If you’re planning a custom home or remodel, you’ve probably heard the terms design-build and design-bid-build used when talking about the process. But, what do they actually mean? And what’s the difference?
There’s a common misconception that the design-bid-build, or hard-bid, method is the only way to go about building a custom home. This method is very common in commercial and industrial construction, so it makes sense that most homeowners are more familiar with it. Unfortunately, while design-bid-build sounds great in theory, in practice it often ends up costing clients extra in budget, time, and stress.
Luckily, there’s a better way! The design-build method operates differently, involving more collaboration on the front end between the homeowner, builder, and architect. Design-build is the process we recommend because it consistently creates a more creative and productive work environment and a higher-quality home. Let’s take a deeper dive into the design-build versus design-bid-build process, and the pros and cons of each.
Design-Build Versus Design-Bid-Build
In a design-build contractual environment (also referred to as a negotiated bid), the builder and architect work in synergy in the earliest phases of the project. The builder is selected before providing detailed budgetary numbers for the project. During the selection process, they will provide a set fee schedule for their services before bidding occurs for the remainder of the project. They will also provide budget information, advice about what you can achieve with your budget, and value engineering suggestions to help you prioritize where to splurge and where to save.
In this situation, the client may select either the architect or builder first, who will then recommend the other based on the home’s intended style and the parameters of the project. This is the relationship we at KGA prefer, so we can work together with the builder to define and flesh out the scope of the project to create the best possible outcome for our clients.
Advantages of Design-Build
- You have the benefit of both the builder’s and architect’s practical advice and ideas from the beginning.
- The builder works with your budget and produces project estimates as the home design is created. Doing it this way sets clear cost expectations so you can manage your budget throughout the planning and design phases.
- Establishing a team approach between the builder and architect eliminates potential conflict. You shouldn’t have to play referee between your building professionals!
- Design-build architectural costs are usually lower than in a design-bid-build or hard-bid process (more on hard bids below). For example, architectural fees in a design-build contract may run between five and eight percent of construction costs. In a hard or competitive bid contract, expect to pay between 12 and 20 percent.
Disadvantages of Design-Build
- A design-build framework is not set up to lead to a design-bid-build process between general contractors. If your intent is to hard bid the project, starting the project as a design-build may add unnecessary time and money to the process.
- Design documents that are produced in a design-build relationship are usually inappropriate for hard bids. Documentation preparation for hard bidding requires more details and specifications to ensure an apples-to-apples comparison when evaluating competitive quotes. It will take additional time and money to revise the existing documents accordingly.
Design-Bid-Build or Hard-Bid Contracts
The second contract method is design-bid-build or hard-bid, a situation in which the client selects and hires the architect first. Together, they plan and define the project and all details, including bid documents. The client then solicits bids from general contractors who compete for the project. Normally, the builder who comes in at the lowest price wins the business. At first glance, this seems like an attractive option, but it comes with several caveats.
Advantages of Design-Bid-Build
- In a design-bid-build or hard bid, you can compare general contractor prices.
- In this process, the custom home becomes a commodity with the general contractors contractually restricted to the exact project parameters. The contractor does not provide their ideas or insights about the project’s design; they are simply hired to build the home as planned and specified.
Disadvantages of Design-Bid-Build
- In high-end custom home construction and remodeling, the two variables that most affect budget overruns are quality and the client-builder-architect relationship. It’s these two factors that are impossible to line item and quantify in a hard-bid contract. Both are better managed in a design-build project in which there is an established relationship based on mutual trust.
- As we mentioned previously, architectural fees in a design-bid-build project can be a larger percentage of construction costs than that of a design-build contract. This is because the plans require a greater degree of detail, including specifications for every component in the home.
- This type of working environment potentially sets up an adversarial relationship between the client, architect, and contractor. This is especially common if the bid documents did not include all of the details necessary to complete construction.
- There is no builder present to help with budget and schedule guidance during the design process. Because the builder enters the project further along in the project, you won’t have visibility into how you’re going to come out on the construction costs and schedule.
- Given its challenges, a design-bid-build project is more likely to go over budget. To get the job, a builder may low-ball a bid, but then not honor their pricing during the project. We’ve seen it happen in the industry more times than we can count. It is extremely frustrating for clients who get hit with surprise costs that take them over budget.
Build With the End in Mind
As you can see, we prefer the design-build contractual arrangement over the design-bid-build or hard-bid approach. The hard-bid method is better for commodity types of construction like roads, bridges, facilities, and rehabilitation projects. Custom residential building works optimally as a collaboration from the start. When the design team works in tandem with the builder, the creative partnership leads to a higher-quality build and a better experience for everyone.