DESIGN-BUILD CONTRACTORS

In This Article
Choosing a Design-Build Contractor
Pros & Cons of Design-Build
Hiring Recommendations
View all articles on BUILDING YOUR TEAM

Most residential contractors do a little designing here and there, usually in conjunction with the homeowner, who may bring sketches, photos, and tear-outs from magazines or plan books. This is especially true in remodeling, where design options are largely constrained by pre-existing conditions. Technically, these contractors are providing a design-build service, but do not call themselves design-builders and are not charging separately for the design work (at least not as a line item in their estimate).

On new homes and large, complex remodels, however, many contractors would rather work off someone else’s plans unless they offer “design” as a service. Design-build contractors generally contract and bill separately for the design phase and construction phase. Some allow you to terminate the contract after the design phase allowing you to use the plans with another contractor. This is an important option that you will want in your contract. These contracts may offer a discount if use use the same contractor do the construction. Their training, skill, and style of design will vary as with any other type of building designer. In some larger design-build firms, one or more of the designers may, in fact, be licensed architects.

There are many variations in a company’s approach to design-build bidding and contracts. Many design-build firms work on the basis of a negotiated bid, as they generally do not put out the plans to other contractors to bid. In this system, the contractor generally shares some of their costs with you and negotiates a fee (fixed, hourly, or percentage)  for the design and construction services they are providing. This may work well for a sophisticated owner who has a clear sense of what a project should cost. However, it can be problematic for a client who wonders if he is getting a fair price. Whatever pricing system is agreed upon, make sure it is capped by a guaranteed maximum. If you’re not sure if the pricing is fair, consider hiring a licensed real-estate appraiser to price the job. It could be a few hundred dollars well spent.

In the traditional owner-architect-contractor triangle, the architect designs the house and monitors the construction to make sure that the contractor is following the design and not cutting corners. The builder may claim that that some aspects of the design are impractical, unwise, or needlessly expensive, and suggest alternatives to the owner. If the architect is still involved and has a good relationship with the builder, they usually resolve these sorts of issues, preferably during the bidding phase. In the design-build model, there is no such give-and-take: the owner trusts that the contractor has come up with a good design that is cost-effective and is building to high-quality standards.

CHOOSING A DESIGN-BUILD CONTRACTOR
Since you are hiring both a designer and a contractor, you should ask the same sorts of questions you would ask an architect/designer, plus the questions you would ask of a contractor. In evaluating a company, keep their design side and construction side separate, as you might like one and not the other.

On the design side, you want someone whose taste is compatible with you own. Look at their portfolio and visit some of their projects if possible. Talk to people on their design team about how they work during the design phase, how they work with clients, and how charge for design. Ask if you can get outside bids on the design from other contractors.

On the construction side, ask the same questions you would about a general contractor: about the types of jobs they’ve completed, square foot costs, experience in any specialties of interest to you, how much work is done subs vs. employees, and so on.

Ask for references and ask former clients about the design phase and the building phase. What went well?  Were there problems and surprises along the way?  Were there cost overruns and why?  In the end, how do like the project?  Was the cost reasonable?  Since the builder and designer are from the same company – maybe even the same person – finger pointing won’t cut it. If there are problems, the design build firm must take full responsibility.

PROS AND CONS OF DESIGN-BUILD
Pros of using a design-build contractor

  • All the same advantages as a general contractor, plus:
  • Simplifies the process with one-stop shopping for design and construction
  • Potential cost savings compared to hiring an architect for design. Significant cost savings compared to hiring an architect for design and construction administration.
  • No disputes between the designer and contractor over design errors or interpretations, or the “right” way to build. Should result in very few change orders or upcharges related to unclear or incomplete plans and specs.
  • Potential cost savings due to a more practical approach to design (since the design-builder is more likely to design with an eye toward construction costs).

Cons of using a design-build contractor

  • High level of trust in design-build contractor required, as the contractor controls both the design and construction.
  • While the design may be more practical and economical, it may lack the creative elements and innovations of an outside designer.
  • No competitive bidding, so cost could be inflated.
  • No checks and balances with respect to contract negotiations, change orders, and payment requests.
  • No one is checking to make sure that the contractor is building properly and not cutting corners – as with any general contractor.

The vast majority of residential jobs do not involved an architect, anyway, so some of the disadvantages listed are only relevant if you are comparing a design-build contractor to hiring an architect for the full service of design plus contract administration.

