Choosing the right construction contract type is important for avoiding delays and disputes in complex projects. One approach that’s becoming increasingly popular in construction is the design-build contract. But what exactly is it?

In this guide, we’ll explain how design-build contracts work, their advantages and disadvantages, and why they’re a game changer for contractors and owners alike.

What is a Design-Build Contract?

A design-build contract is a project delivery method where a single entity, known as the design-builder, is responsible for both the design and construction of a project. This approach streamlines the process by combining the two phases into one contract, with the design-builder managing everything from conceptual plans to final construction.

Unlike the traditional design-bid-build method—which separates the design and construction phases and involves multiple contracts, design-build focuses on collaboration. It’s widely used for projects where time, efficiency, and cost control are critical.

Key Features:

• Single Point of Responsibility: The design-builder handles the entire project, reducing miscommunication.
• Integrated Phases: Overlapping design and construction phases speed up project timelines.
• Collaborative Approach: Encourages innovation and problem-solving between stakeholders.

How Does a Design-Build Contract Work in Construction?

Here’s how the design-build process works:

1. Owner Selects the Design-Builder: The project owner hires a firm or team responsible for both designing and constructing the project. Selection can be based on qualifications, cost proposals, or both.
2. Design Phase Begins: The design-builder collaborates with the owner to develop plans that meet project goals and budget constraints.
3. Construction Overlaps with Design: Unlike traditional methods, construction can start while design work continues, speeding up the timeline.
4. Project Completion: The design-builder ensures all aspects of the project meet agreed-upon standards, minimizing disputes.

This approach reduces delays and provides greater flexibility, making it ideal for time-sensitive projects.

Advantages of Design Build Contracts

The design-build approach offers several benefits that appeal to both contractors and project owners.

For Contractors	For Project Owners
Streamlined communication with design teams Contractors can collaborate more efficiently with designers, leading to fewer misunderstandings.	Simplified process with one point of contact Owners only need to communicate with one person, reducing complexity.
Overlapping design and construction phases This allows contractors to complete projects faster.	Faster project timelines due to integrated phases Projects can be completed earlier compared to traditional methods.
Increased innovation through collaboration Teams working together can come up with creative solutions to challenges.	Greater cost predictability with fewer change orders The unified approach minimizes unexpected expenses.
Reduced disputes and miscommunication risks With one responsible party, accountability is clear.	Improved accountability with a single responsible party Owners can trust that the design-builder will manage the entire process.

Disadvantages of Design Build Contracts

Despite its advantages, the design-build approach comes with some drawbacks.

For Contractors	For Project Owners
Limited competitive bidding for subcontractors The design-builder might limit options for subcontractors, potentially increasing costs.	Risk of cost-cutting by design-build teams To stay within budget, the team might compromise on quality.
Higher liability risks for design errors Contractors take on the responsibility for any mistakes in design.	Reduced control over design details Owners may have less input compared to traditional methods.
Balancing owner expectations with profitability Contractors must meet client needs while maintaining budgets.	Heavy reliance on the design-builder’s expertise The project’s success depends on the skill of the chosen team.

Design Build vs. Design-Bid-Build: A Clear Comparison

The design-bid-build method involves separate contracts for the design and construction phases. This approach is often favored by project owners who value control and competitive pricing. However, the sequential nature of this process frequently leads to longer timelines.

Owners must coordinate between the design and construction teams, which can increase the potential for miscommunication and disputes.

Key aspects include:

• Separate Contracts: Owners manage separate agreements for design and construction, requiring more oversight.
• Longer Timelines: The sequential phases mean construction cannot begin until design is complete.
• Greater Owner Control: While this allows for detailed input, it also requires significant coordination and expertise.

On the other hand, design-build integrates the design and construction phases under one unified contract. This method is ideal for owners seeking efficiency and simplified management.

By overlapping phases, it significantly shortens project timelines. However, it demands a high level of trust in the design-builder, as they hold responsibility for both phases.

Key aspects include:

• Unified Contract: One entity handles both design and construction, reducing administrative burdens.
• Faster Delivery: Overlapping phases allow construction to begin before design is finalized.
• Collaboration and Innovation: A cohesive team encourages innovative solutions and minimizes conflicts.

In short, design-build offers speed and simplicity, while design-bid-build emphasizes control and detailed oversight. Owners must weigh these factors based on project priorities, budget, and desired involvement.

Common Types of Design Build Contracts

There are different types of design-build contracts, each designed to suit specific project needs. Let’s look at a few of the most common ones:

1. AIA Design-Build Contract (A141): The AIA A141 Design-Build Contract is a popular choice for large, complex projects. It covers cost management, roles and responsibilities, and dispute resolution, making it ideal for projects like commercial buildings or hospitals.
2. Fixed-Price Design-Build Contract: With this contract, the design-builder agrees to complete the entire project at a set price. It’s perfect for projects with a well-defined scope, ensuring the project stays on budget.
3. Cost-Plus Design-Build Contract: This model pays the design-builder for actual costs plus a fixed fee or percentage for profit. It’s often used for projects where the scope isn’t entirely clear, offering flexibility as the project evolves.

Want more details? Check out our guide to Cost-Plus Contracts in Construction.

Example of Design Build Contracts in Action

This hypothetical case highlights the efficiency and innovation possible with a design-build contract, offering valuable lessons for contractors and owners considering this approach.

Landmark Construction Inc., a mid-sized design-build firm, recently took on the ambitious task of developing a 15-story commercial tower for InnovateCorp, a tech startup expanding its operations in Austin, Texas. This project, called “Innovate Tower,” aimed to create a state-of-the-art workspace for over 1,000 employees while showcasing cutting-edge green building practices.

Project Details:

• Client: InnovateCorp
• Location: Downtown Austin, Texas
• Scope: Design and construction of a 15-story LEED-certified office building.
• Timeline: 18 months (from initial design to project completion).
• Budget: $50 million.

Design Phase:

The design-build process began with Landmark Construction assembling an integrated team of architects, engineers, and sustainability consultants. Within three months, they finalized a design that balanced InnovateCorp’s goals of modernity, functionality, and sustainability. Key features included:

• Open-concept workspaces with natural lighting.
• A rooftop garden and energy-efficient HVAC systems.
• Modular interiors to accommodate future expansions.

Construction Phase:

While design work continued on upper floors, Landmark Construction began site preparation and foundational work. This overlap between design and construction saved three months compared to a traditional design-bid-build approach. Close collaboration ensured materials, like solar panels and recycled steel, arrived on schedule, preventing delays.

Results:

• Timely Delivery: Innovate Tower was completed in just 16 months, two months ahead of schedule.
• Cost Savings: By leveraging bulk material orders and value engineering, the project came in $2 million under budget.
• Client Satisfaction: InnovateCorp praised the streamlined communication and innovative problem-solving that Landmark Construction brought to the table.

FAQs About Design Build Contracts

Why Design-Build Contracts Could Be the Right Choice for Your Next Project

Design-build contracts are truly game changer, offering an approach that combines design and construction under one roof. By eliminating the need for multiple contracts and coordinating teams, this method not only accelerates timelines but also reduces the likelihood of miscommunication and costly delays.

Though they come with their own set of challenges, such as the need for clear initial plans and good collaboration, the overall benefits—like improved efficiency, cost savings, and a more unified project vision—tend to outweigh the potential drawbacks for both contractors and project owners.

If you’re ready to take your next construction project to the next level and make the most out of design-build contracts, Builtfront is here to help you. With our tools and expertise, we can guide you through the process, ensuring everything runs smoothly from start to finish.