How to Protect Yourself from a Predatory Design and Build Contract

It is now, of course, widely accepted that a comprehensive Design and Build process—as opposed to the traditional Design-Bid-Build approach—is a more cost-effective and efficient way to contract and complete a construction project. Studies have shown projects are delivered approximately 33% faster and end up costing and average of 6% less when choosing this method. But, it can still go wrong. A few “traps” to avoid…

  1. Typically, Design and Build contracts are set up by a General Contractor (GC), with the idea that there’s one point of contact and one place to point fingers. You’ll first want to know whether the design team is actually “in-house” (employed by the GC). If not, then the “design team” is actually just a Sub-Contractor with a vested interest in making as much money (themselves) as possible. If there is a design “issue,” this Sub-Contractor is the first place the GC will point a finger.
  2. Designers and architects are notorious for over-designing with little regard for your budget, and are more interested in designing a statement piece for themselves than for you, the client. Construction budgets and estimates, early and often through the design process, are one of the KEY components to Design + Build. You’ll want to define not just when you get construction estimates, but what they look like (how detailed they are) and what sort of margin of error each has at various phases of design. Receiving a single, usually round number like, “It’ll be $900,000,” should be a red flag. Remember, if something is vague, it’s usually like that for a reason; so the Contractor can make more money down the road.
  3. Don’t get “locked in.” This is a big one. Contractors have various ways to lock a client into the whole project before the start of design, often in the form of a large, non-refundable retainer early on. Beware of agreeing to this! While there are hard costs associated with getting the construction team and estimators working on the project throughout design, they shouldn’t exceed $2k-$10k for a typical renovation project, or double that for most ground-up home builds. To protect yourself, ensure you contract with the ability to send out the final design to as many other construction firms as you’d like. While it’s a bit of a pain in the ass, it will keep the Contractor just a little more “honest” knowing the bid will actually be a competitive one. And remember, the “Build” portion is the expensive part.

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