Risk vs Reward in DesignBuild Remodeling
“I completed a real estate development study program at MIT as an introduction. The class looked at real estate as an investment, talking about the ‘Risk-Return Tradeoff.’ The idea is that as risk increases the expected return must increase as well. This made me think about DesignBuild, and what type of risk/return we offer our clients.”
David Supple, the CEO, and Founder of New England Design and Construction reflected on his experience at MIT and realized that investing in your home by choosing to work with a DesignBuild firm offers something different, something richer.
The DesignBuild Process, Home Remodeling, and Risk Reduction
As a homeowner, you’d expect to get back what you put in when it comes to remodeling your home. The reality? You actually get back so much more. Quality, efficiency, trust, and expertise tailored to your remodeling needs are just a few of the returns associated with the DesignBuild process.
As you can see, the return on investment is not entirely monetary. By practicing DesignBuild, we believe our greatest impact is the improvement of your day-to-day lives. We do this through elevated design and impeccable craftsmanship. Because risk reduction is built into the DesignBuild structure, you actually experience more return and less risk on your investment.
How Does the DesignBuild Process Reduce Risk Exactly?
There is less risk in DesignBuild because the client has one company that assumes all responsibility. Design-bid-build, on the other hand, splits responsibility between an architect and contractor because they aren’t operating as one entity, putting the client in the middle of any issues that arise. With DesignBuild, one team is fully accountable for the project from design conception to final build. Architects and builders are on the same team, so instead of ambiguous answers and blame games, you get clear communication and collaborative problem-solving.
So, Is DesignBuild More Expensive? Turns Out, It’s Actually Not…
We often see homeowners who do not use a DesignBuild firm find a large discrepancy between the initial estimate and final construction cost for their projects. With DesignBuild, the initial estimate may come in higher than these other firms, but it is typically much more accurate in the long term. At the end of the project, we find that clients spend almost the exact same amount if doing comparable projects, but with DesignBuild they started out with a much more realistic figure. However, when you look at the final price paid for a project, prices are actually comparable, but the risk with DesignBuild is much lower. To view this relationship between the estimate, the different methodologies, and the risk incurred, refer to the graph below.
Cost versus risk in design-build and design-bid-build methods
This is attributed solely to our DesignBuild model and the culture of accountability it encourages. If a construction company is not responsible for the design of a project, it’s easier to produce a lower estimate. That company is not responsible for designing the project to meet that estimated cost. The “lowest bidder” often comes out to be the most expensive, time-consuming, and stressful. We create the complete opposite experience. This is why DesignBuild is preferred in home remodeling.
Why Does the Final Cost Differ Between Design-Bid-Build and DesignBuild in the End?
Our clients value that true estimates are part of the DesignBuild model. Finding out the established cost once the design is complete can mean it’s actually higher than the estimate. You could also find out that the project isn’t workable, meaning certain design elements are simply unsafe, impractical, or far outside of the price point.
I took a look at all the remodeling companies who are members of our local chapter of NARI (National Association of the Remodeling Industry). I found 43 DesignBuild companies, 36 design-bid-build companies, and 10 companies that were a mix of both. Most of the design-bid-build companies reflect that they like to work with a designer very early. This is a DesignBuild mentality. Remodeling is inconvenient and risky. Homeowners choose the least risky and most accountable company.
With an investment property a client may be more likely to risk more and choose the lowest bidder. I recently decided to GC my own investment property work and ended up 50% over budget! I know what DesignBuild is, and know how great my team is. I chose to take more risk, and it did not pay off. I paid the same as if I had chosen DesignBuild from the beginning. In the end, I had a much larger headache and higher stress level. My experience trying out design-bid-build was a validation of the DesignBuild system we use. May I never stray from our beautiful system again!
Again, the goal is to provide the least cost with the least risk. In remodeling, there are many potential risks:
The list goes on!
Choosing the lowest bid will result in a higher cost in the end for several reasons. Change orders will likely be far more frequent, which adds more cost due to added labor. Misunderstandings due to your remodeling professionals not working on the same team will result in mistakes and more change orders. Schedule overruns, due to misunderstandings and change orders, will result in added costs as well.
For these reasons, you can see that the greater your initial investment estimate, the less risk you’ll incur. To put it plainly, you shouldn’t be looking for the lowest cost estimate. It’ll prove to be risky and unattainable.
Bottom Line? DesignBuild is Superior Because DesignBuild Works.
With the differences laid out, it’s clear why the DesignBuild method is preferred to other methods for home renovations. We look forward to learning about your home remodeling project.
In the meantime, if you’d like to learn more about the DesignBuild process, we have many other resources available in our blog.
David Supple is the owner and CEO of New England Design and Construction. He is currently working on writing a book about his experiences and thoughts in the design and construction industry. David is a graduate of Tufts University with a degree in architecture. In California, he trained as an architect for three years, designing, directing, and managing 50- 100,00 square foot renovations. He founded New England Design & Construction in 2005 and became incorporated in 2006, and rapidly expanded the company to servicing the Greater Boston Area. He is an aspiring comedian but currently he only practices with his wife.
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