101_mop_introduction To Design Build

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AN INTRODUC TION TO DESIGN-BUILD

Introduction to Design-Build M an u a l o f P ractic e

The Number One Reference Document for Professionals & Students researching the basic concepts and key elements of the Design-Build Industry. An Official DBIA Manual of Practice Chapter

AN INTRODUC TION TO DESIGN-BUILD

Table of Contents 1 | Intro/Overview............................................................................3 2 | Benefits of Design-Build.............................................................5 3 | Who Uses Design-Build..............................................................6 4 | Design-Build Entity Selection......................................................7 5 | Contract Types.............................................................................8 6 | Owner Cautions..........................................................................9 7 | Summary..................................................................................11

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1.0 Introduction to Design-Build Project Delivery

D

esign-build is a method of project delivery in which the owner executes a single contract with one entity (design-builder) to provide architectural/engineering services and construction services. Designbuild is also known as “design-construct” and “single source” or “single responsibility”.

By contrast, with the “traditional” design-bid-build approach, the owner commissions an architect or engineer to prepare drawings and specifications under a design contract, and subsequently selects a construction contractor by competitive bidding or negotiation. When discussing project delivery methods, it is important to distinguish between delivery systems and other contractrelated trends and philosophies. Design-build, design-bid-build and construction management are the three project delivery systems most commonly employed in North America. On the other hand, partnering and total quality management (TQM), while excellent tools when appropriately applied, are not project delivery systems. During the past decade, the use of and interest in design-build in the United States and Canada has greatly accelerated, making the growth of this delivery method one of the most significant trends in the design and construction industry. According to an American Institute of Architects (AIA) Practice Memo, “Design-build is attracting a lot of attention, because owners, including government agencies, are finding it attractive [for] complex and unusual projects, because it 1

eliminates some of the major seams in getting a project built.” 3

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In its recent study on design-build, the American Society of Civil Engineers (ASCE) reports that “Design-build has been used successfully on complex power plants and chemical process facilities and on simple straightforward office buildings and family housing. In fact,” states the ASCE report, “there is no reason that design-build cannot be used on 2

most types of construction projects, including traditional civil infrastructure projects.”

1. American Institute of Architects, February 1994 Practice Memo What is Design-Build and Why Is Everyone Talking About It, by Douglas E. Gordon, p. 14. 2. American Society of Civil Engineers, Design Build in the Federal Sector, Washington, D.C. 1992, p.11.

AIA, ASCE and others cite a number of reasons why owners and the design and construction community are considering design-build. Primary among these are: • Owner-driven demands for better quality and continuous improvement in project delivery and in the final product; • Interest in saving time and money, through a process wherein budget, schedule and constructability are key concerns from the outset; • Desire to avoid the legal entanglements of adversarial relationships; and to reap the advantages of a cooperative effort by all parties united under a single contract; • Need to realign the responsibilities and risks on a project, by dividing responsibilities/risks according to the party most capable of managing those risks; • Response to the restructuring of American business and government and the increased influence of global markets/foreign competition.

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Design-Build project delivery should not be viewed as the most effective delivery system for every project, however. Traditional methods provide clear advantages in many situations.

2.0 What are the Benefits of Design-Build?

The benefits of a well-designed and -managed design-build process include the following:

Singular Responsibility. With both design and construction in the hands of a single entity, there is a single point of responsibility for quality, cost and schedule adherence. The design-builder is responsible for quality, budget and schedule, and performance of the completed facility. Conflicts between design and construction are the design-builder’s responsibility, not the owner’s. With design-build, the owner is able to focus on definition of needs (scope of work) and timely decision-making, rather than on coordination between designer and builder. Quality. The singularized responsibility inherent in design-build is a powerful quality motivator. Because the design-builder is solely responsible for the completed product, and cannot shift responsibility for defects to another party, he is motivated to build in quality throughout the design and construction process. Traditional design-bid-build often relies upon restrictive contract language, adversarial audit and inspection, and the legal system to ensure project quality. Cost Savings. Design and construction personnel, working and communicating as a team, evaluate alternative designs, materials and methods efficiently and accurately. Value engineering and constructability are utilized continuously and more effectively when the designers, contractors and vendors work as one during the entire design and construction process. Time Savings. Because design and construction are overlapped, and because bidding periods and redesign are eliminated, total design and construction time can be significantly reduced. Design-build is ideal for the 5

