Alternative Delivery Rising?

A rising tide lifts all boats, but will it also cause owners to jump ship from their favorite project delivery methods?  That’s the premise of a recent ENR article on the alternative delivery market.

Traditional hard-bid, design-bid-build contracting became difficult to resist for many owners during the Great Recession, when hungry firms submitted low bids to keep busy.  The alternative delivery market fell sharply as a result, hitting its bottom in 2010.  Since then, however, the market has seen growth that compares favorably to, and may even outpace, the growth of large project construction overall.  According to ENR, the Top 100 Construction-Manager-At-Risk firms and the Top 100 Design-Build firms saw annual revenue increases in 2012 of 10.4% and 12.9%, respectively (to approximately $90 billion and $104 billion).

Explaining the rise in alternative delivery numbers, ENR suggests that some owners may have learned a “you get what you pay for” lesson during the downturn.  But there’s more to the alternative delivery story than a couple of years of cautionary tales and an improving U.S. domestic economy.  Technological advances over the past several years have fostered more innovative and collaborative approaches to project management.  In the public sector, the number of states authorizing design-build contracts continues to grow, and even the holdout states have become more receptive to public-private partnerships that depart from hard-bid models.  (See this New York State Comptroller’s report for a recent example of state officials grappling, more or less reluctantly, with new fiscal realities.)  Value can be a tougher sell than price, especially during hard times, but it’s often the right wave to ride.

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