Design & Construct Contracts in the USA: How They Work, Risks and When to Use Them

By PHIL DEWICK

Construction agreements in the U.S. have evolved to accommodate increasingly complex projects, tighter schedules and higher expectations around cost certainty and accountability.

As a result, owners today can choose from multiple delivery models, each offering different approaches to risk allocation, design responsibility and project control.

Among these models, Design and Construct (D&C) contracts are among the most widely adopted frameworks for U.S. commercial construction projects. Also referred to as Design and Build (D&B) contracts, this approach consolidates design and construction responsibilities under a single contractual entity, fundamentally changing how projects are planned, priced and delivered.

This article explains how D&C contracts work in the U.S., how they compare to traditional construction-only agreements, how risk is allocated and when this contract model is most appropriate for owners.

What Is a D&C Contract?

A D&C contract is a construction agreement in which the contractor is responsible for both design and construction of a project. Instead of the owner separately engaging designers and builders, the owner enters into one contract with a single entity that manages the entire delivery process.

In a D&C construction contract, the contractor assumes responsibility for:

• Developing the design to meet the owner’s requirements
• Coordinating all consultants and subcontractors
• Delivering the construction works in accordance with the approved design

This structure creates a single point of accountability, which is one of the key reasons D&C contracts are widely used across the U.S. construction industry.

How Does a D&C Contract Work?

Step 1: Owner’s Project Brief and Procurement Package

Before entering into a D&C contract, the owner typically prepares a detailed project brief. In the U.S., this brief often includes:

• A concept or preliminary design
• A defined scope of work
• Performance and functional requirements
• An indicative project delivery schedule
• Technical specifications and compliance criteria

These documents collectively form the procurement package, which sets the baseline for pricing, design responsibility and risk allocation.

The quality of this package is critical. Inadequate or ambiguous documentation is one of the most common causes of disputes under D&C contracts in the U.S.

Step 2: Tendering and Contractor Selection

Once the procurement package is issued, the owner proceeds with project tendering, inviting qualified contractors to submit proposals to deliver the D&C contract.

Contractors assess design risks, construction methodologies, regulatory requirements and cost implications before submitting a proposal. Pricing may be structured as a lump sum or Guaranteed Maximum Price (GMP), depending on the contract form.

Following technical and commercial evaluation, the owner appoints a preferred D&C contractor and the contract is executed.

Step 3: Design Development and Construction

After the contract award, the D&C contractor advances the design from the preliminary stage to Approved for Construction status. This phase includes:

• Detailed architectural and engineering design
• Consultant coordination
• Regulatory approvals
• Constructability reviews

Once AFC is achieved, construction proceeds in accordance with the approved design, program and contractual requirements. This integrated workflow is one of the defining advantages of Design and Construct contracts in the U.S., particularly for schedule-driven projects.

Step 4: Completion, Handover and Defects Liability

At project completion, the D&C contractor is typically responsible for:

• Preparing as-built drawings
• Managing asset handover
• Delivering close-out documentation

Most D&C contracts include a defects liability period, typically 12 to 24 months, during which the contractor must rectify any patent or latent defects identified after completion.

Owner’s Control Over Design Development Under a D&C Contract

One of the most important considerations when adopting a D&C contract is the level of control the owner retains over design development.

Limited Owner Design Control

When the owner provides only a concept design, the contractor assumes responsibility for the full design development process. In this scenario:

• The contractor has significant design flexibility
• The owner’s influence over detailed design decisions is limited
• Risk transfer to the contractor is maximized

This approach is commonly used in the U.S. commercial construction market, where speed, cost certainty and accountability are prioritised.

Increased Owner Design Control

Some owners prefer to retain greater control by issuing design documentation up to a defined stage, such as:

• 100 percent schematic design
• 70 percent detailed design

While this reduces the contractor’s design flexibility, it provides the owner with greater certainty around layout, materials and functional outcomes. This model is often adopted for projects with strict branding, operational or regulatory requirements.

Importance of Clear Contractual Definition

Regardless of the approach taken, the D&C contract must clearly define:

• Design ownership and liability
• Approval authorities
• Scope boundaries and exclusions

Ambiguity in these areas is a leading cause of disputes under D&C contracts in the U.S.

Design and Construct (D&C) Contracts vs Traditional Construction-Only Agreements

Under traditional construction-only contracts, also known as Design-Bid-Build, the owner retains full responsibility for design and engages a contractor to deliver construction works only.

This model can be suitable for low-complexity projects, such as residential housing or minor refurbishments, where construction methodologies are well understood.

As project complexity increases, however, the limitations of traditional contracts become more apparent. Design and Construct contracts offer:

• Integrated design and construction
• Reduced coordination effort for owners
• Clearer risk allocation

For complex commercial and infrastructure projects, D&C contracts are often the preferred delivery method in the U.S.

Advantages and Disadvantages D&C Contracts

Advantages of D&C Contracts

One of the primary advantages of Design and Construct contracts is single-point responsibility. Owners deal with one contractual entity, reducing coordination challenges and dispute risk.

Another key advantage is time efficiency. Design development and construction planning can overlap, allowing faster project delivery.

Cost certainty is also improved, as pricing is typically established earlier and design risk is transferred to the contractor.

Disadvantages of D&C Contracts

Despite their benefits, D&C construction contracts may result in reduced owner control over detailed design. If performance requirements are not clearly defined, final outcomes may differ from expectations.

Contractors may also price in contingencies to account for increased risk, potentially increasing upfront costs.

Risk Allocation Under D&C Contracts

Under a D&C contract, the contractor assumes responsibility for:

• Design adequacy
• Consultant coordination
• Compliance with building codes and regulations

This risk transfer benefits owners but requires careful contractual drafting to ensure risks are clearly allocated and appropriately priced.

Common D&C Contract Variations in the U.S.

Several variations of D&C contracts are commonly used in the U.S.

A lump sum D&C contract provides price certainty, while a GMP D&C contract offers flexibility during design development.

Hybrid models incorporating Early Contractor Involvement are also widely used, allowing contractor input during design before transitioning to a full D&C agreement.

When to Use a D&C Contract

A D&C contract is well-suited to projects where:

• Time certainty is critical
• Cost predictability is a priority
• Clear accountability is required

In the U.S., D&C contracts are commonly used for commercial buildings, industrial facilities and infrastructure projects with complex coordination requirements.

D&C contracts offer a streamlined and efficient project delivery model that aligns design and construction under a single contractual framework. In the U.S., they are widely adopted for their ability to improve accountability, reduce coordination challenges and enhance cost and schedule predictability.

When supported by clear documentation and well-defined risk allocation, D&C contracts can deliver strong outcomes for both owners and contractors. Selecting the appropriate contract structure ultimately depends on project complexity, risk appetite and desired level of design control.

Phil Dewick is principal at Dewick & Associates USA.