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Contract Relationship Options

1. Design-Bid-Build (Traditional method): This is a good option for possible construction savings. The owner initiates a contract with the architect and defers General Contractor services way until blueprints are complete. The architect's tied directly to the owner from start to finish and the owner chooses their own contractors. The architect (design professional) prepares construction documents with his engineering team so the project can be submitted for permits and sent out to competitive bid. The architect assist the bid competitive process while representing the owner in his selection process. This method sometimes has higher design costs, yet it lowers construction costs substantially by securing competitive bids in the climate of a construction bid-war. The merit to this method is that it can reduce overall project cost while also having close representation with owner/architect in the total process sequence.

2. Owner-Build (On Your Own) Although not recommended, the owner could contract separately with the contractors of each trade. The owner takes the lead role and is responsible for getting bids and acts as construction manager, coordinating the work of individual subcontractors. You would think this has potentially the lowest cost, but it may have the highest cost assuming risk of things going wrong. In this case, the owner assumes the role of the General Contractor and saves the General Contractor's fee (approximately 10% of construction cost). The pitfall is that it can result in project overruns if the owner fails to control costs throughout the bid and construction management processes. The owner will often piggyback a construction manager onto the project or ask for special services from the architect which could add more cost than the 10% savings. This option potentially has the longest time frame for project completion, depending on the owner's knowledge and how much time the owner has available to work on. The owner has to factor in the cost of his/her own time as well which always is counter productive. Subcontractors may not be loyal to owners as they would be for there Que of repeat work than with a General Contractor. Also, the quality of construction work may be hampered due to inadequate coordination between overlapping trades. This is more likely to result in additional cost than other contracting methods.

3. Design-Build (Turnkey): This gives the owner the best control of cost of where its all going from the onset while leaving less leg work for the owner from start to finish. The owner contracts with either one single entity or parallel contracts for both design and construction (Usually an architect and general contractor work both side-by-side). Avoid using a designer or any unlicensed draftsman as this leaves potential holes with no recourse. An architect team gathers his engineers and with the General contractors and work together in the design/build progression. The contractor will establish his cost based on the known information so that as the project develops in time, the Contractor can provide progressive levels of information from probable cost (rough guestimate) to a final guarantee cost once arrived to reaching all the engineering portions of the final drawings. From schematic to design development phase and into final documents, the contractor will work intimately with owner and architect from each phase that offer ways to exercise in finding the most cost-effective ways. By means and method, a marriage to products with labor arise efficiently. This control of of project cost keeps it most efficiently in real-time. The good news to design build is that its a fast tract process getting quick answers for cost from the General Contractor/his subs and his sub-subs without going through additional last minute rebids, changes and alternatives that interrupts the project at the tail end. may even eliminate some of those pesty change orders.  As results, this relationship offers the best control of design and construction quality to assure proper control. However design-build  does not have to be for everyone as it does take trust when the contractor provides numbers outside the competitive market where in this case unless the owner chooses to change their mind and entertained  in terminating the contractor, they could return back to competitive pricing. 

4. Pre-manufactured Home (Vendor Relationship) Has potential low construction cost but could limit resale value.  Construction materials may be required to meet state, local and including county fire codes as there is little or no flexibility to comply . Many areas may not allow such construction due to zoning issues. Potentially the quickest construction erection if desired model is available, yet are limited by the manufacturers schedules. The choose of products. material and finishes are very limited including the plumbing/lighting fixtures so the design options may not be there. Remodeling/retrofitting may be challenging  thus lacking some flexibility for the future alteration or additions since its a manufacturer item from unlike conventional field construction. Financing institutions may not always providing construction loans beyond the property value which means it takes more capital as should,be verified with loaning institutions limitations as well as future refi loans as shopping rates from banks may be limited or expensive. Remember the quotes you get from modular designers does not include total cost for site retrofit, utilities, foundations to name a few. Yet, with newer technologies and some custom options expanding, the confidence level might change over time.

Contact: John Salat at freeingwinds@earthlink.net or call 949-235-4847

Last revised  2019 copyright (c), John Salat All rights reserved