24 Oct Which commercial construction delivery model delivers the best ROI?

Which commercial construction delivery model delivers the best ROI?

The best ROI depends on your schedule, complexity, and risk profile, but in Middle Tennessee most owners see higher returns using Construction Manager at Risk (CMAR) or Progressive Design-Build (PDB) versus Design-Bid-Build by accelerating revenue, reducing change-order exposure, and securing earlier cost certainty.

Why it matters

Construction delivery choices directly affect Net Present Value (NPV) by changing time-to-revenue, total project cost, and risk of overruns. In Nashville and broader Middle Tennessee, where demand is strong and tenant decisions move quickly, shaving even one to three months from delivery often dwarfs small differences in hard costs.

For a 200,000 sf asset earning $30/sf NNN, every month of delay costs roughly $500,000 in lost revenue. If a delivery model brings the building online three months sooner, owners can add about $1.5 million in near-term cash flow—value that compounds when capitalized at sale.

How it works

ROI in delivery is driven by four levers: speed (time-to-revenue), cost control (budget accuracy and change orders), performance (OpEx/quality), and risk allocation (contingencies and claims). Models that integrate design and construction earlier tend to score better on these levers because they align decisions, secure trades earlier, and resolve conflicts before the field.

Design-Bid-Build (DBB) separates design and construction and can work for simple, price-competitive scopes, but it often defers risk discovery to late stages. CM at Risk (CMAR) adds the builder early, providing preconstruction, open-book pricing, and a Guaranteed Maximum Price (GMP) once design matures—balancing speed and cost control for most institutional assets.

Design-Build (DB) and Progressive Design-Build (PDB) integrate designer and builder under one contract. PDB starts with qualifications and preconstruction collaboration before setting a GMP, enabling better scope alignment and long-lead procurement. Integrated Project Delivery (IPD) goes further with a multiparty contract and shared risk/reward, typically reserved for complex healthcare and lab projects where speed, quality, and change avoidance are paramount.

What the data says

Comparative studies from the Construction Industry Institute (CII) and Design-Build Institute of America (DBIA) consistently report that Design-Build and CMAR deliver lower cost and schedule growth than DBB by reducing change orders and increasing coordination. FMI and PlanGrid estimate rework consumes roughly 5% of project costs—often tied to late discovery and poor coordination—costs that integrated delivery helps prevent.

Commissioning and coordinated MEP design, which are more reliably implemented under CMAR/PDB/IPD, also improve operating outcomes. Lawrence Berkeley National Laboratory found median 16% energy savings from commissioning with about a 1.1-year payback, savings that flow straight to NOI and support tighter exit cap rates.

Key considerations

Schedule and long-lead items: In today’s market, medium-voltage switchgear, air handlers, and specialized electrical gear can carry 30–60+ week lead times. CMAR and PDB enable early release packages and factory witness testing to protect the critical path—often the fastest path to ROI in Nashville’s tight leasing cycles.

Risk and cost certainty: If you need early price certainty, CMAR with a phased GMP after 60–70% design is a pragmatic choice. For highly complex healthcare or mission-critical work, PDB or IPD can minimize late-stage RFIs and claims by aligning the design and trade partners around target value early.

Owner controls and procurement: Public owners constrained by low-bid statutes may have to use DBB or CMAR. Private owners seeking single-point accountability can favor DB/PDB but should ensure performance-based criteria, robust preconstruction, and clear validation gates before setting the GMP. For a services overview and approach to preconstruction, see our construction management services overview, and to evaluate outcomes, review our project portfolio.

Actionable Takeaway: Quantify ROI by modeling time-to-revenue, change-order risk, and OpEx impacts; in Middle Tennessee, shortlist CMAR or Progressive Design-Build for most institutional assets, then lock long-lead procurement during preconstruction. If you’d like a comparative delivery analysis for your project, request a feasibility review.

FAQs

How do I compare ROI across delivery models?

Build a simple NPV model that includes total project cost, the expected start of revenue, contingency drawdown, and OpEx differences from performance features like commissioning. Run sensitivities for one to three months of schedule variance and 1–3% cost growth to see which model is most resilient.

When is Design-Bid-Build still a good choice?

DBB can be effective for straightforward, repeatable scopes with well-defined documents and minimal complexity, especially where public procurement requires low bid. Its ROI weakens when scope evolves, permits extend, or long-lead procurement must start before full design.

What’s the difference between CM at Risk and Progressive Design-Build?

Both add the builder early, but CMAR keeps separate design and construction contracts and sets a GMP after design matures. Progressive Design-Build unifies design and construction under one contract, collaborates through precon, and then sets a GMP once cost and performance are validated.

Does a GMP always protect my budget?

A GMP limits cost above a defined scope, but it is only as strong as the drawings, allowances, and exclusions behind it. Owners should align performance criteria, validate quantities, and include clear alternates to avoid scope gaps that erode GMP protection.

Which model fits healthcare projects in Nashville?

Healthcare systems often prefer CMAR or Progressive Design-Build to manage complex MEP, infection control, and phasing while accelerating long-lead equipment. These models improve coordination, reduce change orders, and support commissioning that protects patient throughput and NOI.

Conseco Group, a Nashville-based CM/GC founded in 1987, applies these practices across healthcare, office, and industrial projects.