1 What "Delivery Method" Means

The delivery method is the contractual framework that defines how the owner, design team, and construction team relate to each other on a building project. It establishes who designs, who builds, who carries cost risk, when the owner receives price certainty, and how changes are handled during construction. On a complex residential project in Los Angeles, the delivery method is not an administrative detail. It is the structural decision that shapes every subsequent interaction between the project participants.

Every delivery method answers one question differently: when does the owner get a reliable construction cost, and what happens when the actual cost differs from that number? In one method, the owner receives a fixed price after design is complete but pays a premium for that certainty through embedded contingency. In another, the owner pays actual costs with no ceiling. In a third, the owner receives a guaranteed maximum price developed from real subcontractor pricing during design, with cost overruns absorbed by the construction manager.

Three primary delivery methods serve residential projects in Los Angeles. Design-Bid-Build (lump sum) is the sequential model: design completes, the project is bid competitively, a contractor is selected at a fixed price. Cost-plus provides maximum flexibility by eliminating a fixed price entirely - the owner pays actual costs plus a contractor fee. Construction Manager at Risk (CMAR) integrates preconstruction services with construction delivery under a Guaranteed Maximum Price, compressing the timeline and transferring cost risk to the construction manager. Each method allocates risk, cost, and accountability differently. The sections that follow lay out exactly how.

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2 The Project Team

A complex residential project in Los Angeles may involve 15 to 25 professionals across design, engineering, construction, and project management. Understanding who does what - and who each participant reports to - is foundational to understanding how different delivery methods work. The roles below appear on virtually every project above $3 million in total construction value.

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3 Design-Bid-Build (Lump Sum)

How It Works

Design-Bid-Build is the traditional sequential delivery method. The architect completes the construction documents. The completed drawings are sent to contractors for competitive bidding. Each contractor reviews the drawings, solicits subcontractor pricing, and submits a lump-sum price to build the project. The owner selects a contractor - typically, though not always, the lowest qualified bidder. Construction begins after contract execution.

The defining characteristic of this method is its strict sequence. No construction pricing occurs during design. The contractor has no involvement in design decisions. The owner receives cost information only after investing 12 to 24 months in design and permitting.

Cost Structure

The contractor submits a single lump-sum price that includes direct construction costs, subcontractor costs, the contractor's fee, general conditions, overhead, and contingency. The owner sees one number. The contractor's fee, profit margin, and contingency allowance are embedded in the price and are not visible to the owner as separate line items. Typical general contractor markup on a lump-sum residential project in LA ranges from 10 to 20 percent of construction cost, though the owner has no contractual mechanism to verify the actual markup.

The fixed price provides cost certainty at contract execution, and the owner can plan and budget around it. That certainty comes at a cost. The contractor's contingency is priced for risk, and the contractor retains any unused contingency. If the project encounters fewer problems than anticipated, the savings belong to the contractor, not the owner.

Timeline

Everything in DBB is sequential. Schematic design through construction documents typically takes 6 to 12 months on a complex residential project. Permitting in Los Angeles adds 3 to 12 or more months depending on the entitlements required. Competitive bidding takes 4 to 8 weeks. Construction follows. The owner receives no construction cost information until the bid comes in, which is typically 12 to 24 months after the project begins. If the bids exceed the budget, the team redesigns and re-bids, adding months to the schedule.

Risk Allocation

The contractor bears execution risk within the lump-sum price. If actual costs exceed the bid, the contractor absorbs the difference. This risk transfer is the primary value of the fixed-price model. However, the lump sum applies only to the scope defined in the construction documents at the time of bidding. Any change to that scope - whether initiated by the owner, required by field conditions, or resulting from design ambiguity - becomes a change order.

The Change Order Dynamic

After contract execution in a lump-sum arrangement, the owner and contractor's interests diverge on changes. The contractor prices every change order without competitive pressure, because the owner cannot realistically solicit competing bids for incremental work on an active project. This is not a character issue. It is a structural incentive: the lump-sum contractor's economic interest is to maximize the value of change orders, while the owner's interest is to minimize them. This dynamic is inherent to the fixed-price model and intensifies as project complexity increases. On a complex hillside project or a fire rebuild with evolving scope, the change order volume can fundamentally alter the cost certainty that the fixed price was intended to provide.