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application of “fast track” construction techniques without associated risks to the owner. Materials and equipment procurement and construction work can begin before construction documents are fully completed. The resulting time savings translates into lower costs and earlier occupancy of the completed facility. Reduced Administrative Burden. Although design-build can be resource-intensive during the early phases of a project, the owner is not required, during actual design and construction, to coordinate and arbitrate between separate design and construction contracts or resolve budget and schedule conflicts. Early Knowledge of Firm Costs. Guaranteed construction costs are known much earlier in advance compared to other delivery systems. The entity responsible for design is simultaneously estimating construction costs and can accurately conceptualize the completed project at an early stage. Design-build can afford the owner one or more “go, no-go” decision points during the design phases. The decision to proceed with the project is made with firm knowledge of the final cost and scope. The aggregate benefit of these advantages come at considerable risk to the design-builder but will generally translate into far greater value to the owner than that traditionally available. Correspondingly, a design-builder’s reward should reflect a portion of the greater risk assumed and value created.

3.0Who Uses Design-Build Design-build is the project delivery system of choice on more than 40 percent of the non-residential construction projects in the European Community and is used on more than 60 percent of the non-residential projects 3 in Japan, according to recent industry authorities. In the United States, use of design-build in the private sector has been increasing in frequency and application during the past thirty years. Designbuild is being used in a wide array of commercial and institutional applications including hospitals, educational facilities, office buildings, retail centers and hotels. Design-build has also been used for decades in the industrial and power sectors. 6

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In the U. S. public sector, the federal government, many states and local governments employ design-build contracting for a significant percentage of their building programs. In the six years from 1986 to 1991, total use of 4 design-build in the public and private sectors grew 172%, from $18 billion to $49 billion. In 1992, new awards of 5 design-build contracts to the ENR top 400 contractors exceeded $80 billion, and in 1993, $71 billion. In the 12month period ended April 1996, publicly reported design build contract awards of $5 million or more increased by 103 6 percent. 3. Brian Bowen, President, Hanscomb Associates, Inc., Design Build and Construction Management - International Trends, Professional Design-Build Conference, October 21, 1994, Atlanta, Georgia. 4. Arthur Fox, ENR Editor Emeritus, DBIA Annual Meeting, Chicago, IL, October 12, 1993. 5. Engineering News Record, June 6, 1994, p. 27. 6. Engineering News Record, June 19, 1996, p. 34.

4.0 How Is A Design-Build Entity Selected? The methods for selecting a design-builder range from pure qualifications-based selection to pure pricebased selection, with many combinations in between. Qualifications-based selection or negotiation permits the early involvement of the design-build entity with the owner in critical initial decisions while preserving the range of benefits that design-build can provide. On the other hand, public sector owners and some private owners may be prevented from using negotiated or direct selection. The methods most commonly utilized by such owners have been competitive negotiation, cost/design competitions, and pure price competition.

A summary of design-build selection methods follows:

Direct Selection. The design-builder is directly selected by the owner on the basis of such factors as reputation, technical and managerial qualifications, past performance, and prior association. Direct selection is most commonly utilized by private sector owners. 7

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Competitive Negotiation. A number of design-builders are prequalified or interviewed, with selection based upon a combination of technical and managerial qualifications, references and past performance, preliminary design solutions, fees to be charged, budget cost estimates, recent comparable costs, personnel to be assigned to the project, and scheduling commitments. As with direct selection, the negotiated source selection approach is most commonly utilized by private sector owners; however, major federal agencies (such as General Services Administration, U. S. Army Corps of Engineers, U.S. Postal Service) and many states are also adopting this method on certain projects. Cost/Design Competitions. This method, also known as “best value” selection, is perhaps the most widely used competitive approach. Proposors are shortlisted on a qualifications basis. The owner issues technical criteria, to which each proposor responds with a qualitative proposal and firm price. The owner establishes an evaluation system for qualitative features and for price. The owner reviews each qualitative proposal, then price, and makes selection based upon “best value” (combination of qualitative factors and price). Cost Competitions. This method of evaluation most closely resembles the design-bid-build process. The owner’s design concepts are developed to a highly detailed and prescriptive level in the Request for Proposals (RFP). The selected firm’s role in design is more that of a detailer than conceptualizer. Proposals are evaluated as to whether they meet the base criteria, and award is made to the low bidder. This process, which is not recommended by DBIA, eliminates two of the most advantageous features of design-build competitions: multiple proposed design solutions and innovation in the use of materials and systems. This approach can also lead to conflicts in design professional responsibility.

