Return of the Master Builder: For years, lawyers and insurers have told architects and engineers they cannot guarantee construction prices or completion dates or take responsibility for the actual construction of what they design. These warnings are wrong. By structuring projects carefully and intelligently, architects can increase their prestige, self-esteem, and earnings as design-builders.

1. © Schiff Hardin LLP. All rights reserved | schiffhardin.com
ARCHITECT-LED DESIGN-BUILD:
A PRACTICAL BUSINESS PLAN
Jeremy S. Baker
Mark C. Friedlander
Construction Law Group
Schiff Hardin LLP
233 S. Wacker Drive
Chicago, IL 60606
312-258-5506

2. Design-Build Is Here to Stay
The popularity of design-build construction as a project
delivery method is growing rapidly.
Its growth is fueled by owners who are attracted to its
single-point responsibility and shortened project
delivery times.
Traditionally, however, contractors have dominated the
lucrative position of prime design-builder, employing
the architect as subcontractor.
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3. Designers Lose Opportunities
The architect usually has the initial relationship with and
trust of the owner, who in many cases would like to rely on
the architect to see all aspects of the project through to
completion — even construction.
But most architects have been taught not to assume any of
the risks associated with construction – and do not know
how to structure their practices to take advantage of the
opportunities and profits involved in running a construction
project without undue exposure to risk.
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4. Potential Upside for Architect Design-Builders
• Strengthen relationships with Owner and Contractor teammates.
• Earn profits during construction phase that dwarf design phase profits.
• Gain marketing advantages for traditional architecture work.
• Increase market share by offering potential owner clients a guaranteed price
and schedule early in the design phase – without undue risk.
• Maintain control of the project so completed structure is as designed.
• Increase profits during the design phase by eliminating unnecessary work.
• Minimize risk of claims.
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5. WHAT A PROJECT OWNER WANTS
• Fastest project delivery
• Quality design and construction
• Fair and reasonable prices
• Early price determination
• Single point responsibility for problems
• Not to have to make premature choice of delivery method
• No disputes or litigation
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6. TRADITIONAL DESIGN-BUILD
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Owner Owner
Contractor
Architect
Contractor
A
In-house
architect
OR

7. The “Flip Side of the Coin”
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Owner Owner
General
Contractor
Architect
General
ContractorArchitect

8. Developing Architect’s Design-Build Capabilities
• Step 1: Create design-build company to carry construction risk.
• Step 2: Enter into master subcontract agreements with preferred general
contractor teammates.
• Step 3: Enter into traditional design contracts with owner and subconsultants.
• Step 4: Provide blank form Design-Build Proposal to owner.
– Develop design, perform conceptual estimating
– Revisit whether owner wishes architect to build project
– Complete the Cost and Schedule components of Design-Build Proposal
– Significantly advance design
– Revisit whether owner’s original program and scope evolved
• Step 5: Enter into construction agreements.
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9. Preliminary Structuring:
Create The Architect’s Design-Build Company
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Professional
Design Firm
Non-Professional
Design-Build
Company
Architect
Step 1

10. Architect-Led Design-Build:
The Single Contract Approach
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Owner
Architect’s
Design-Build
Company
Architect G.C.
Sub SubConsultant Consultant

11. “Sequential” Design-Build:
Structure of the Relationship (Private Sector)
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Owner
Architect Architect’s Design-
Build Company
G.C.
Consultant Consultant
Sub Sub
Design Contract
Architect’s
Design-Build
Proposal
(a/k/a Price
and Schedule
Guarantee)
Construction
Contract

12. The “Teaming” Agreement
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Step 2
Architect’s
Design-Build
Company
General
Contractor
Teaming Agreement
• Master Agreement
• An agreement to subcontract
future projects to contractor
• Future “Purchase Order” will
identify owner, project, drawings
• Immediate Services from
Contractor paid on T&M basis:
• Conceptual Estimating
• Preconstruction services
(100% Subcontractor)

13. Considerations in Architect Selecting
General Contractor Teammates
Mandatory Qualities
• Financial Security
• Professional Approach
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Issues of Judgment
• Size
• Geography
• Industry Niche

14. Architect’s Contract: Owner and Subconsultants
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Step 3
Owner
Architect
Standard Owner-Architect Agreement
• Ex: AIA B101, Owner-Architect Agreement
• Blank form Design-Build Proposal as Exhibit
Standard Architect-Sub
Consultant Agreement
• Assumption: trade contractors
to finalize design of engineered
systems

15. The Design-Build Proposal:
“Price/Schedule Guarantee”
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Owner
Architect
Architect’s
Design-Build
Company
Step 4
• Architect’s Design-Build Company’s price and schedule guarantee is contingent
upon it being selected by Owner to build project.
• Architect’s Design-Build Company supplants Architect during construction phase.
• Legal safeguards included regarding budget and estimating.
• Construction Contract eventually supersedes Design-Build Proposal.