When DBB Works

Design-Bid-Build is a legitimate delivery method for projects with complete, stable designs where competitive pricing is the priority and scope changes are unlikely. A straightforward lot with resolved soils, a simple building program, and a design team that produces thorough construction documents is a reasonable candidate. The method is less suited to complex hillside projects, fire rebuilds in PGRAZ zones, or any project where scope is likely to evolve during construction. Those projects generate change orders, and the lump-sum change order dynamic works against the owner.

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4 Cost-Plus

How It Works

In a cost-plus arrangement, the owner pays the actual cost of construction - labor, materials, subcontractor invoices, permits, equipment - plus a contractor fee. The fee is either a fixed amount or a percentage of total construction cost. There is no competitive bidding process in the traditional sense. The contractor may solicit subcontractor pricing, but there is no contractual obligation to the owner on the total project cost. The owner bears 100 percent of cost risk.

Cost Structure

The absence of a cost ceiling is the defining characteristic of cost-plus delivery. The owner pays whatever the project costs, plus the contractor's fee. If the fee is structured as a percentage of cost - typically 10 to 15 percent on residential projects, sometimes more - the contractor's compensation increases as the project cost increases. This creates a structural incentive misalignment: the contractor earns more when the project costs more. A fixed fee (flat dollar amount regardless of final cost) partially addresses this misalignment, but the absence of a cost ceiling remains.

On a $10 million project with a 12 percent cost-plus fee, the contractor earns $1.2 million. If the project grows to $12 million through scope changes, field conditions, or design evolution, the contractor's fee grows to $1.44 million. The contractor has no financial incentive to control costs and no contractual obligation to do so.

Flexibility

Cost-plus provides maximum flexibility. The owner can change design decisions, add scope, modify materials, or redirect priorities during construction without the adversarial change order dynamic that characterizes lump-sum contracts. The contractor has no reason to resist changes because the owner is paying actual cost regardless. This flexibility is the primary value of cost-plus delivery, and for certain projects, it is the right trade-off.

Where Independent Oversight Provides the Most Value

The absence of a contractual cost ceiling on cost-plus projects creates a legitimate need for independent oversight. Someone needs to verify that costs are reasonable, that subcontractor pricing is competitive, that scope is not expanding without authorization, and that the project is tracking against the owner's budget expectations. This is where the owner's representative role provides its strongest value. The owner's rep serves as an independent check on costs and progress, filling the accountability gap that the cost-plus structure inherently creates.

On a cost-plus project, the owner pays the contractor's fee (10 to 15 percent of cost) plus the owner's representative fee. Owner's rep compensation varies by engagement structure: some charge 2 to 5 percent of construction cost, others work on a monthly retainer of $25,000 to $30,000 for the duration of the project. On an 18-month construction schedule, that retainer alone represents $450,000 to $540,000. The owner is paying for construction and paying separately for oversight of that construction. This is a rational structure when the delivery method provides no built-in cost accountability mechanism.

When Cost-Plus Works

Cost-plus works for smaller renovations with trusted contractors where scope flexibility matters more than cost certainty. It also serves owners who genuinely do not need budget discipline or who prioritize the ability to make unlimited changes during construction. For a $5 million to $30 million ground-up project, the absence of a cost ceiling is a significant risk. The total project cost is determined by events during construction, not by a contractual commitment before construction begins. Most owners building at this investment level want - and should want - cost certainty before they authorize construction to proceed.

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5 Construction Manager at Risk (CMAR)

How It Works

In CMAR delivery, the construction manager is engaged during design, not after it. During preconstruction, the CM provides real-time cost estimation, constructability review, schedule development, and value engineering as the design progresses. The CM works alongside the architect, providing construction cost and feasibility feedback that allows the design team to make informed decisions before the drawings are finalized.

As the design matures, the CM solicits actual subcontractor pricing and develops a Guaranteed Maximum Price (GMP). The GMP is not an estimate. It is a contractual cost ceiling built from real subcontractor bids, with defined contingency and the CM's fee as visible line items. Once the GMP is accepted, the CM assumes financial responsibility for delivering the project at or below that number.

