One Company's Experience with Design/Build: Labor Cost Risk and Profit Potential

Abstract

This paper offers the data from one construction company's experiences with design/build. Specifically, the paper presents an analysis of the company's labor cost risk based on a case study of two similar projects. One project was a typical design/bid/build job and the other was a design/build job. The design/build project experienced consistently greater fluctuations in the labor cost. These fluctuations seem to indicate that it is very difficult to accurately estimate labor costs for design/build projects, thus adding to the risk of such projects. The second half of the paper presents an account of this same company's overall profit experience with design/build work. Profit margins were analyzed using three categories—design/build versus non-design/build, client-specific design/build, and design/build construction types. The design/build projects' average profit margin was 3.5 percentage points greater than that for the non-design/build work.