The decision by owners to offer design/build contracts instead of a design/bid/build option often comes down to a consideration of risk and value. How do they want to assign risk and do they want the least price or the greatest value? If they plan to own the project for an extended period of time, owners will be more interested in value and low maintenance costs, and more likely to consider design/build contracts.
Richard Thomas, vice president of advocacy and external affairs for the Design Build Institute of America (DBIA), Washington, D.C., says people shop for value rather than the cheapest price. We don't buy products that cost the absolute least amount, but quality products from recognized brand names that are believed to provide good service life and have value-added features. “That's what design/build is all about,” says Thomas. “It's the oldest method for doing contracting work and it wasn't until the mid-1800s that the focus began to shift to design/bid/build contracts.”
Today, the U.S. is shifting back to design/build contracting for many reasons. The government as a whole offers about 50% of its contracts as design/build work, with the army and navy currently conducting more than 75% of their contracts in this way. Only six state DOTs in the U.S. don't allow it, down from 12 DOTs a year ago.
When an owner decides to award a project based on the lowest bid, they hire an architect or design firm to develop the concept and provide working drawings for bidding purposes. Then either the owner or the architect employs engineering services for the engineering portion of the work. Owners may or may not qualify bidders to ensure their competency to perform the work.
For contractors, the design/bid/build process starts when the project's costs are determined based on the plans; the lowest priced bidder usually getting the work. When details are omitted in the plans or job conditions are incorrectly represented, a contractor is entitled to change orders, which add to the project's cost and can cause delays. So the owner doesn't know the final project cost until the job is completed.
In the case of a design/build contract, owners invite a contractor or a small group of contractors to provide the design, engineering, and price of the project based on supplied project program requirements: basic jobsite conditions, project limits, and sometimes a not-to-exceed price.
With the contractor in the driver's seat, it becomes their responsibility to hire or form joint ventures with architectural and engineering firms to develop the design concept and details. Owners may not know what the project will be like until contractors formally present their concepts. If, for instance, three contractors bid a project, three different concepts result. After an owner makes a project design selection and accepts the budget, the price and schedule are fixed. Now the contractor is entitled to change orders only if the owner adds to the project scope or unforeseen conditions excluded from the contract result. Advantages to design/build contracting include:
- Owners are able to establish a guaranteed price much sooner in the bidding process.
- Owners can make qualified selections based on a contractor's track record; as well as consider their past performance in safety, on-time completion, quality, and other important factors.
- Owners, especially public bodies, can try materials and technologies they might not consider otherwise.
- The overall project schedule, including design and construction, is shortened. With design and construction overlapping, early bidding and construction packages can be released before the design is 100% complete.
- Projects are often more creative as design/build teams compete to provide the client with the best value.
A variation on the design/build theme is referred to as “best value design/build.” Best value considers both the technical solution and price in the evaluation process. This rewards bidders who come up with innovative solutions to project challenges. Contractors have the option to include these items in their proposals. For example, in the case of the best value design/build for the I-35W bridge replacement in Minneapolis, MnDot invited bidders to resolve identified entry ramp deficiencies in the original construction. Contractors could decide to address any number of these deficiencies as part of the package.
The joint venture team of Ames Construction, Burnsville, Minn.; Fluor Enterprises, Aliso Viejo, Calif.; Wadsworth Brothers Construction, Salt Lake; and Ralph Wadsworth Construction, Salt Lake, was selected to complete a $1 billion design/build contract reconstructing 24 miles of I-15 south of Salt Lake City. Lanes will be added in both directions and 64 bridges will be constructed or reconstructed. Fourteen intersections also will be modified or reconstructed, two of which are unique designs. Dick Fahland, vice president for design/build at Ames Construction, says this best value design/build project, which is the form of contracting they prefer, included the most efficient approach to traffic maintenance during construction, the schedule with the least amount of construction time, and the most scope for their dollar. The Ames design included an innovative rotary interchange (only the fourth in the country) and a divergent diamond interchange (only the third in the country). “Best value selections definitely favor the innovative contractor,” he says. “But design/build also places significantly more risk on the contractor, as we are ultimately responsible for every aspect of the project.”