5.0 WhatTypes of Contracts are Used? Depending upon project characteristics and selection method, numerous forms of contracts are used in design-build. Among the most common are: 8

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•

For negotiated design-build engagements, the contract is typically a two-part arrangement. The first part authorizes preliminary design, some design development and outline specifications, all sufficient to determine final cost and to conceptually describe the project. The second part completes the design and authorizes construction, and may include incentives, targets, and savings clauses.

• When best value selection is used, single part lump sum contracts are most commonly utilized because price and scope are established during the competition process. • With increasing frequency, design-build entities are also offering project finance as apart of a comprehensive package of services. This may take the form of design-build-lease, design-buildoperate, or design-build-interim finance. Many variations of these basic approaches are available. Regardless of the type of design-build contract chosen, it must be tailored to the needs of the owner and the project.

Since the Design-Builder assumes the greater risk their contractual fee should reflect such enhanced risk assumption

Because the design-builder usually assumes greater risk (early fixing of price, warranty of performance, accuracy of drawings and specifications) than does a contractor in traditional delivery models, the design-builder’s contractual fee should reflect such enhanced risk assumption.

6.0 Caveats: Cautions for the Owner Complexity of the Process. Design-build project delivery requires careful planning and professional execution to be successful. The owner should approach the design-build process mindful of factors such as the project’s complexity, funding, design intent, responsibility/risk allocation and other important issues. 9

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For owners who do not have in-house personnel with expertise in preparing and administering design-build requests for proposals and contracts, two options should be considered for securing appropriate professional guidance to assure proper project definition through the early phases. Under the first option, an owner’s design-build consultant (sometimes called criteria professional) should be retained to prepare scope definition and RFP documents, and to provide additional consulting services as needed. With the second option, the owner may use direct selection or negotiation to bring the design-builder on board at project inception to assist in establishing project goals, scope and definition. Converting Owner Needs to Performance-Based Language. Preparing a statement of facility requirements (sometimes called the design criteria package) that is comprehensive enough to assure compliance by the offerors, but avoids restrictive details that would inhibit creative solutions, is the most challenging aspect of preparing a design-build RFP. When facility requirements and quality standards are stated in performance terms and related to recognized industry standards, the approach not only provides flexibility to the offerors in meeting the desired objectives, but fixes responsibility upon the design-builder in clearly understood objective terms. Potential For Conflict of Interest. There may exist the potential for conflict of interest between the design-builder and the client, particularly since the design professional is often not in privity with the owner. However, this can be minimized or eliminated by utilizing the practices recommended throughout the Manual of Practice, particularly: • Alternatively, the engagement of the design-builder on a negotiated basis makes the designbuilder (including the design professional) the agent of the owner, with a professional responsibility to represent the owner’s interest. • Articulation of the owner’s expectations in performance terms, and holding the design-builder comprehensively responsible for meeting them, makes the design-builder solely responsible for quality and performance of the completed product - which is a powerful incentive for quality assurance in both design and construction. • Engaging an owner’s design-build consultant to represent the owner throughout the design and construction process will provide an independent professional solely responsible to the client for 10

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general oversight, review, and approvals. • Prequalification and/or shortlisting of prospective design-builders will generally eliminate those unfamiliar with the process, unqualified by reputation or experience, and lacking in quality controls and methodology. In the ultimate analysis, the reputation and integrity of the design-builder, as in any professional relationship, is the best safeguard against conflict of interest. Structuring Appropriate Rewards. Because the design-builder generally assumes more risk and delivers greater value to the owner than a construction contractor under traditional delivery systems, professional fees tend to be higher. However, a well-managed design-build process will provide the owner far greater incremental value than the cost represented by such fees.

7.0 Summary This document is intended as an introduction to the concept of design-build and the benefits it can provide. A more thorough discussion of the details of implementing a design-build project or program can be found in DBIA companion documents entitled: • The Design-Build Process Utilizing Competitive Selection, document number 201 • The Design-Build Process Utilizing Negotiated Selection, document number 204 •

Design-Build Definitions, document number 102

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DBIA Manual of Practice Document Number 101 An Introduction to Design-Build Second Edition, November 2008 Design-Build Institute of America Washington, D.C. © Copyright 2008 by the Design-Build Institute of America. All rights reserved. Printed in the United States of America. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the DBIA. This publication should not be understood to offer legal or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Design-Build Institute of America 1100 H Street, NW, Suite 500, Washington, D.C. 20005 (202) 682-0110 First Edition, November 2008 Design-Build Institute of America Washington, D.C. Design-Build Institute of America

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