For the Tulsa commercial contractor, the relationship between the owner and architect or designer is called a delivery method. Each delivery method has advantages and disadvantages, and each changes the risk level for the owner and contractor. The most common relationship a Tulsa commercial contractor, is as a general contractor as a competitive bidder. The AIC or American Institute for Constructors calls this “Design-Bid Build”. The AIC describes the “design-bid-build” as follows:
“…TRADITIONAL DESIGN-BID-BUILD
The design-bid-build delivery method is commonly referred to as hard bid, stipulated sum, or fixed price. In this method, the owner has separate contracts directly with the architect and contractor. The architect designs the project, produces the construction document, and provides construction administration. Once construction documents are completed, the project is put out to bid, and a contractor is selected to build the project. The contract is largely awarded based on price; however, contractor qualifications may also be considered. The contractor is responsible for constructing the project in accordance with the contract documents. Both the architect and the contractor may subcontract out portions of their contracted work; however, they may remain solely responsible to the owner. For example, if a steel subcontractor installs a member incorrectly and causes a failure, the owner’s recourse is against the contractor, not the steel subcontractor. The contractor is generally considered to have the highest risk in this delivery method. Any mistakes in the bidding of the project are absorbed by the contractor, and there is no guarantee that the contractor will earn a profit on the project. The owner is generally considered to have the lowest risk because the owner has a fixed price for the work prior to starting construction. The exception to this is the potential for change orders. A poor design may necessitate the need for many changes in the work that are not priced in a competitive environment…”
The next way Tulsa commercial contractor gets clients is through a Construction Management at risk delivery method. The AIC describes the Construction Management at risk as follows:
“…CONSTRUCTION MANAGEMENT (CM) AT RISK
In the construction management (CM) at risk delivery method, the contractor acts as the owner’s representative and coordinates work between the design and construction teams in a manner similar to that of the CM agency. In this method, the owner contracts directly with the designers and construction manager. With this delivery method, however, the CM at risk is responsible for the work and contracts directly with the contractor/subcontractors. The CM at risk delivery method is a cost-plus contract, so the owner pays for the cost of the work plus the CM’s fee. However, the CM provides a cap on how much the owner could pay for the work, which is referred to as a guaranteed maximum price, or GMP. Costs incurred on the job that exceed the GMP are paid by the CM. The GMP is why the CM is at risk…”
The Tulsa commercial contractor could also be a consultant in a construction management agency delivery method, as described below by the AIC:
“…CONSTRUCTION MANAGEMENT (CM) AGENCY
In the construction management (CM) agency delivery method, an independent agency acts as the owner’s representative and coordinates work between the design and construction teams. In this method, the owner contracts directly with the designers, contractors, and construction manager. The CM agency does not hold any subcontracts and is purely in a consulting role with the owner. Because of this, the CM agency has the lowest risk of any of the delivery methods. With these projects, the owner may contract directly with multiple designers, contractors, and subcontractors. During construction, the construction manager provides the construction administration for the owner…”
The CM delivery methods allow some input from the Tulsa commercial contractor into the preconstruction process, especially over the design-bid-build delivery method. For the contractor to have even more input into the design phase, they might decide to have a design-build delivery method. The design-build is described by the AIC below:
“…DESIGN-BUILD
In the design-build delivery method, the owner contracts with a single entity for both design and construction services. Entities may be a single design-build firm with in-house design and construction employees or a temporary partnership between design and construction firms commonly through a joint venture or subcontract. Because one entity is responsible and liable for both the design and construction of the project, the design-build firm has the highest risk of any of the delivery methods…”
The newest delivery method that gives the contractor the maximum input into the design phase in an attempt to ensure that the design gives the highest constructability is Integrated Project Delivery or IDP. The AIC describes IDP in the following way:
“…INTEGRATED PROJECT DELIVERY (IPD)
The integrated project delivery (IPD) delivery method is the most recently developed of the delivery methods discussed here. With this method, a collaborative multiparty contract aligns each of the major parties’ goals with the success of the project. Typically, the contract provides a financial reward pool that is shared equally with all parties. The more successful the project is, the more of the reward pool is shared with all parties. Conversely, if the project is not successful, the financial pool would not be shared but instead used to improve the project. This shared risk/reward delivery method is intended to promote collaboration and encourage project-focused decision making. On IPD projects all major parties, including subcontractors, are selected and involved early in the project, which intensifies the design and allows for collaborative decision making. A successful IPD project will reduce individual risk, increase project efficiency, reduce waste, and maximize value to the owner…”
In these delivery method, most Tulsa commercial contractors will choose to be paid percentage of completion or accrual method. AIC defines this below:
“…Percentage of completion (accrual method): All revenue, expenses, income, and/or losses are based on measurement/estimate of completed progress. Because most projects are constructed over more than one fiscal period, the percentage of completion method is more often used for most commercial construction companies…”
This allows the contractor and the subcontractors to be paid for the amount of work they’ve done and don’t have to wait until the end of the project to get paid.