16. Architect enters into “Construction Agreements”
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Step 5Owner
Architect’s
Design-Build
Company
General
Contractor
(100% Sub.)
Construction Contract
Architect’s functions during
Construction Phase provided by
Architect’s Design-Build Company
Subcontract for Particular Project
Purchase Order from Teaming Agreement
attaches and subcontracts 100% of Construction
Contract to Contractor teammate

17. Pros and Cons of a 100% Subcontractor
PROS
• Construction risks virtually
eliminated
• Contractor’s presence may assist
marketing or sales
• Contractor likely to refer projects
back to Architect
• Architect not perceived as
competing with contractors
• Contractor may be source of
financial security for owner
• Contractor may be additional
source of management expertise
• Contractor may negotiate better
deals with subcontractors
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CONS
• Reduces available profits
• May be harder to explain to owner, at
least initially

18. Advantages to the Owner of Design-Build
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• Fastest delivery (fast-tracked)
• Design-Builder is single point of responsibility
• Early price determination
• Fewer disputes – less litigation

19. Advantages to the Owner of the Architect
Leading the Design-Build Team
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• Architect is trained to balance design quality vs. cost
• Owner can delay the design-build decision
• Owner and Architect often have pre-existing relationship
• Architect has less conflict of interest than when contractor leads team
• Common complaint of Architect lacking cost discipline disappears when
Architect must construct to a fixed cost
• Contractor as 100% sub can still be source of financial capitalization

20. Advantages to the Architect of
Architect-Led Design-Build
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• Additional profits
– Mark-up on the construction cost
– Savings accrue to architect
– Reduced labor costs in production
• Marketing advantages
– Guarantee of price and schedule
– Owner can delay design-build
decision until design advances
– Contractor becomes source of
future work
• Control over construction
– Avoid unwise design changes
– Allow necessary or advisable
changes
• Reduced liability
– Construction accidents insured by
contractor
– No claims from obvious design
omissions
– Cooperative resolution of design
problems

21. Benefits to the Contractor from
Architect-Led Design-Build
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• Contractor makes usual fee, assumes usual risk, has potential to share in
construction cost savings with Owner and Architect
• Projects often developed by Architect and presented to Contractor “on a
silver platter” with no Contractor marketing expense
• Negotiated pricing rather than competitive bidding
• Enhanced relationships with Subcontractors/Suppliers
• Reduced likelihood of claims/litigation
• Increased profits from reduced overhead (see next slide)

22. Source of the Architect’s Construction Fee
(i.e., Contractor’s Savings)
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• FEE DOES NOT COME FROM OWNER’S POCKET!!!!
• Larger profit margin in negotiated vs. competitively bid contracts
• No contactor marketing overhead for project = leaner pricing
• Cost analysis certain to result in project or compensation
• Minimal contingency for bidding errors/oversights
• No contingency for adversarial administration

23. Architect-Led Design-Build Program
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• Feasibility Consultation
• Establish and Incorporate Design-Build Entity (i.e., LLC)
• Design and Construction Registrations with State
• Employee Lending Agreement
• Resource Sharing Agreement
• Master Subcontract Agreement
• Owner-Architect Agreement
• Design-Build Proposal a/k/a Price & Schedule Guarantee
• Fair Model Construction Contract
• Standalone Design-Build Agreement (GMP or Lump Sum)
• Consulting During First Project

24. For More Information Contact:
Jeremy S. Baker
Partner, Construction Law Group
Schiff Hardin LLP
233 South Wacker Dr., Suite 6600
Chicago, Illinois 60606
(312) 258-5506
jbaker@schiffhardin.com
www.schiffhardin.com
Please connect with me!
Twitter: @builderlawyer
www.linkedin.com/in/jeremysbaker
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Attorney Responsible for Content: Jeremy S. Baker
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