What is a Design-Build Firm and Should You Work With One?

There are architects, and there are contractors – two separate functions that must work in synergy with each other, and who must also serve as checks and balances against each other.  It seems to make sense to combine both functions under one roof – and this is popularly referred to as a “design-build firm”.  So why wouldn’t you simplify your life and work with one?

 

Conventional wisdom dictates that you should always work with a separate architect and contractor, the reason being that the architect works as the client-advocate overseeing the contractor.  The assumption is that contractors are as trustworthy as mechanics and used car salesmen and will take every opportunity to gouge the customer.  And there’s enough anecdotal evidence out there to justify this stereotype.  After all, construction is a mystery to most people and you have little choice but to believe whatever your contractor tells you.  So with a design-build firm, the assumption is nobody’s looking out for you – therefore, design-build firms inherently pose a conflict of interest.  There’s even some debate as to whether they are ethical – or even legal.

 

Having worked both ways, here’s my take on the matter.  In theory, the architect-as-client-advocate sounds great, but from my experience, few architects are effective in that role.  Architects are artistes and ego driven.  They want their vision built no matter what.  They are often ignorant – and sometimes completely oblivious – to cost of materials and labor.  When I’ve worked with separate architects and contractors, nobody was my advocate.  I had to maintain tight control over the budgets and often mediate spats between the two parties.  Each came to me complaining about the other and they resisted direct contact at all costs.  I rationalized this as “healthy tension” that I believed was benefiting the project, but I can assure you it also created its share of problems.

 

In contrast, working with a single design-build firm was a bit easier, but posed its own set of challenges.  With the architect and contractor partners in their own business, they have a shared interest in benefiting themselves.  Nobody was looking out for my best interests and I had to be even more vigilant, exercising even more control over the budgets, questioning every dollar spent, and second-guessing every recommendation.  Differences between the architect and contractor were settled at their office, not in front of me, and didn’t require me to serve as referee.  Architect and contractor spoke with a single voice and a shared vision, and that made my life a whole lot easier.  But it brings us to the trust factor.

 

It helps that I’ve had a long relationship with my design-build firm, having used them as contractors before.  They have earned my trust, I know how they work and what to expect of them.  We’ve become friends outside work, attending each other’s weddings and children’s birthdays.  They’ve built their company on the work I’ve given them so I know my jobs will always take priority over their other clients.  I know they would never jeopardize our relationship.  I would not have been so confident working with a design-build firm I didn’t know as well.

 

There’s also the budget consideration.  Don’t forget that the architect and contractor each take a percentage of the overall construction budget which could be as much as 20% to each party.  Working with a single design-build firm makes it easier to negotiate a package deal at a much lower percentage.

 

The bottom line – there’s no clear-cut answer.  It depends on you, your situation, your knowledge level and your confidence in undertaking a major project.  If you’re uncertain, I’d suggest starting with an architect you like and trust and letting him/her guide you in your search for a separate contractor.  But if you know what you’re doing and intend to be heavily involved in the day-to-day process and don’t feel a need for an advocate, then a design-build firm may be the best way to go, as long as you know the benefits and pitfalls.

 

In separate postings, I will talk about how to find and hire a contractor and the value of working with an architect.

Hiring a Contractor – Fixed-Price or Cost-Plus?

There are two types of contracts when working with a contractor – “cost-plus” or “fixed-price”.  Under cost-plus, you pay the contractor for the cost of materials and labor plus a commission to cover his compensation – typically 20% but it can range anywhere from less than 10% to over 25%.  Of course both parties work to a pre-determined budget so you have a pretty good idea of what the total job will cost.  With a fixed-price contract, you pay a set amount and it’s up to the contractor to make it work – if he’s over budget, it comes out of his pocket and the more money he saves, the more he makes – you pay the same either way.

 

A recent article in the Los Angeles Times Sunday Real Estate section [“Digging – It’s Your Job” 7/13/08] suggested always negotiating a “fixed-price” contract, never a “cost-plus”.  Their reasoning was that it left it up to the contractor to lose money or turn a profit.  I couldn’t disagree more.  What contractor is going to choose to lose money?

 

I always work on a cost-plus basis and here’s why.  I want to know what I’m paying for, and I want control over my budget.  The estimated cost of the project is just that – an estimate.  Every job is full of surprises and budgets need to be flexible.  You never know what you’re going to find when you’re opening walls or removing flooring.  No contractor is going to want to lose money and with a fixed-price contract, he’ll do everything possible to cut corners including using inferior materials or skipping important steps to maximize his profit.

 

If you want to know exactly what you’re paying for what, negotiate a cost-plus contract within a set budget and insist on detailed invoices with back-up.  My contractor’s invoices generally have up to five or more pages of Excel spreadsheet showing over 200 or more line items detailing what’s being billed against the original estimate.  Changes to the original estimate are discussed in advance, solutions worked out between us and billed separately as a change order.

 

The only time I might make an exception and opt for a fixed-price contract would be for a small job like a closet make-over, a bathroom remodel or maybe even a kitchen – but never for a major house remodel.

To learn more about finding and hiring a contractor and why to work with an architect, read “How to Find and Hire a Contractor” and “Architects!  Who Needs ‘Em?” here.