The GMP, Precisely

The Guaranteed Maximum Price is a cost ceiling, not a cost floor. It establishes the maximum amount the owner will pay for the defined scope. If the project costs more than the GMP, the CM absorbs the overage. This is not a promise or a projection. It is a contractual obligation. If the project costs less than the GMP, the savings are shared between the owner and the CM per the contract terms, typically at a 75/25 split favoring the owner. This shared savings mechanism creates a direct financial incentive for the CM to find efficiencies and manage costs aggressively, because the CM participates in the savings.

The GMP is built from actual subcontractor bids, not from estimating databases or historical averages. Each trade package is competitively bid. The CM's fee is a fixed line item, visible to the owner. The contingency is a separate, defined line item with explicit draw protocols that require documentation and, in well-structured contracts, the architect's approval before contingency funds are released. The owner sees exactly what the contingency is, how much remains, and what it has been used for.

Open-Book Accounting

All costs in a CMAR engagement pass through at actual. Every subcontractor bid, every invoice, every material purchase receipt is accessible to the owner. The CM's fee is fixed - it does not increase when costs increase. There is no incentive to inflate costs because the CM's compensation is not tied to the cost of the work. Open-book accounting eliminates the information asymmetry that characterizes lump-sum and percentage-based cost-plus arrangements. The owner sees every dollar, and every dollar is documented.

Schedule Compression

Because the CM works during design, procurement and preconstruction activities can overlap with design completion. Long-lead materials can be identified and ordered before the permit is issued. Subcontractor relationships can be established and preliminary scoping completed before construction documents are finalized. This parallel processing typically compresses the overall project timeline by 3 to 6 months compared to Design-Bid-Build, where everything is sequential. On a project with an 18- to 24-month construction phase, that compression represents significant carrying cost savings in addition to the schedule benefit.

The Preconstruction Fee

CMAR requires paying the construction manager during design. This preconstruction fee typically ranges from $30,000 to $100,000 or more depending on project complexity and duration. This is a real cost for a real service. The preconstruction work includes detailed cost modeling, constructability review, value engineering, schedule development, subcontractor prequalification, and identification of site conditions or regulatory requirements that would otherwise surface during construction.

The return on preconstruction investment is quantifiable. Conditions identified during preconstruction - soil issues, utility conflicts, code compliance challenges, material lead times - cost 10 to 50 times more to address when discovered during construction. A $60,000 preconstruction engagement that identifies a $400,000 foundation condition during design, when it can be designed for, rather than during excavation, when it becomes an emergency change order, is not an expense. It is the most leveraged investment on the project.

The Trust Architecture in CMAR

The owner's protection in CMAR comes from three structural mechanisms, not from trust, reputation, or goodwill. These mechanisms are contractual. They exist regardless of who the CM is or how the relationship feels.

1. The GMP is a contractual obligation. Cost overruns are the CM's financial liability. The owner's cost exposure is capped at the Guaranteed Maximum Price. If the project costs more to build, the CM absorbs the difference. This is a legal commitment embedded in the contract, enforceable without negotiation or dispute resolution.
2. Open-book accounting makes every dollar visible. There is nothing to hide because there is nothing to gain by hiding it. The CM's fee is fixed. The costs pass through at actual. The owner can audit any line item at any time. This transparency is not a courtesy. It is a structural feature of the cost-reimbursable model with a guaranteed maximum.
3. The architect serves as an independent check. The architect is hired by the owner, reports to the owner, and retains full design authority throughout the project. The architect reviews the CM's work, evaluates change requests, approves contingency draws, and ensures the project is being built to the design intent. The owner already has an independent professional with a legal obligation to the owner watching the construction. That professional is the architect.

These three mechanisms - cost ceiling, cost transparency, and independent oversight by the architect - provide structural protection that is embedded in the delivery model. They operate through contracts and documented accountability, not through personal assurances.

The Architect's Role in CMAR

In CMAR delivery, the architect is not subordinated to the construction manager. The architect retains full design authority. The CM and architect work as peers: the architect focuses on design, the CM focuses on delivery and cost. Communication with the owner is direct from both parties, not filtered through either one. Cost feedback from the CM during design helps the architect make informed decisions about materials, systems, and details, but the design authority remains with the architect.

