You've just decided what you need or want to build. The next big decision is how to build it. What method of "construction delivery" should you choose?

There are three principal methods: design-bid-build, design-build, and construction management.

• Design-bid-build is also known as the traditional method or "plan and spec bidding." An architect or engineer designs the building. Construction companies submit bids based on the completed plans and specifications. The owner selects a construction company, usually on the basis of price.

• With design-build, the same company or partner companies are responsible for both design and construction. This resembles the "master builder" concept employed in Europe.

• With construction management, a construction manager-separate from the designer and sometimes separate from the builder-is selected early in the process to assist in the development of the project and to put together a team to design and build it.

In the past, design-bid-build predominated in the U.S. Its use has declined in the last 20 years. Today, all three approaches to construction are commonly used, and each has its special advantages and disadvantages.

Here's a look at each approach through the eyes of Jeffrey L. Sterner, senior vice president and general manager of High Construction, Inc. Sterner holds a bachelor's and a master's degree in engineering from Drexel University, and has 18 years of experience supervising construction operations using all three construction delivery methods.

The design-bid-build method provided Messiah College, Grantham, PA with an objective process for evaluating several bids for Jordan Science Center. (Builder: High Construction, Lancaster, PA)

Design-Bid-Build: Aggressive Price Competition

"This method creates competition on the basis of price and provides an objective process for evaluating bids on an apples-to-apples basis," Sterner says.

Design-bid-build is commonly used by public bodies that require an open and objective evaluation process. It's also used effectively by companies like Wal-Mart or Rite Aid that essentially build similar or prototypical buildings over and over in different locations. Many large corporations also use the competitive bid approach as a matter of corporate purchasing policy. That's unfortunate, because applying the same approach to all construction purchases is not going to yield the results you want in all cases.

Competitive bidding has its shortfalls too. From the outset, this methodology excludes the builder from the process until the design documents are completed. This often leads to a dilemma when all competitive bids received are over your budget! You're then left with a poor set of options-spend more on construction or more on design-or both.

Aggressive price competition can also create unintended results. When a construction company knows that it needs to submit the absolutely lowest price in order to be successful, it cannot include things in its estimate that are not shown in the documents, even if it anticipates there may be a problem. As a result, even minor design discrepancies can lead to change order claims and an adversarial working relationship involving the builder, designer, and owner. Unfortunately, there are construction companies that will intentionally bid a project with a below-cost margin anticipating opportunities to make it up on change orders.

Of all delivery methods, the traditional method generally generates the highest dollar value of change orders and the longest total time from project conception to completion, according to Dr. Victor Sanvido's research at Penn State University.

The design-build method provided a collaborative approach to designing and building the Hampton Inn & Suites, Valley Forge, PA, with firm, guaranteed prices. (Design-builder: High Construction, Lancaster, PA)

Design-Build: Early Cost Guarantees, Integrated Effort

Design-build answers many of the disadvantages of design-bid-build. There is a single entity responsible for both the design and construction of the project, so there is no finger pointing for design discrepancies. This reduces change order potential and eliminates much of the adversarial climate common to the competitive bid approach. Design-build also involves the builder from the start. A realistic budget can be established quickly with the owner, and the builder works to guide the designer towards the budget. That's why the design-build approach can provide firm price guarantees early in the process, before the design work is completed.

Design-build is used by a wide variety of buyers. Some simply enjoy the collaborative approach that it  employs or have had bad experiences with the competitive bid approach. It is also very beneficial for individuals or companies that do not have a lot of construction experience and want the counsel of the builder from the beginning in order to manage the design and approval process. It allows an owner to arrive at a preliminary design and firm cost estimates without incurring the entire cost of a full design.

Design-build is not for everyone however. "The decision [to choose a firm] is based on who can provide the most value and is usually made before anyone can reasonably know the cost of the project," Sterner says. It's difficult for government agencies, or some private sector businesses, to make a choice like that without price.

One of the ways the design-build process can be modified is to use "bridging documents." At the onset of many design-build jobs, the starting criteria may be as basic as performance standards to define the project. For example, a manufacturing building may be defined by its required size, the power requirements for anticipated equipment, interior climate conditions to be met, and some definition of the interior surface finishes. That still leaves a lot to be defined by the design-builder. It may leave too much undefined for some. The U.S. government frequently purchases projects using design-build, but it does so after hiring a designer to flesh out a preliminary design first. These "bridging documents" are then issued to qualified design-builders, who offer a price to complete the design documents and construct the project.

A more common approach in the private sector, and the one favored by High Construction, is a two-part approach. For a relatively low cost, usually less than 2 percent of the total project cost, the design-builder works with the buyer to develop the preliminary design and a firm price and schedule for the project. This process gives the buyer all of the information necessary to make an intelligent business decision about the project, while at the same time limiting the initial investment.

The construction management delivery method is well-suited to building large, fast-track projects like the Ingram Micro, Jonestown, PA warehouse and distribution center. (Construction manager: High Construction, Lancaster, PA)

Construction Management: Relying on an Expert Intermediary

A construction manager is like a ringmaster who gets the project up and running and sees it to completion on behalf of the owner. Like design-build, the builder and designer are both involved in the project from the start. Each however, retains its independence. The construction manager is selected based on qualifications, and a fee structure is established at the beginning of the project.

Sterner says this approach is particularly well suited to large, complex projects and to fast-track projects. It is also a favorite of corporations that have downsized their internal construction or engineering departments and now need to use construction managers to augment their staffs.

At some point, when the drawings are near completion, many owners request a "guaranteed maximum price" (GMP) from the construction manager in order to control the total cost of the project. The construction manager's fee is already known, so the GMP is the total estimated cost of construction, with the construction manager's fee added to it. This is commonly referred to as "CM at risk."

Public entities that want to use construction management frequently use a variation known as "agency

CM." A public entity is not permitted to purchase construction services without competitive bids. However, they are permitted to purchase professional services based on negotiations. Construction management is considered a professional service if it is limited to the management of the project only- acting as the owner's "agent." Trade contractors are still selected by a competitive bid and are then managed by the agency CM.

Construction management has its disadvantages too. For one, it is difficult to control the ultimate cost early in the process. Even the total cost that will ultimately be paid to the construction manager is difficult to pin down. In addition to the fee, construction management agreements provide for the payment of all sorts of reimbursements, from personnel cost to phone usage to insurance premiums and more. Each construction manager will likely have a unique set of billing rates for such items, and at the time the selection is made, it is very difficult to accurately calculate the cost of all such items.