Design and Build Contracts, Advantages and Disadvantages

Anyone who has spent time working in the UK construction industry is likely to have strong opinions about Design and Build contracts. In the immediate future, it’s likely that activity within the sector is going to increase, and whilst the exact political flavour of the Conservative government has yet to be confirmed they have at least promised to invest heavily in house building. With that in mind, the following points highlight some of the thorny issues associated with design and build contracts.

UK House Building

200,000 appears to be the magic number; in March 2015, David Cameron promised to double the target of 100,000 homes aimed at first time buyers, and with his position now confirmed in No.10 Downing Street we wait with bated breath to see if this commitment will reach fruition. Across the UK, firms are experiencing a modest rise in construction projects and reporting a certain amount of confidence. Besides the always-nebulous claims of politicians a range of measures including a loosening of planning laws and assistance for first time buyers is buoying up the industry after last year’s lack of growth. For many developers, however the fact that an increased demand for labour and materials is likely to push up prices can make design and build contracts more attractive.

Design and Build Advantages

Design and Build [D&B] is a useful procurement route for developers in that it allows a certain amount of control over costs. In general, lump sum contracts result in a contractor agreeing to take on the responsibility for both the design and construction of a project for an agreed price. The contractor may have their own team of designers or may engage an outside firm. They will agree a design initially with the developer, but after the contract is signed the contractor will have full responsibility.

If the agreed-on design remains unchanged throughout the project, the developer can be reasonably sure that the overall cost of construction will remain unchanged. Of course, it’s possible that the developer will require some design changes during the project, but it should then be possible for the contractor to provide an illustration of exactly how any such changes will affect overall costs.

Another of the advantages of design and build contracts is the possibility of reduced construction time. If the contractor is entirely responsible for design a great deal of time can potentially be saved as the design and building elements will run concurrently. For developers the main benefit is that, once the contract is agreed the contractor takes on much of the financial risk inherent in a project; that’s increasingly attractive when prices of both labour and materials are looking likely to rise. When various political parties claim that an upswing in construction is just around the corner, it’s worth remembering that it’s not just the taxpayer who will be expected to contribute. The Conservative government will also need to rely on private investment.

Design and Build Disadvantages

Not everyone in the industry is a fan of design and build contracts and it’s therefore worth taking a look at their disadvantages. Those who dislike the system point out that if a builder is given a free hand to design a building based on a pre-agreed price, even if costs don’t rise during the project they will be likely to work to the lowest possible specifications [if the contract allows them to alter the specifications].

Secondly, there’s an inherent problem in that builders are not architects. An architect, as well as having years of training and a very specific set of skills not least aesthetic ones, will be up to date with both the legal and design requirements. There are also requirements that may not be written into law but will be at the cutting edge of what makes a building fit for purpose now, and years into the future. Giving a builder a set amount of money and most, if not all the responsibility for design is a recipe for a shoddy result, say some people.

Making generalisations about the merits of D&B versus traditional construction methods is dangerous. In the real world, both can and do result in some buildings that are successful and some that are a disaster. For developers, architects and contractors perhaps the most important point is to ensure that the contract whatever form it takes is fully understood by all sides, covers all legal requirements and has the flexibility built into it to allow a satisfactory result.

Construction Management

Recently there has been something of a trend towards construction management rather than design and build contracts. Here, an intermediary in the form of a construction manager is appointed and the developer takes more responsibility for the overall costs of a project. It’s possible, however that if private investors are effectively forced into taking more financial risk the supply of money for the promised housebuilding boom could begin to dry up.