Precontract Negotiations in Design-Build Projects

Understanding how negotiations work between multiple parties has proven advantageous in strategizing through business decisions. However, precontract negotiations in the construction industry has not yet been exclusively studied in private design-build projects. Challenges and best practices associated with negotiating a design-build contract for a complex construction project are usually captured as tacit information through the experience of design-build professionals. To elicit this information from such experts, semi-structured interviews were conducted and analyzed in this study, aiming to explore current trends in precontract negotiations in design-build. Existing literature on the critical factors that significantly affect design-build contracts is utilized to build a scenario to prompt these interviews. These factors include payment terms, retentions, warranty/correction period, liquidated damages, and change orders. Moreover, the impact of scope definition and mutual trust between parties on the precontract negotiations were discussed. Ultimately, positions and trade-offs considered by the design-builder and the owner perspectives while negotiating a design-build contract in the private construction sector were presented. Some key findings for precontract negotiations in design-build from the interviews were (1) scope definition is not a decisive factor, (2) trust between contracting parties impacts the tone and speed of negotiations more than the content of the resultant contract, and (3) protecting subcontractor interests should be the priority for both the owner and design-builder. This study will be beneficial to design-build professionals to strategize through their precontract negotiations and maximize the performance of their design-build contracts. However, since this is an exploratory study, future investigation on presented findings is warranted.