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A New Solution For Public Construction Projects: Sequential Designer-Led Design-Build - Part One.

Article Excerpt
Article by Mark C. Friedlander* and Ruth Krugly**

Regardless of complexity, most public construction projects share a few basic goals:

High quality design and construction by companies that stand behind their work.

Delivery of the project within the approved budget.

Minimizing project duration and avoiding delays.

Avoiding construction disputes and claims for additional compensation.

Public sector construction projects typically face more difficult problems and obstacles than private sector projects. The formality of the budgeting process renders cost overruns unusually troublesome, and the realities of public administration of the projects often result in delays and claims. The requirement of most public procurement laws that the construction contract be awarded to the lowest responsible bidder often leads to an adversarial claims process that is not only costly but also damages public perception of the project and the internal harmony among the participants.

The traditional construction process has not worked well for public projects. It consists of hiring an architect or engineer (A/E), waiting for the A/E to produce a full set of construction documents which are then distributed for competitive bidding, and then hiring the contractor with the cheapest bid to build the project. The primary advantage of this delivery structure is that it is old and familiar, so everyone knows what to expect. However, as most public entities have discovered to their detriment, this method has numerous and serious drawbacks:

It maximizes project duration since bidding cannot begin until after construction documents are complete, and construction cannot begin until the bidding phase is complete and the construction contract awarded.

The cost of the project is unknown until after bids have been received on the completed construction documents.

It is difficult to establish a budget early in the design process with any degree of certainty.

The bidding process is cumbersome and prone to challenge.

Problems or omissions in the construction documents lead to contractor claims for extra compensation.

The project is difficult to administer because of adversity between the A/E and contractor.

The contractor's primary interest is to make money, not to ensure a high quality project.

Many contractors "lowball" their bids, generating claims and change order requests to make up the difference.

If there is a problem in the completed construction, the A/E and contractor often deny responsibility, blaming the other.

With such a long list of drawbacks to the traditional construction process, it is not surprising that municipalities and other public entities have experimented with and/or adopted other more innovative project delivery methods to try to better meet their goals. Some of these methods have worked to a greater or lesser extent, but none has been wholly satisfactory. Below are brief summaries of some of the more common methods used.

Fast Tracking. Where shortening project delivery times is of paramount concern, some public owners begin the competitive bidding process with preliminary drawings and award a construction contract prior to completion and final detailing of the construction documents. Although the ability to begin procurement and early construction activities before final completion of the drawings does save significant time, it plays havoc with cost control. Contractors use the late provision of design details as reasons to seek costly change orders and time extensions, and adversity between the contractor and A/E may lead to frequent and expensive claims and litigation.

Agency Construction Management. In this project delivery method, a contractor-type entity provides various types of pre-construction services and then supervises and coordinates the construction, but with no risk or liability for construction price, schedule or quality. Experience has shown this method to be marginally better at early price determination than traditional construction, but there have been many instances in which the estimate provided by the construction manager, who would not suffer any consequences from underestimating, proved to be unrealistically low when trade contractor bids were ultimately obtained and compiled. Rather than being reduced or eliminated, the A/E's adversity to the contractor was merely transferred downstream to the multiple prime trade contractors. Moreover, the owner became the target of claims by trade contractors for lack of coordination, items omitted in the buy-out, etc.

At-Risk Construction Management. In this structure, the construction manager becomes contractually responsible for the project costs and schedule, somewhat like ordinary general contracting where the contractor provides pre-construction services. At-risk construction managers are less willing to commit to early price determination because they are responsible for cost overruns and do not have control over how the construction documents are detailed and completed. As in traditional construction, the construction manager has adverse interests to those of the A/E and often asserts claims for additional time and/or compensation on account of real or fictitious errors or omissions in the construction documents.

Each of the above project delivery methods (and other less common methods as well) has strongly opinionated supporters and detractors. But most public officials experienced in construction know that none of these methods meets all of the above-listed goals or solves most of the problems with traditional construction. This has lead to a surge in popularity of design-build methods of project delivery which, while as old as the pyramids (literally), have enjoyed a meteoric growth in popularity in both the private and public sectors in this country.

Design-Build: An Improvement But No Panacea

In design-build, the A/E and contractor are hired as a team. Instead of the owner having one contract for design and a different contract with a different party for construction, the owner enters into a single contract (or series of contracts) with a single entity who agrees both to design and to construct the project. The design-builder may be a single entity with both design and construction capabilities; it may be some kind of joint business venture that consists of an A/E and a contractor; or the contract may be just with one member of the team, who then enters into a subcontract with the other.

Historically, the design-build team has been controlled and dominated by the contractor. In the majority of design-build projects, the owner enters into a design-build contract with the contractor, who then subcontracts the professional design services to the A/E. Even in joint business ventures, the contractor tends to control the entity by virtue of being the recipient of approximately 90% of the project revenue. Traditionally, contractors are more likely to be risk-takers than A/Es, and they naturally tend to assume the prime position with the owner, responsible for guaranteeing price and schedule.

Design-build offers some significant advantages over traditional construction and avoids many of the problems that typically plague public construction projects. It allows construction to be fast-tracked without loss of cost control since the contractor cannot logically claim that it did not know how its own A/E teammate would complete the...