A design-build contract is a single agreement in which one company is responsible for both designing and building your project. For a homeowner, it is the document that sets out what will be designed and built, how the price is set, how changes are handled, when you pay, and who is responsible when something goes wrong. Some firms put design and construction in one contract from the start; others sign a design agreement first and a construction contract once the plans and price are settled.
Norman Builders is a design-build home builder and remodeler founded in 2007, with an office in Newton, NH, working across the Merrimack Valley, the North Shore, the Seacoast and southern New Hampshire. This guide explains the parts of a design-build contract for a home and what to check before you sign. It is general information, not legal advice; have an attorney review any large contract.
What Is a Design-Build Contract?
In the traditional design-bid-build route you sign two separate contracts: one with an architect for the plans and one with the builder who wins the bid. In design-build there is one company on the other side of the table. That changes three things in the paperwork:
- Responsibility: the design-builder answers for the design and the construction, so gaps between the drawings and the build are not a dispute between two of your contractors.
- Timing of the price: the contract is often signed, or at least started, before the design is finished, so it has to explain how the price is reached as the design develops.
- Your role: instead of approving finished plans once, you approve the budget, the concept, your selections and the final plans in stages.
Standard forms exist. The American Institute of Architects publishes design-build agreements, including A141 and a version for one- and two-family homes, A145, and the Design-Build Institute of America publishes its own contract documents. Many residential builders use their own contract instead. Whatever the form, the sections below are what to look for.
New to the method itself? Start with design and build: what it is and how it works.
Design-Build vs. Design-Bid-Build: Key Differences
Risk Allocation
In design-bid-build, if the plans are missing a detail, the builder may charge extra to fill the gap and the architect may disagree, leaving you in the middle. In design-build, the same company drew the plans and prices the work, so that kind of gap is generally its responsibility. The risk of your own changes and of conditions the contract excludes still sits with you.
Cost Structure
Design-bid-build usually ends in a fixed bid on finished plans. Design-build can use several pricing models, set out below, and often includes allowances for items you have not chosen yet.
Progressive Design-Build vs. Fixed-Price
Fixed-price design-build sets one price for the whole project based on early design information. It gives you a number early, but the builder has to price items that are not designed yet, and every later change becomes a change order.
Progressive (two-step) design-build splits the work. You first contract for design and budgeting. Once the plans and the budget line up, you sign for construction. If they never line up, you can stop after the first step. When comparing firms, ask who owns the drawings if you stop there, and whether you can take them to another builder.
Our own process follows that order: we define the budget first, then move through conceptual design, design development and final plans before construction starts.
How Are Costs Structured in Design-Build?
| Pricing model | How it works | Who carries cost risk | Fits best when |
|---|---|---|---|
| Fixed price (lump sum) | One agreed price for the defined scope | Mostly the builder, for work in the scope | The design is well defined before signing |
| Cost plus a fee | You pay actual costs plus a fixed fee or percentage | Mostly the owner | Older houses or renovations with unknowns behind the walls |
| Guaranteed maximum price (GMP) | Cost plus a fee, capped at a maximum | Owner up to the cap, builder above it | You want open books with a ceiling |
Allowances
An allowance is a budget figure for something not yet selected, such as tile, light fixtures or appliances. If you choose something that costs more, the price goes up by the difference; if you choose something cheaper, it comes down. Linda B. of North Andover, writing about the three bathrooms we built, explained how this worked on that project: "He also provided an allowance budget to give us an idea of what the total project would cost." The upgrades they chose raised the total, and the review adds: "Ryan did not exceed his labor estimate."
Design Fees
Read how the contract treats design work you pay for before construction is priced: whether that money is credited to the build, what happens to the drawings if you stop after design, and who owns them. Compare contracts on design and construction together.
Must-Have Clauses in Your Contract
- Scope of work: the drawings and specifications the price is based on, and a clear list of exclusions.
- Price and pricing model: fixed, cost-plus or GMP, with the fee and any allowances listed by item.