This peer relationship is what makes the architect's independent role as the owner's check on the CM credible. The architect has no financial interest in the CM's success or failure. The architect's obligation is to the design and to the owner. When the architect reviews a change request or evaluates a contingency draw, the architect is doing so from a position of independence. For a detailed exploration of how this relationship works, see The Architect's Role.

When CMAR Works Best

CMAR provides the strongest value on complex projects where coordination drives cost. Hillside sites with caisson foundations and complex access constraints. Fire rebuilds in PGRAZ zones with layered regulatory requirements. Projects with large consultant teams where 15 to 25 professionals need coordinated design input. Projects where the total investment - typically $5 million and above - warrants the preconstruction engagement and where the owner needs both cost certainty and cost transparency.

The method is less suited to simple projects with straightforward scopes where competitive lump-sum bidding provides adequate cost certainty. If the design is complete, the site is resolved, and the scope is unlikely to change, Design-Bid-Build may be the most direct path. CMAR's value lies in what happens before construction starts - and the more complex the project, the more that preconstruction input is worth.

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6 Fee Structure Comparison

The following comparison lays out the actual fee structures for each delivery method as they operate on residential projects in the Los Angeles market. These are ranges based on direct experience across project types and investment levels. Individual projects will vary based on scope, complexity, and market conditions.

To put the fee structures in concrete terms: on a $5 million residential project, a lump-sum contractor's embedded markup at 15 percent represents approximately $750,000 in fees and contingency, with no visibility into how that number is allocated. A cost-plus contractor at 12 percent earns $600,000 with no cost ceiling, and an owner's representative on a $25,000 monthly retainer over 14 months adds $350,000 for oversight. A CMAR engagement at 10 percent represents a $500,000 fee that is a visible, fixed line item in the GMP, with a contractual cost ceiling, open-book accounting on every dollar, and shared savings if the project comes in under budget. At $15 million, the same ratios apply at scale - the lump-sum markup exceeds $2 million, the cost-plus contractor fee plus owner's rep retainer can reach $2.5 million or more with no ceiling, and the CMAR fee remains a fixed, visible line item within a guaranteed price.

The economic logic of each structure is visible in those numbers. The question is not which fee is lowest in absolute terms - the lump-sum fee may be higher but includes cost risk transfer, while the CMAR fee is lower but operates within a different accountability framework. The question is which structure aligns the contractor's financial incentives with the owner's interests and provides the cost visibility the owner needs to make informed decisions throughout the project.

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7 The Decision Framework

The right delivery method depends on the project, not on a general preference. Project complexity, design stability, budget sensitivity, timeline requirements, total investment level, and the owner's need for cost visibility all factor into the decision. The following synthesis addresses each of these variables and matches them to the structural characteristics of each delivery method.

Project Complexity

Simple, flat-lot projects with resolved soils and straightforward building programs are well-served by Design-Bid-Build. The design can be completed, the drawings are clear, and competitive bidding produces a reliable fixed price. As complexity increases - hillside sites, caisson foundations, complex grading, multi-consultant coordination, fire zone compliance - the value of preconstruction input increases proportionally. The more unknowns a project contains, the more important it is to identify and price those unknowns during design rather than discovering them during construction. CMAR's preconstruction phase exists precisely for this purpose. Cost-plus provides flexibility but no cost management framework, which means complexity-driven cost increases flow directly to the owner without a ceiling.

Budget Sensitivity

Owners who need to know the total project cost before authorizing construction have two structural options: a lump sum or a GMP. A lump sum provides certainty but embeds invisible contingency and creates the change order dynamic described in Section 3. A GMP provides certainty with visible contingency, open-book cost documentation, and shared savings. Cost-plus provides no cost certainty at any point in the project. The owner's budget exposure is open-ended.

Timeline

Design-Bid-Build is entirely sequential and produces the longest overall timeline. Cost-plus can begin construction before design is fully complete (because there is no fixed scope to price), but this flexibility introduces its own risks around scope creep and undocumented changes. CMAR compresses the timeline by overlapping preconstruction activities with the permitting period and enabling early procurement of long-lead items. On projects where carrying costs, loan terms, or occupancy deadlines are significant, the 3 to 6 months of schedule compression that CMAR provides has real financial value.