Greg Gidez served as a principle at an architectural firm for 20 years before becoming the corporate design manager for Hensel Phelps, Greeley, Colo. With experience on both sides, he understands why some architects prefer bid work and not design/build. “Many architects not familiar and experienced with design/build prefer working directly for owners rather than contractors,” says Gidez. “They can be very proud of their designs and don't want financial or schedule constraints to alter them, at least not on the first go around.”
However, when preparing design/bid documents, owners require a lot of detail work and spec writing in order to manage risk and identify the complete scope of the work. But specifications and design often are modified in shop drawings or product submittals as a reaction of the marketplace, because of scope, quality, or schedule, potentially resulting in errors. When working on a design/build project, costs and systems are determined early because designers focus their efforts on the quality and constructability of the documents. “Professional fees are better spent on program compliance, as well as design, quality, and constructability issues early on in the process, instead of redesign after bid if the project comes in over budget. Understanding the advantages and opportunities of the design/build process allows the designer to eliminate waste and to focus their efforts where they can provide the greatest value to the project.”
Gidez likes putting it all out on the table at the very beginning and thinks better designs result when all parties' expertise is considered. For example, by using flat-plate floor construction techniques on a project, engineering shear-studs into reinforcing details makes it possible to eliminate forming costly drop capitols around columns. This saves construction time and frees money for more important design considerations, such as aesthetics or program compliance.
According to Gidez, Hensel Phelps currently bids 75% of its work as design/build or design/assist. In either project delivery method, collaboration and integration of the design process with the construction team improves the outcome. Many federal, state, and local entities have recognized the benefits of an integrated and collaborative design/build process that provides best value.
With yearly sales at $4 billion, Clark Construction, Costa Mesa, Calif., is one of the largest U.S. contractors. Senior vice president Barbara Wagner says the company has been doing design/build projects since the mid-80s. Today approximately half their work is design/build and best value design/build. But Wagner notes some owners are taking advantage of the current depressed market by going back to lowest-bid contracting. Wagner cautions that shifting risk to contractors shouldn't be the primary reason owners commit to design/build work; more creative design, speedier construction, and other rewards should remain the focus.
Clark construction doesn't use the same design and engineering team on every project. When they are awarded a contract, they team with companies who have expertise in the type of construction required. “Sometimes owners are involved in the decision about who will be involved, but sometimes they don't care,” says Wagner. “Occasionally owners assign us architects, a practice we really don't care for. We also get contracts from owners who give us no documentation, telling us what they want and leaving us to work it all out on our own.” She adds that whenever possible, they colocate the teams so everyone shares an office and works directly with the design staff, which provides them with real-time cost information during the design process.
Becoming a team
One reason for design/build's popularity is because of its proven success in delivering projects quicker, on budget, and without compromising quality. With the emphasis on collaboration and integration, the teamwork process encourages everyone to be on the same page when the interests of the project are at stake.
In lowest bid work, contractors know designers and engineers are hired by owners to represent their interests, so they are on the other side when issues arise. In this case, there are two competing forces: the contractor is motivated to provide the least cost and the owner to maximize the scope. As problems arise, owners, architects, and engineers often maneuver to shift financial risk for problems onto the contractor. With owners in control of the money, contractors can find themselves in a hard place.
However, when all parties collectively work as a team to satisfy the project's needs, less conflict and litigation result—another reason owners choose design/build. Contractors performing design/build work often carry the primary relationship with owners and assume the risk for a project. They encourage architects and engineers to become team members. Because of these considerations, design/build gradually is becoming more popular as a contracting option.
The Design Build Institute of America (DBIA)
The DBIA is a leading industry organization with 4000 members consisting of contractors, architects, engineers, manufacturers, lawyers, students and faculties, and owners. The organization offers a number of services that promote the use of design/build.
- Advocate for design/build contracting and integration of the design and construction processes
- Offer training and certification courses taught by industry practitioners
- Lobby government bodies to permit the use of design/build project delivery on capital projects
- Work to increase the number of design/build projects
- Publish resources and best-practice guidelines
To learn more about the DBIA, visit www.dbia.org.