Thinking about Design/Build?
Just this afternoon I got my most recent call about design/build—an architect client of mine wanted to take on a design/build project and wanted my opinion. Now, there are many ways to structure a design/build project, but the scenario he described is the one I get calls on the most often: an architect or engineer (A/E) will design a building, then retain the trades directly. This way, the A/E has control over the full construction value of the project, not the 3%-12% they usually get for the design alone. When an A/E takes responsibility for construction and subs out 100% of the “work,” we call that A/E a “Paper GC” since the A/E won’t actually get out and swing hammers—their role as general contractor exists only in the paper contracts.
If you have ever considered this set-up for one of your projects, ask yourself these questions:
- Is this the best method for me to use to deliver this project? Have I considered:
- acting as an owner’s representative, project manager or construction manager?
- acting as a “Paper GC” but instead of hiring the individual trades retaining a trusted GC?
- forming a joint venture with an experienced contractor and presenting ourselves to the owner as a team?
- Am I comfortable with the additional responsibilities that go along with being a contractor, like site safety, scheduling of materials and scheduling of trades?
- Do I have the clout to get trades to a job site when I need them there—even in this tight job market?
- What if the project requires bonding—am I prepared to provide a personal financial guarantee?
- Is design/build legal in my state, and if so, do I need a contractor’s license to take on a project?
- Does my professional liability policy contain any exclusions related to design/build exposures? If so, can they be removed, and at what cost?
- Can my insurance broker arrange a general liability policy for me as a “Paper GC”? If so, what would be the cost? (Don’t underestimate this one—recently one of my construction management clients in Brooklyn, NY wanted coverage for a moderate rehab of a 20-unit building with a construction value of $500,000. Only one insurer offered a quote—and the annual premium was $19,500.)
If your answers indicate that you are ready to assume the role of design/builder, assemble your team. In addition to quality subs, you will want an attorney and an insurance broker that specialize in design and construction to help with the risk management of the project.