This is negotiated prior to execution of a project contract. Overruns that result from owner-directed changes to the design during the project delivery are usually borne by the owner. Conversely, overruns that occur in the absence of any owner-directed change in the...
Projects
Do design-build projects preclude participation of small firms?
Not at all. In many cases smaller firms can partner with other firms to complete a project. For example, when a small design firm does not have construction capabilities, it may find a construction partner and propose on a project together as one entity. Similarly, a...
How can an owner avoid the perception of favoritism in procurement decisions for design-build projects?
Such a perception can be an issue for an owner. However, it can be mitigated by ensuring that the bidding process is competitive, open, and transparent, and that the final contracts can withstand rigorous scrutiny by all parties, especially the public.
Absorption of Risk
Assuming a risk (or risks) and the associated potential financial burden. The term is used in allocating risks among various parties by determining which party is available to absorb and manage - and therefore is responsible for - a specific risk.
Availability-Based Contract
A business arrangement in which an asset is always available to deliver a defined level of service to an owner in return for a steady stream of payments, often used in DBOF and in P3 projects.
Business Case
The documentation developed by an owner when evaluating the financial implications of a public-private partnership (P3) for financing a capital project. The business case considers the discount rate applied to cash flows expected from a project, efficiency factors...
Collaborative Delivery Methods
Approaches to procuring and delivering a capital project that involve close collaboration among the owner, the designer, and the contractor - from design through completion. These include construction management at-risk (CMAR), fixed-price design-build (FPDB),...
Consequential Damages
The indirect results of alleged failures. Collaborative delivery contracts hold neither the owner nor the design-builder or CMAR firm responsible for the indirect results of its alleged failures. Due to the subjective nature and varying scope of state laws, it may be...
Construction Management at-Risk (CMAR)
A collaborative delivery method in which the owner retains an engineering firm and a CMAR firm under two separate contracts; one for design and one for construction. CMAR project delivery is most often chosen when the owner wants to capture some of the benefits of...
Demand-Based Contract
A business arrangement in which an owner makes payments to a service provider in return for the actual level of service provided.