum or unit price	GC prices completed drawings; limited design input
Design-Build (DB)	DB firm (in-house or sub’d A/E)	Same DB firm	GMP or lump sum	Estimator prices evolving design; collaborates with design team
Construction Manager at Risk (CMAR)	Owner’s A/E firm	CM/GC at risk	GMP	Estimator provides cost guidance during design; GMP set at defined milestone
EPC (Engineering, Procurement, Construction)	EPC contractor	EPC contractor	Lump sum or reimbursable	Full turnkey; estimator responsible for engineering, procurement, and construction costs

---

The Guaranteed Maximum Price (GMP)

The GMP is the absolute ceiling the contractor commits to for total project cost.

What the GMP Covers

GMP = Cost of Work + General Conditions + Design Fee + Contractor Fee + Contingency + Allowances

• Cost of Work — direct labor, materials, equipment, subcontractor costs
• General Conditions — field supervision, temporary facilities, site safety, project management
• Design Fees — if the A/E is a sub to the DB firm
• Contractor Fee — overhead and profit
• Allowances — defined quantities for items not yet fully designed
• Contingency — contractor-held reserve for scope gaps and risk events

Shared Savings

If final project cost comes in below the GMP, the contract typically specifies a split (e.g., owner 75% / contractor 25%). This motivates the contractor to manage costs efficiently.

Who Bears Overruns

If costs exceed the GMP due to contractor-driven causes, the contractor absorbs the overage. The contractor is protected only if:

• The owner directs a change in scope
• Unforeseen conditions are discovered (subject to contract language)
• Owner-caused delays add cost

When Is the GMP Set?

Most commonly at approximately 30–60% design completion (end of FEED or schematic design). The earlier it is set, the more contingency is required to cover design development risk.

---

Contract Risk Matrix: Owner vs. Contractor

Risk Category	DBB	DB/GMP	EPC Lump Sum
Design completeness at bid	Owner	Contractor	Contractor
Scope interpretation errors	Contractor	Contractor	Contractor
Unforeseen site conditions	Contractor (with DSC clause)	Negotiated	Usually contractor
Price escalation (materials)	Contractor	Contractor (unless clause)	Contractor
Schedule-driven cost growth	Contractor	Shared — depends on cause	Contractor
Owner-directed scope changes	Change order	Change order to GMP	Change order

Key implication: In design-build, the contractor takes on design risk that doesn’t exist in DBB. The estimator must price scope gaps, design development cost, and specification uncertainties — not just what the drawings show.

---

Design-Build Delivery Steps (Estimator’s View)

1. Site Selection / Program Definition — Owner defines facility requirements, capacity targets, site. Estimator may provide ROM cost guidance.
2. RFQ Issuance — Owner pre-qualifies DB firms. Estimator helps write the firm’s qualifications.
3. RFP Issuance — Owner issues RFP with performance specs and program. Estimator receives and reviews all documents.
4. Proposal Preparation — Estimator develops the cost proposal (typically Class 4 or 3) for the technical proposal.
5. Award / Kickoff — DB contract awarded. Estimator transitions to preconstruction estimating.
6. Design Development — Estimator tracks cost in real time as design evolves; issues design alternatives for VE decisions.
7. GMP Development — Estimator prepares the definitive GMP estimate (Class 2 or 1), compiles BOE, and presents for owner approval.
8. Construction and Closeout — Estimator supports change order pricing, EVM reporting, and final cost reconciliation.

---

Open Book Policy

Many DB/GMP contracts require the owner to have audit rights over actual cost records. The estimator must ensure:

• All cost categories match the Schedule of Values (SOV)
• Sub buyouts and trade contract awards are documented
• Contingency draws are logged and justified
• Nothing is billed as “cost of work” that is actually contractor overhead

---

Relevant Contract Forms

Contract Form	Issuer	Use Case
ConsensusDocs 410 / 410.1	ConsensusDocs Coalition	Design-build; GMP provisions
AIA A141	American Institute of Architects	Design-build; owner-contractor
DBIA Standard Form	Design-Build Institute of America	DB-specific; balanced risk allocation
AGC 415	Associated General Contractors	CM at Risk with GMP