- Payment schedule: payments tied to stages of work, the deposit, and what is held back until the punch list is done.
- Schedule: start and substantial completion dates, how weather and permit delays are handled, and deadlines for your selections.
- Change orders: how changes are requested, priced, approved and added to the schedule.
- Drawings: who owns the plans and whether you can use them with another builder.
- Permits and inspections: who applies for them and pays for them.
- Licenses and insurance: registration or license numbers where they apply, and certificates of insurance.
- Warranty: what is covered and for how long, in writing.
- Closeout: the final walk-through, punch list and final payment.
- Disputes and termination: how disagreements are resolved and how either side can end the contract.
Massachusetts and New Hampshire Rules to Know
Massachusetts: for work on an existing owner-occupied home of one to four units, Massachusetts General Laws chapter 142A, section 2 requires a written contract for jobs over $1,000, with items such as the contractor's registration number, start and completion dates, a description of the work and materials, and a payment schedule. The same section limits the initial deposit to one-third of the total price or the actual cost of special-order materials, whichever is greater. Those rules cover additions and renovations; building a new one- or two-family home requires a Construction Supervisor License.
New Hampshire: there is no state general contractor license, but electricians and plumbers are licensed by the state, and towns issue their own building permits. Our guide to contractor licenses explains how to check credentials in both states.
The Owner's Role at Each Milestone
- Initial consultation: share your budget, needs and time frame.
- Budget: review the estimated project cost before design begins.
- Concept: approve the conceptual floor plan.
- Design development: make selections as systems are chosen and doors, windows and roofing are picked, with a project coordinator guiding you.
- Final plans and contract: sign off on the construction documents and the construction price.
- Construction: answer questions quickly and approve changes in writing; the project manager keeps you updated.
- Completion: walk through, agree the punch list, and make the final payment once it is done.
What Past Clients Say About Budgets and Changes
Reviews are a good test of how a firm handles the contract once work starts. A few from our clients:
- George C., Newburyport, MA: "His calm, relaxed demeanor in talking through all the details in preparation for signing the contract inspired confidence."
- James E., Andover, MA: "The only cost overruns we experienced were small and outside the scope of our original agreement."
- Jeff and Nancy L., Newburyport, MA: "We felt you kept to fair pricing when additional material and labor was warranted."
- Brad and Sara R., Hampton, NH: "Ryan worked closely with us to keep us on budget while still enabling us to make the desired changes that came about as the job progressed."
More reviews are on our customer reviews page. For the questions to ask when comparing firms, see how to compare design-build construction companies.
Frequently Asked Questions about Design-Build Contracts
Do design-build contracts save money?
Not automatically. The contract type does not lower the price of materials or labor. What it can do is surface cost early, because the builder prices the design while it is being drawn, so you are less likely to pay for plans that have to be redrawn after bids come in high. How much you end up spending depends on the scope, the finishes, the pricing model in the contract and how many changes you make.
How do design-build firms charge?
There are two parts. The design phase may be a separate fee, a fee credited toward construction, or built into the construction price; it varies by firm, so ask for it in writing. Construction is usually priced as a fixed price, cost plus a fee, or cost plus a fee up to a guaranteed maximum. Allowances cover items not chosen yet, such as light fixtures or tile.
Who takes the risk in a design-build contract?
The design-builder is responsible to you for both the design and the construction, so errors or gaps between the drawings and the build are its problem to solve. Cost risk depends on the pricing model: a fixed price puts more of it on the builder, cost-plus puts more on you. You still carry the cost of changes you ask for and of items the contract excludes.
How does design-build handle changes during construction?
Through written change orders. A good contract says how a change is requested, how it is priced, who approves it and how it affects the schedule. Agree on the price of each change before the work is done, and keep a running list so the total never surprises you.
Planning a Design-Build Project?
Working with Norman Builders starts with an initial consultation about your budget, needs and time frame. Read more about our design-build construction services, call (978) 833-7337, or request an estimate.