RECOMMENDATIONS FOR HIRING A DESIGN-BUILD CONTRACTOR
If you can find a reputable design-build contractor whose design work you like, you are likely to save money verses hiring an architect for their full service from preliminary design to construction administration. However, you may have more design freedom and have more control over the specifications (such as finishes, products, fixtures, and mechanical equipment) if you use an outside designer and bring your own plans and specs to the contractor.

Some design-build contractors will allow you to hire them just for design, and allow you to bid the job elsewhere. This approach gives you a lot more leverage on cost controls. Make sure you have the option to keep the plans and use them with another contractor if you part ways after the design phase is complete and you have paid for their design services.

Full disclosure: I was a design-build contractor for a number of years and also worked with architects on a number of jobs. On most architectural  jobs, I was happy to have the support and extra set of eyes of the architect. I never had a serious conflict with an architect, although on one large renovation job, the architect made a significant measurement error that resulted in a less-than-satisfactory outcome for the client (basically a large, unplanned soffit over a Victorian home’s grand stairwell).

Bottom line: If you find competent, trustworthy, and reasonable people to work with, the job should go smoothly regardless of their specific credentials and the structure of the work relationship.

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Comments

  1. Design Fee on Cancelled Project

    I have a contract that did not itemize the design. The contractor gave us a rough design map as well as some emails discussing the plan. After he finished part of our project, I decided to cancel the remaining items on the contract. Is the contractor entitled to a design fee on items not started? The contract is not specific about the fees of cancelling. Is this a negotiation process?

    • buildingadvisor says:

      If your contract did not list the design fee as a separate item, and did not include any details about cancellation, then you are correct – it is a matter of negotiation.

      Many design-build contracts charge a separate fee for design. Some go further and state that you will receive a discount on the design if you use the same contractor for construction (or alternately pay a surcharge if you take the plans and run).

      Others are less formal and less clear about these points, which sounds like the case here.

      Bottom line: If the contractor provided you with detailed plans, and you intend to use these plans, then it is reasonable that you would pay a reasonable fee for the plans. If the plans are more rough and conceptual, then you should pay less – comparable to what you would pay an architect or other designer for preliminary plans.

      A la carte design services are often billed by the hour, so that’s one way to approach the issue – compensate the contractor for the hours put into the design and separate amicably.

      If you don’t plan to use the design, it’s more murky. If the contractor made a professional and good-faith effort to address your design needs, but you simply don’t like the result, then (in my opinion) he should be reasonably compensated. If, on the other hand, the design work is shoddy, unprofessional, or otherwise falls short, then you shouldn’t pay much, as the contractor didn’t do the job he was hired to do. Of course, you may not agree on the quality of the design, which has a subjective element.

      Hope you’re able to find an amicable solution.

      Read more about DESIGN-BUILD BIDS

  2. Who Owns Design-Build Plans?

    I selected a design/build contractor and paid an upfront design fee of several thousand dollars. I may not use the the contractor now that I have seen the build contract amount. Do the design plans belong to me or the contractor?

    • buildingadvisor says:

      Many design-build contractors contract and bill separately for the design and construction phases of the project. Some let you bid the project with other contractors; some let you easily terminate the contract after the design phase. Others may require contractually that you use their company for both design and construction. What happens if you part ways after the design phase should be spelled out in the contract.

      In a well-written contract, there would be a clear description of what happens if the owner and design/build contractor part ways for any reason after the design phase. Ideally, you would be free to take the plans and use them as you like. Technically, you rarely “own” the plans a designer has drawn for you in the sense that you cannot sell or publish the plans (s ), but you do have the right to use them in your building project.

      If the contract is silent on what happens to the plans that you have already paid for, then it becomes a matter of negotiation. Since you have paid thousands of dollars as a “design fee”, it is reasonable to expect that you should be free to use the plans as you wish. If the contractor disagrees and you are unable to reach an agreement that would provide you with the plans, even for additional money, then you have three options:

      1) Walk away from the plans and the thousands of dollars you have spent on them.
      2) Consult a lawyer, threaten a lawsuit, and – if necessary – go to court over the issue.
      3) Take the plans (assuming you have a copy) and use them as you like on the commonsense assumption that you have paid for them and they are yours to use.

      Personally, I would choose option 3 as it is very unlikely that the contractor will take legal action over use of the plans. Going to court typically costs tens of thousands of dollars and it is unlikely (my opinion) that the contractor would prevail unless the contract specifically states that you cannot use these plans if you terminate. A brief consult with a lawyer (I’m not one) might be a good idea. Remember to ask ahead of time what he will charge you to review the matter.

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