Same number of bids. More wins. (Part 6 of 6)

Like what you see? Consider subscribing to get the latest articles here.

For most of my time as a VP of Preconstruction & Sales for a specialty subcontractor, I never considered how a GC’s Agreement with the owner might change how we bid and win projects. In my mind, it didn’t matter! Build relationships, be low (or close to it) on bid day, and hope the GC isn’t a jerk. That’s what I knew. And it honestly worked well enough to win some great and profitable Contracts. But it always seemed like way too much work—a 10%-20% win rate just isn’t enough! 

Then, I learned that the GC’s agreement with the owner matters a lot, and in fact, subcontractors can gain a competitive advantage by being smart about it—especially because most subcontractors are like I was: clueless! After that, while other subs were out there bidding every job the same and treating every client the same, I started treating each project and client in a unique way depending on their agreement with the owner. It made everything about the bidding, sales, and preconstruction processes so much simpler. 

Over the next 6 weeks, I will give you a clear understanding of 6 common delivery methods used in the construction industry and some really good tools to get smarter in how you approach each of them. Today is about Method #6: Design-Build 

In this series, I hope to help you, subcontractors, who want to increase your win rate. I also want to help general contractors understand what their subcontractors go through when pursuing a project.  

Please note that there is increasingly very little difference between the terms GC (General Contractor) and CM (Construction Manager). As a result, I use the terms interchangeably throughout the below. Let’s dive in. 

Method #6: Design-Build 

What it means:  

Design-build is unique to any of the methods discussed so far. In these agreements the design and build phases of construction overlap. I.e. There will still be design going on while construction is underway (in contrast to design-bid-build where the design is 100% complete before it goes out for bid!).  

How it works: 

Because of the above, these agreements are not awarded to a GC/CM, but rather a Design Builder. Some Design Builders—like Jacobs or Fluor—own the design and construction in house. In other instances, the Design Builder is a partnership between a GC/CM and an architect who sign a singular Contract with the owner. For example, Clark and Gensler may sign an agreement to be the Design Builder on a project and work in tandem to set a conceptual budget. The owner agrees to this conceptual budget, and then the Design Builder works to design and build the project to meet that budget (while also meeting any requirements the owner has for building the project). 

Why it’s used: 

This is an increasingly popular delivery method on the East Coast—and has been popular for years on the West Coast—because it is so much more collaborative than typical design-bid-build or GMP arrangements. 

In design-bid-build and GMP, the GC and the architect each have a contract with the owner. This means that their Contracts are often in conflict with each other, which leads to conflict between the GC and the architect! For example, the architect’s Contract says to design the building in full. The GC’s Contract says to build the building per the design. When the GC discovers a problem with the design, the architect does not want to be on the hook for it! So what do they do? Try to justify the problem and reference some Contract language that intends to make the GC (or subcontactor) responsible for the cost to correct it. This is an age-old problem and a key reason why construction has so much conflict today. 

But with Design-Build, the GC and architect are under the same agreement as the Design Builder, and are therefore incentivized to solve problems together. Crazy concept, right? 

Beyond the collaborative benefits, there is also mounting data that suggest Design-Build projects get built faster and for less total cost than their design-bid-build and GMP counterparts. 

What you need to know: 

On some design-build projects, the subcontractor also enters into the Design-Build agreement. This means they are under the same Contract as the GC/CM and architect and are more like a peer than a subcontractor. If you ask us, this is the peak of subcontracting because you are working directly for the owner. In other words, no more needing to be the low-bidder or hoping that the GC gives you the job—your relationship is with the owner directly and it’s their money so they can do whatever they want with it! (Like award you the project based on relationship and value, leaving you to make higher than average profits—and deservedly so!) This is largely reserved for electrical and HVAC contractors. 

But, even if you are not electrical or HVAC, you can benefit from the Design-Build method. For one, Design Builders are much more collaborative than your typical GC/CM and architect. Therefore, if you have awesome VE ideas or creative ways to build the project faster, they will listen intently and reward you for providing that value. It’s nice to provide value that is actually appreciated! For two, Design-Build is largely a value-based award system, meaning, while price matters, it may not be the #1 consideration. And finally, since the team is so much more collaborative, the job is usually much easier to run in the field. If you do discover issues, the team is willing to listen to unique ways of fixing them. With this in mind, it should cost you less to manage these projects, which means you can get more competitive and still make more money! 

At the end of the day, if you want to win consistently in the design-build world, you need to be truly sophisticated—technically, operationally, and in your preconstruction department. And you have to be excellent at communicating and selling that value to your GCs. If you can get there, it’s a fun place to be. 

Key question to ask yourself: Are we sophisticated enough—in operations, preconstruction, the field, and sales—to win consistently in the design-build world? 

The Great Ones Have Coaches 

The owner of one of our general contractor clients once said to me (we are both huge Baltimore Ravens fans): “Lamar Jackson didn’t get a $250M Contract by going at it alone. He has coaches for almost every part of his game. That’s the same reason I wanted to hire you guys.” 

And he’s right! Hiring a coach or a consultant is something all the great athletes do to up their game, yet business owners are often hesitant to do the same! (Imagine trying to play tennis against Roger Federer without ever going to a coaching lesson) 

So, if you’re reading the above and wondering: 

• How do we become sophisticated like the top Contractors out there? 

• How do we set a strategy for the type of company we want to be? 

• How do we set a strategy for the type of work we want to chase? 

• How do we create a sales process that increases our hit rate? 

• How do we make our operations truly better and different? 

Then, I hope you’ll reach out to us. Our consultants and coaches have hundreds of years of construction experience and are well-suited to help you make the kind of changes you are looking to make. If you’re ready to talk, then email me at mverderamo@wellbuiltconsulting.com 

Good luck, and happy growing. 

Spark Notes:

• I used to think all that mattered was being low and likable on bid day—until I realized that understanding the GC’s agreement with the owner could completely change our win rate.

• Design-Build flips the script by aligning the GC and architect under one contract, leading to fewer conflicts, faster builds, and more collaborative (and profitable) projects.

• Subs who understand how to navigate Design-Build—especially those who bring creativity and value—can stand out without always being the low bidder.

• If you want to win more with the same number of bids, it’s time to level up your sophistication in precon, operations, and sales—and maybe bring in a coach to help.