Free Template: Design-Build Contracts Explained

Most contractors or designers don’t get into the industry because they want to spend hours at their desk writing up paperwork. That is why we want to make it as easy as possible for you to learn how to draft up professional contracts in your design-build business. 

Our free residential design-build contract template is a great way to begin because it walks you through everything that should be included in a contract, so that you do not have to start with a blank screen every time. And you can download our design-build contract as a PDF or Word document. Having this design-build contract example will provide a helpful starting point for conversations with your attorney.

Luckily, there are business tools even more advanced than contract templates that millions of contractors rely on to help them more easily draft contracts and run their business more efficiently. Houzz Pro business software lets you store all your documents in the cloud instead of in bulky binders and unwieldy file cabinets. You can also collect clients approvals quickly through e-signatures, and the software helps you keep track of your contracts and other business documents and any changes made through the life of a project. 

Explore our e-signature and single, central business hub features with a free trial of Houzz Pro.

What Is a Design-Build Construction Contract?

A design-build construction contract is a single agreement that covers both the design and construction aspects of a building project. The document details every aspect of the project including the scope of the work, materials, costs, terms and conditions, and more. While you are likely to have more than one type of contract for a project such as those with your subcontractors, this article focuses on the contract between you as a design-build contractor and your client. 

Also referred to as agreements, a design-build construction contract is more comprehensive than a scope of work document because it covers every detail of the project. It becomes legally binding once it is signed by all relevant parties.

Why Are Design-Build Contract Forms Important?

A design-build construction contract protects both you and your client, especially if disputes arise later in the project. The contract details the expectations of the clients and the costs associated with the project and helps ensure that everyone is on the same page before any work begins. The document can be used as a reference point to resolve questions. It also shows the professionalism of your company and gives clients peace of mind. Investing in the work it takes to draft an all-encompassing contract upfront can save you costly change orders and legal fees in the long run.

When Do You Need a Design-Build Construction Contract Template?

The more traditional approach to construction has clients contracting with a designer in one document and a builder in the other. But a design-build construction contract provides one-stop shopping for your clients. Folding both the design and construction aspects of a project into one contract, and under one contractor, saves time and money. It also helps avoid instances where a homeowner is stuck in the middle of a disagreement between a contractor and designer.

A design-build model brings architecture and design and construction under a single contractor and, therefore, the client has a single point of contact throughout the project's life cycle. The contract spells out the responsibilities of both the designer and contractor, so that everyone is collaborating from the start.

Types of Residential Design-Build Construction Contracts

The types of home design-build contracts vary depending on your approach to pricing. Here are three common ones:

• Fixed price - This type of contract sets a total cost for the entire project. Every expense is figured into this total sum that the design-build contractor is charging for the work. 
• Cost plus - Under this scenario, the client pays the design-build contractor the actual cost of the project plus an agreed-upon fee or percentage of the cost. 
• Guaranteed maximum price - Some design-build construction contractors set a cap on the price of a project, agreeing to complete the project for a cost that does not exceed a certain limit.

Risks of Residential Design-Build Contracts

There are risks and tradeoffs associated with design-build contracts for both contractors and homeowners. The field of design-build firms in the industry is still limited; therefore, clients may have fewer choices of contractors and less flexibility. Also, with so many moving parts and putting all your eggs in one basket, you as a design-build contractor are likely to carry a larger financial risk should things go wrong.

And because a design-build contract takes more time to prepare because of the scope of details and work involved, a design-build contractor can lose more in time and money if the client decides not to go forward with the contract that took so much work to draft.

Clauses to Include in a Residential Design-Build Contract Template 

It is recommended that you seek professional legal advice before drafting any contract. This protects  you and your company and helps ensure you have all your bases covered. Here are some of the common clauses included in a design build construction contract:

• Company and client information - Include the name and contact information for both your company and the design firm if it is not part of your company, as well as the information of the clients. Make sure that in all cases the legal name is used. 
• Property information - List the address and parameters of where the construction will take place. Use the information on the property deed whenever possible to provide clarity and avoid legal issues. 
• Services - Detail the services you will provide for the project, so that everyone is on the same page. To avoid confusion, in some cases you may want to consider listing any common services that your firm will not be providing for this particular project.
• Scope of work - Describe the entire scope of work in specific detail. Cover every aspect of the work and services you are providing. Note the quality of the materials, tools, supplies, and labor being provided. You may also want to include the project requirements and specifications for each phase of the project.
• Risk assessment - Note any possible risks, whether it is possible weather delays or anticipated hazards on the site. 
• Materials and expenses - Spell out the type of materials, quantity, and cost as well as the labor costs and all other expenses associated with the project. Provide as much detail as possible to illustrate all the pieces that make up the total cost of the project. 
• Payment terms - This clause explains the agreed-upon payment terms and fees for late payments. It includes the payment schedule, amount of initial deposit if required, and more. 
• Construction schedule - Lay out the timeline from the start to end date and construction milestones and target dates. 
• Permits and licenses - Don’t forget to include the permits that are required from various agencies and any costs associated with them. Make it clear who is responsible for acquiring the permits. 
• Insurance and security - Liability insurance not only protects you and your clients, it is required. Include information about your insurance coverage and any bond information. 
• Conditions and responsibilities - Add a section that lists the conditions that need to be met before work begins and throughout the project, and who is responsible for them. This might include permit acquisition, security deposits, equipment delivery, and more. It is important to determine and note who has the authority to make decisions as the project progresses.  
• Refund and cancellation terms - Clarify when a refund would be issued and the terms should a client seek to cancel or terminate the contract.  
• Amendments - Identify a process for making changes to the contract.
• Governing law - The state and state laws that will govern the interpretation of the clauses in the contract should be noted and could depend on the location of your company and the project. 
• Dispute resolution - Offer up remedies for resolving disagreements. These typically include mediation, arbitration and litigation.
• Warranties - In this section, explain which promises you are making and what you are excluding from those promises. 
• Indemnity - Design-build construction contracts typically require the contractor to compensate (indemnify) the client for certain injuries or losses associated with the work or resulting from a breach in the contract. Third parties, such as other subcontractors hired by the client, may also need to be included.
• Force majeure - This clause is intended to remove liability from circumstances you have no control over.  Examples include natural disasters and other unavoidable catastrophes. 
• Signature terms - Include a place for the document to be signed and dates and an explanation of what the signers are agreeing to. The document is not legally enforceable unless it is signed.

