December 2002

Stan Postma, P.E.
Vice President and Manager
Carter & Burgess, Inc.
Salt Lake City, Utah

Les Miserables author Victor Hugo wrote, "An invasion of armies can be resisted, but not an idea whose time has come." This certainly applies to the idea of design-build. This method of project development was used almost exclusively by the private sector until the public sector, which normally favors design-bid-build due to its perceived emphasis on low initial project cost, started to take notice of this option's many attractive benefits. Then, in what may have been the sincerest form of flattery, it imitated the private sector and began to use design-build for its own projects.

"I think that public agencies are warming to the use of design-build because it offers them a number of advantages in the areas of time, cost and quality," says Timothy J. Mains, director, government affairs and business policy for the Design-Build Institute of America (DBIA). "It allows them to take advantage of innovative ideas in both design and construction. Also, an increasing number of public success stories are becoming more publicized. In addition, as public owners become more savvy, they are looking more at the overall costs—life cycle costs, including operation and maintenance—and are finding that design-build provides them the best value for their tax dollars. It is also easier to couple design-build with other integrated services such as financing, property acquisition, and operation and maintenance, and outsource all of these activities in a public/private partnership endeavor."

"The public sector is looking for ways to design and build more efficiently," agrees Rus Rudden, a senior project executive for Carter & Burgess' national Transportation Programs Division. Rudden is based in the firm's Oakland office and is manager of the construction phase and implementation of the $525 million design-build contract for the Bay Area Rapid Transit (BART) extension to San Francisco International Airport. "They are also looking for ways to assign coordination responsibilities—between disciplines and trades and between design and construction—that are hopefully effective as measured by saving time and money and lessening the burden on agency staff."

Despite its benefits and its recent surge in popularity, public agencies are sometimes restricted from using design-build because the decision is made by individual state legislatures. Because each state possesses different statutes and procurement laws—largely written with design-bid-build and public safety in mind and subject to varying interpretations—design-build is often allowed on a limited basis with specific demonstration projects mandated to test the process and polish the rules.

Reasons for debate
There are many reasons why so much debate surrounds whether design-build should be fully or partially allowed in each state. First, there are benefits and drawbacks to both design-build and design-bid-build. Second, there are specific issues a government agency must take into consideration when using design-build.

"Government agencies really need to give adequate attention to the life cycle costs of the facility and the qualifications of the prospective proposers to provide fully integrated services, and award on the basis of what provides the best value to their constituents," says Mains. "The lowest bid only represents the lowest initial cost and is not necessarily the 'best value.' They need to be aware of all the benefits and weaknesses of every method of project delivery and every procurement methodology available to them and pick the one that makes the most sense under the circumstances."

Additional factors might include the project's complexity, retaining competition on public projects, and determining if state and federal licensing and procurement laws need modification to better serve the public interest.

The market sector in which design-build is being used must also be taken into account. For instance, there are specific issues government agencies should weigh when using design-build for transportation projects, according to Rudden and Mary S. Nowee, an architect and specifier for Carter & Burgess in Oakland.

First, the agency's requirements within design-build procurement documents will need to be defined in order to obtain the required results while taking advantage of design-build's cost savings. It also must be determined if the project is for an entire new system or one with limited, well-defined interfaces with the existing operating system; the need for control within that system may make design-build an unsuitable candidate. Whether the owner will be able to give up control of final details and portions of the final acceptance criteria must be deliberated; if not, design-build probably isn't a good approach.

The level of community involvement required will also need to be measured; a high level during a design-build contract can introduce cost uncertainties and may make design-build less economical. The detail given in the design-build procurement documents must also be included, since more document detail means less flexibility in time and cost.

"Transportation projects have enormous coordination responsibilities, starting with coordinating utilities, civil works, specialized power requirements and sophisticated electronic systems, and ending with coordinating access to the alignment by various contractors or trades," says Nowee. "When these coordination demands are coupled with political or legislative demands and fast-track strategies to divide design and construction work into many small and medium-size packages to allow many small companies to be involved, the result has been larger coordination responsibilities—and costs—on public agencies."