Design Stability

If the design is genuinely complete and unlikely to change, the lump-sum model works as intended. The contractor prices a defined scope and executes it. If the design will evolve during construction - and on complex residential projects, it almost always does - the change order dynamic in lump-sum contracts becomes a liability. Cost-plus eliminates the change order issue entirely but eliminates cost certainty with it. CMAR manages design evolution through the GMP structure: changes within the defined contingency are absorbed, changes outside the GMP scope are priced transparently against actual costs, and the architect retains design authority throughout.

Investment Level

The preconstruction investment in CMAR ($30,000 to $100,000+) is proportional to project scale. On a $2 million renovation, this represents 3 to 5 percent of the construction budget - potentially disproportionate. On a $10 million to $30 million ground-up project, it represents less than 1 percent and is typically recovered many times over through cost avoidance, schedule compression, and value engineering. The higher the total investment, the more consequential the delivery method decision becomes, and the more the structural accountability of CMAR justifies the preconstruction engagement.

Comparison Reference

The following table summarizes the structural differences across all three delivery methods. Use it as a reference alongside the detailed sections above.

The bottom line: for complex residential projects in Los Angeles with significant site challenges, multi-consultant coordination, and total investment warranting preconstruction services, CMAR provides cost certainty through the GMP, cost transparency through open-book accounting, schedule efficiency through parallel preconstruction, and structural accountability through the CM's financial stake in the guaranteed price. The architect's independent role provides the owner with a professional check on the CM's work without requiring a separate oversight engagement.

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8 How to Start

Assemble the Right Team Early

The two most common entry points for a complex residential project are the architect and the construction manager. Many owners start with an architect, who defines the building program, evaluates the site, and begins schematic design. That is a well-established path. But engaging a construction manager early - during or even before design - is equally valid, and on complex projects it can be the more efficient starting point. A construction manager with preconstruction capability can organize the project team, develop preliminary budget ranges before design begins, evaluate site-specific challenges, identify the consultants the project will require, and provide the owner with a realistic framework for cost, schedule, and regulatory requirements before the first design dollar is spent. On projects with significant site complexity - hillside lots, fire-damaged parcels, properties with known geotechnical or entitlement challenges - that early organizational work often determines whether the project is feasible at all.

The order matters less than the timing. What matters is that the key professionals - architect, construction manager, and geotechnical engineer on complex sites - are engaged early enough that their input shapes the project rather than reacting to decisions already made. A feasibility-level assessment from a construction manager before schematic design can establish budget boundaries that keep the design on track from the start, rather than discovering a cost mismatch after months of design work.

Commission a Geotechnical Investigation Early

Regardless of delivery method, the geotechnical report is the first piece of critical information for any project on a complex site. The geotech defines the soil conditions, bearing capacity, groundwater levels, and slope stability that determine the foundation system. On hillside sites in LA, the geotechnical investigation is the single most consequential early expenditure. It should be commissioned during schematic design, before construction cost estimates have any meaning. For a detailed explanation of how soil conditions drive foundation costs, see the Foundation Systems guide.

Get Construction Input During Design

The highest-value window for construction management input is during design development, after schematic design has established the building program and site strategy but before construction documents lock in the details. During this phase, cost and constructability feedback can actually influence decisions. A construction manager reviewing structural systems, material selections, and site logistics during design development can identify cost drivers, flag coordination issues between consultants, and develop real pricing from subcontractors while the design team still has flexibility to respond. That input becomes progressively less valuable as the documents mature. By the time construction documents are complete, the major cost decisions have already been made. For more on how preconstruction services work in practice, see What Is CMAR and Why CMAR.

Understand the Permitting Path

Los Angeles permitting drives the project timeline regardless of delivery method. A standard plan check takes 3 to 6 months. Projects requiring Zoning Administrator review, PGRAZ compliance, or environmental clearance can take 12 months or more. Understanding the permitting path early allows the team to plan the delivery method timeline accordingly and to use the permitting period productively for preconstruction activities, subcontractor procurement, and long-lead material identification rather than waiting for the permit to begin cost planning. The Permitting Overview guide walks through the full LA permitting process.