The clear advantage is that the contractor should understand what they have drawn and so their bid should be accurate. Also, if the contractor knows the budget before they start developing the plans, then they can be held accountable for a design that they can build within budget. The disadvantage is that it is not really possible for a contractor to provide a fixed cost proposal on the cost of construction before the plans are drawn (if plans are needed) so you usually end up hiring the contractor to produce the plans and then, if all goes well, have the same contractor do the construction under a separate agreement.
Personally, if we are used to develop the plans as contractors (whether we use the services of an architect or designer to help us), we like the two step approach of an agreement for the plans followed by a separate agreement for the construction. Our belief is that if all goes well with the plan phase, then that is a good sign that the construction component will work well too. But if personalities clash or the plans do not meet the clients requirements, then at a minimum, the client and contractor need to make sure they understand what did not happen as well as it could and how to fix it when the construction phase starts. For us, the two phase approach allows either party (client or contractor) to not continue.
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