Despite the numerous issues that surface when public agencies decide whether to use design-build, witnessing how the private sector has benefited through the process will prove that design-build is a sound and value-based approach that is here to stay.

Stan Postma is a vice president and manager of the Salt Lake City office of the national consulting firm of Carter & Burgess, where he also directs the office's Public Works and Transportation Programs units. Postma managed the review of the Interstate 15 design-build project in Utah for UDOT. He can be reached at 801-355-1112 or by e-mail at PostmaSS@c-b.com.

The state of design-build
Currently, 46 states permit design-build in the public sector in some form, and the majority of those states have some sort of legislation authorizing the use of design-build. This is either as part of certain pilot programs, or by specific projects or agencies. For example, Ohio has mandatory competitive bid statutes restricting or eliminating design-build, while in Wisconsin, schools and the state are the most significant public entities allowed to use design-build.

Nearly 30 states possess some form of broad design-build legislation. A partial list includes Alaska, Connecticut, Florida, Hawaii, Idaho, Illinois, New Hampshire, New Mexico, Ohio, Pennsylvania, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin. Some states with broad legislation only permit design-build for use in certain market segments, such as highways, water treatment or education while others allow facilities only, excluding public works and transportation. Several states are looking to innovative financing practices to allow design-build projects as they await legislative authority.

One of the most recent decisions concerning design-build occurred in October 2001, when the Federal Highway Administration published a Notice of Proposed Rulemaking in the Federal Register. The final rule will establish procedures for design-build contracting on projects costing more than $50 million. Smaller projects will continue to be approved under current rules.

Design-build vs. design-bid-build
Although they sound similar, design-build and design-bid-build are quite different project delivery systems. In design-build, a single entity known as the design-builder is contractually responsible for the project's design and construction. Under design-bid-build, the project's design and construction are contracted separately. Professional design services for public projects are selected on the basis of qualifications by the owner with a negotiated fee. Contracts for construction services are then obtained by competitive bidding.

Like anything else, there are both benefits and drawbacks to each process.

Design-build advantages:

• Uses a team concept that focuses on common goals and objectives
• The input of the actual builder is available during the design phase to help determine the most cost-effective design
• Takes advantage of the contractor's ingenuity, and innovation in working with architectural/engineering firms to reduce price and schedule, which, in the best-case scenario, will be reflected in the owner's final total cost for the project
• Saves time, because it is on a faster track than design-bid-build, with a faster schedule delivery
• It has a single point of responsibility and there are likely fewer contracts between the owner and others
• Reduces owner's administrative costs due to combining the solicitation process for design and construction

• Design is more precise and detailed at outset
• The engineer/architect of record works for the owner and represents the owner, not the builder
• There is more ability to determine the acceptability of the final end product—that is, not just the acceptability of the design, but also the acceptability of the final product produced by the design
• More design and construction company competition

• Requires decisions to be made earlier in the process or the owner loses control of quality and details
• Team concepts, such as commitment, communication and trust, must be implemented early in the process
• More expensive for contractor team to bid and not receive contract for this particular type of project
• Difficult for owner to evaluate non-price factors
• Changes are more expensive due to fast-tracking and cost of items that are affected by changes are not competitively bid
• More difficult to question decisions of engineer or architect of record
• Possibility of perceived favoritism in procurement decisions
• Small contractors are concerned that design-build projects will be fashioned on a larger scale which precludes their participation
• More difficulty in protecting design concepts

• Design-bid-build is more likely to be a higher overall cost and require a longer schedule
• Coordination responsibility between multiple design, construction, systems and procurement contracts is costly to the owner in terms of staffing, possible delays and possible change orders
• Increased probability of disputes
• Increased owner involvement cost