Maintenance and Repairs

January 14, 2019 Published by Toronto and Area Chapter - By Lisa Kay

Design/Build or Design/Bid/Build?

From the Winter 2018 issue of the CCI Toronto Condovoice Magazine.

More than 50 years ago the Toronto condo market was just a novel idea in the housing market ...an affordable solution to home ownership for many. Now more than 55 % of Torontonians live in condos. That's a lot of condominiums! That's a lot of choice! In addition to the board of directors' requirement to maintain and repair the condominium's common areas (using the reserve fund study as a guideline), there's another compelling reason to refurbish your condominium-competition in the market place. Prospective buyers aren't focused on the mechanical rooms and structural integrity of the underground garage, they are looking at the entrance of the building, the walk to the elevator, the ride in the elevator .... the corridor that leads to their front door.... and ultimately their new home. They are buying into a vision, a vision that needs to be complete. With competition in Toronto, the vision is being reinterpreted everywhere you go. What is the vision of your condominium in a burgeoning market of choice?

A common element refurbishment is NOT a small job and usually one of the larger expenditures from the reserve fund. Many boards of directors and even property managers have not undertaken a condominium common area refurbishment. Practically, lay people and property managers need a place to start. After reviewing the reserve fund and the estimated funds available, a decision on which process to engage in undertaking a refurbishment needs to be made.

There are two processes most commonly used for capital improvements in a condominium: Design/Build or Design/Bid/ Build.

Design/Build (DB): the one stop shop solution - under this method, a corporation hires a single entity to perform the design, management and construction under a single contract.

Design/Bid Build (DBB): is a more traditional method where the condominium corporation contracts separately with a designer/consultant and a general contractor and the project is tendered.

How does the board make this decision?

The Act states that the Board must adhere to a "standard of care" which is objectively defined as acting honestly and in good faith, exercising care, diligence and skill that a reasonably prudent person would exercise in incomparable circumstances. Boards must act in the best interests of the corporation using common sense and honestly doing what they believe to be the right thing, avoiding conflicts of interest unless disclosed and not successfully challenged by the owners.

Given there are valid pros and cons to each process one could objectively support either. It is for the board of directors to assess each process and decide which they believe is best for their corporation.

Provided below is an outline of those pros/cons and considerations that may help you decide which way to proceed for your refurbishment.

Design-Build (DB)

The one stop shop solution

Pros

• There is only one contract signed with the general contractor
• The design fees are part of the contract and include modifications if required to meet budget requirements
• Value engineering: The general contractor works with the designer from inception to provide the most cost effective and valuable solution, considering materials and construction, for the created design.
• Accurate Costing Upfront: the synergy of the designer and the contractor working in tandem and on site from inception creates the ability to accurately cost the project upfront and avoid cost overruns. This process lends itself well to a fixed price contract given the high degree of familiarity the GC (General Contractor) has to the designer's scope and the applicable site conditions.
• Ability to design within a fixed budget
• Efficient: DB is a faster and more efficient process than DBB. There are fewer parties to coordinate for meetings and faster decision making on all aspects from design to construction, leading to maximized efficiencies throughout the process.
• Single Point of Accountability for both design and construction.
• Enhanced cost and quality control.
• Mock-ups provided before final design solution is determined

Cons

• The DB process is highly dependent on all parties being responsive and timely in its decision-making to take full advantage of the potential efficiencies of DB.
• The corporation gives up the ability to have the consultant independently (from the general contractor) approve progress draws • No tendering/no competitive bids therefore Boards must rely on a reasonableness test for costing, references, site visits of DB company's previous projects and reserve fund budgets.
• A need for more checks and balances in the contract.
• If multiple RFPs are received it is difficult to compare them from a cost perspective since each bidder will be using different materials.

Design-Bid-Build (DBB)

The traditional DBB project delivery method typically involves three sequential project phases: the design phase, the bid phase, and the construction phase.

Pros

• This method is widely applicable and used, well understood, and has wellestablished and clearly defined roles for the parties involved.
• The consultant is working directly for the corporation and is arm's length from the Contractor
• Competitive bids are received for a "defined" scope of work and finishes allowing the Board to review with an "apples to apples" comparison.

Neutral Points

• There are two contracts to be signed, one with the designer and one with the general contractor
• The design fees are separate and must be paid up front. If the bids come in over budget there may be additional fees to redesign the project so as to come into budget

Cons

• The DBB process may have a longer duration than DB. There are more steps involved: 1. all design work must be completed prior to the tendering of the construction contract, tenders must be reviewed then awarded 2. GC must review the site thoroughly to ensure the scope/materials complete viability.
• The designer may have a limited understanding of construction and the cost ramifications of their design, which can lead to a more costly final product than budgeted.
• The condominium corporation generally faces exposure to contractor change orders and claims over design and construction issues since the owner accepts liability for design in its contract with the contractor.
• There may be a temptation to go with the lowest cost provider which may not prove the most cost effective in the long run. Generally, all bids should be reasonably close. If there are material differences in the bids the corporation should further investigate why and understand the differences to ensure that there are no future cost overruns potentially resulting in unnecessary delays.

One possible reason for cost differences

In the DBB scenario, the designer typically has a "walk through" with the GCs to explain the project (which lasts a couple of hours). The GCs then send an estimator/ trade(s) to measure the building for pricing. This scenario does not allow the GC to become as familiar with the building (as in the DB scenario). Since the designer has not worked with the GC when developing the design, possible construction issues/conditions may not surface until construction begins. These issues/conditions would not be stated in the tender and not every GC would allow for these additional construction accommodations if not requested in the tender.

So, How to Choose

In determining which process and contractual arrangement to engage in, Condominium Boards should carefully analyze their:

• Ability to closely and effectively manage the process.
• Sensitivity to cost and scheduling escalations.
• Degree of comfort with bearing project risk.

Condominiums that are working within a tight budget and/or have a low tolerance in bearing project risk and wish to minimize the time allocated to such a project, tend to find the more collaborative DB delivery method appealing. Condominiums that are uncomfortable proceeding without tendering (as it may be viewed as an extra layer of diligence) may lean toward DBB.

Ultimately, if you are working with reputable, accredited designers and general contractors that are experienced and specialized in condominium refurbishing, there should be very little difference in the outcome of the quality of the project.