How to Create a Design-Build Contract Step-by-Step

Now that we’ve covered what to include in a design-build contract, let’s explore the next steps toward drafting the document.

• Create a budget - The contract should include the exact cost of the entire project, so make sure you have calculated all the expenses associated with the work. Review any estimates, quotes, or bids you have prepared, along with other relevant documents.  
• Set a schedule - Determine the end and start dates of the project and target dates for various stages of the work. Make note of cases in which you are not responsible for work delays, such as inclement weather or cases in which the homeowner has not acquired the necessary permits.
• Complete designs - The design phase of the work should be completed before writing the contract, so that everyone is on the same page regarding the design portion of the design-build contract. Finish the design details and plans to be included in the contract description.
• Establish terms of subcontracting - To determine the total costs, you will need to establish the number and type of subcontractors needed to carry out the design-build project. Then, calculate the hourly rates and time requirements and finalize the terms with the subcontractors before adding the details to the contract.
• Define provisions of equipment and materials - Another key part of the project is determining the pricing and sourcing of the equipment and materials. Do the research needed to ensure that materials and equipment will be available at the anticipated times and at the cost you budgeted. Make adjustments as needed.  
• Finalize the scope of the work - Make sure you completely understand the scope of the work and that everyone is on the same page about the design and build services and the work you will provide. This may require checking back with the client to ask more questions, and to clarify and confirm their expectations.
• Determine payment schedule - Set the terms and stages of payments, noting the amount and timing of when payments are due at various stages of the project. You may also want to consider seeking an upfront deposit before any work begins to provide you with cash flow. Be sure to include how much time the client has to pay each bill, and any fees you charge for late payments. 
• Draft contract - Now that you have researched, calculated, and reviewed, it’s time to draft the design-build contract. Gather together all the pertinent information and add it to each appropriate clause in the design-build contract template. Decide on the type of contract you are drafting, which will depend on the type of model you have chosen. Here are two common design-build ones:
  
  - Design-build model: This contract is used when a contractor is either a building firm that also does design or a design firm that also does construction. The clients hire a single company to both design and build the remodel or home build.  
  
  - Design-build bid model: Under this scenario, a client has hired a team to create a preliminary set of plans and project description. Then, the team sends out a bid package, and a contractor is chosen to build the project. 
• Consult with a lawyer - Before you send a contract to a client, protect your business and legal expenses by seeking the advice of a lawyer. A professional attorney can help you understand your legal obligations and help ensure that you have adequately covered all the requirements. 
• Review and send - Review the contract one final time, and once you are satisfied with the contract, send it to your client.

What’s Next? Final Tips for Creating Professional Design-Build Contract Template

• Research state requirements - Provisions and requirements regarding contracts for construction and design work vary by state and jurisdiction. Check the websites of the state or states in which you are conducting business to ensure you have met their requirements.
• Include your license number - It is good practice to include this information on all your business documents such as estimates, invoices, and your website. Besides the legal implications, licensing signals the professionalism of your firm and adds assurance for clients. 
• Important note: Seek counsel from a professional lawyer - To make sure your contract is legally airtight, it’s important to have a lawyer review any legal language in the contract or the contract in full. Paying a lawyer upfront to review your contract may end up saving you money in the long run in case of disputes. 
• Don’t forget the signatures - Your contract is not valid unless it is signed and dated. Make it easy for clients to sign off by providing them with the ability to sign digitally, or online.
• Store documents safely - Make sure you have a secure place to store every contract and all your business documents, so they can be referred to in the future and to protect the privacy of your clients and your business. Consider cloud-based storage that provides security and makes it easy to organize all your documents in a single place.

Conclusion

Drafting a professional and comprehensive design-build contract for every project protects your firm and the clients you serve. A design-build contract differs from a more traditional construction contract because it incorporates both the design and construction aspects of the project through a collaboration or a single firm. Including as many relevant details as possible in your design-build contract can help you avoid headaches and expenses down the road. A contract provides a roadmap for construction jobs and serves as a reference point throughout the project journey. 

Starting with a design-build contract sample can help you learn what comprises a professional and comprehensive contract. But there are tools like design-build firm business software that are more advanced than templates to help you draft contracts and manage all aspects of your design-build company more efficiently. 

From lead generation to client communication, project management to time tracking, and document cloud storage, Houzz Pro business software for design-build firms can help you simplify your business operations and maximize your profits. Explore the client communication, lead-nurturing, and file-sharing features in our design build firm business software.

Are you seeking more ways to grow your company and run it more efficiently? Learn about  How to Make a Construction Estimate.