September 1, 2000 7:00 AM CDT

The Design/Build Debate

The use of design/build has enjoyed a steady and rapid ascent

By Steve Saucerman

In his autobiography, Mark Twain said that, "there are three kinds of lies: lies, damned lies, - and statistics," so it's with some hesitation that I begin this piece with a stat, but the numbers regarding design/build are certainly worth noting.

You see, according to the Design Build Institute of America - and also in a recent US News & World Report feature - the use of design/build (DB) as a construction project delivery vehicle has enjoyed a steady and rapid ascent (as a percentage of total construction projects) in recent years ... and is still climbing.

In fact, both sources estimate that DB now makes up roughly 30% of commercial construction contracts and will likely rise higher in the future - predicting a 50% market share by the year 2005.

Design/build is a contractual relationship for construction where a lone general contractor (GC) works directly with the owner from the very beginning of the project and notably in the planning and design phases; a critical time. The GC is often accompanied by an architect/designer who is hired by the GC (or by the owner/GC together). Working together as a team, the partnership defines a budget for the project early on. After that, all parties are obliged to do whatever they can to deliver the project for that original budget.

The design phase still includes the same creation of plans & specifications, budget estimates, mechanical/electrical/structural/civil engineering, zoning/code adaptations, projected schedules, and the other conventional design items that normally go into an architectural package. The big difference with DB is that now the GC (or a subcontractor acting as a prime) is on board - comfortable and agreeable with the costs from the very beginning. Also, the owner tends to feel more comfort knowing that the cost element is out in the open, under control, and that the GC is indeed "on his side."

Design/build's main adversary is the conventional competitive-bid scenario, where a number (sometimes very many) of contractors choose to submit blind competitive cost proposals on a construction project. These proposals are required to be delivered to a predetermined location (often the owner or architect office) before a set date and time (the bid deadline). The bidders may either have been selected by the owner/architect team, or the bid may simply be open to anyone who thinks they have a chance of succeeding.

The combatants work up their numbers based on a package of plans and specifications created by an architect - who has been hired by the owner. The contractor is generally not involved in the creation of the bid documents. A project budget is established early on (most often by the architect), but - without the assistance of an experienced GC (who has far more experience costing projects) - these budget numbers often end up being erroneous. Indeed, in my years as an estimator, it has not been at all uncommon for competitive bid situations to generate results that are 10, 20, 50, and (yes) even 100% over the architect's budget.

I recently quoted a competitive bid project (a public works building), where I ended up being the low bid out of the five bidders. I was $2,300 under the second place finisher and the entire pack of five were all within $50,000 of one another. My number: $1,236,000. The architect's budget (and the number that he told the poor owner): $550,000 (can you say, "oooppss!!"). This folly, of course, led to all bids being thrown out (wasting everyone's time) and caused the documents to go back and be (monumentally) redesigned. Three months later, a much-downsized project again came out for bid, under another architect's name, and this time, the bids only came in $250,000 over budget (I wasn't low this time). The project again went back for adjustment, came out about 2 months later, but I didn't bid; I simply couldn't waste further time.

So if D/B is so great, why are the majority of the construction awards still the result of the competitive-bid process? Well, the answer involves varying elements that range from the desire of the architect to control the construction process to the all-too-human condition of old habits dying hard. It also likely includes the fact that many people still unfortunately judge a "great deal" by low-cost alone. But is it false value? I would submit to you that it is, but like so many other things in life, to make an informed, intelligent decision on whether or not to go with DB, you have to sit down and weigh the good against the bad. So, let's take a look at some of the pros and cons of design/build:

• DB fosters a team atmosphere, eliminating the adversarial relationships inherently spawned by competitive-bid scenarios. DB allows for less of a "me versus them" attitude. The owner, architect, and builder make a commitment early on to work together to find solutions ... as partners.



• Communication problems are reduced as a result of the DB forum being more conducive to open, substantive debate and brainstorming - unlike the old "arms-length" competitive-bid process. With greater communication - conflict is reduced.



• With all the players involved from the beginning, errors and conflicts in architectural and engineering design are minimized, eliminating costly delays required for correction and alteration of documents. Also, specifications are more custom-tailored to the project and include less "boiler plate" entries.



• Change orders are minimized greatly, and if changes do arise (that require additional cost), DB offers a far more agreeable atmosphere for negotiation than competitive-bid.
  
  
• DB helps to eliminate purposely inaccurate contractor and supplier proposals or (as it's known on the streets) "lowballing." This is where a firm bids purposely and artificially low at bid time in order to win the job, all the while confident that he can make up his lost difference in change orders by exploiting ambiguous or erroneous direction and/or details in the bid documents (which are almost always present).



• The GC's attitude is better. He's more willing to offer voluntarily cost-saving advice - which unfortunately is not the case with competitive-bid. I can relate from experience that there is very real (and understandable) ambivalence toward the competitive-bid process and it's intrinsic "hit-or-miss" nature. GC's simply don't get as excited about their prospects and therefore aren't as willing to offer assistance - such as cost-saving ideas. After all, why would we, when another contractor may well end up with the job - only to run out to exploit our own ideas? n A big "pro" for the owner is that he now enjoys a single-source of warranty responsibility. It no longer matters whether it's a design error or construction error - the owner can simply pick up the phone, call the GC, and say, "fix it!"



• Overall project schedule (encompassing the planning, design, contract negotiation, construction, and project close-out phases) is now abbreviated. This is also sometimes called fast-tracking (getting a running start). DB also allows for the submittal and shop-drawing process to commence earlier than normal, giving the team the critical ability to release special-order and long lead-time items (a killer in conventional schedules) before ground is actually broken.



• There is more contract flexibility. In real life, unfortunately sometimes things just "don't work out." DB contracts can be structured to give all the players certain "outs" should the project begin to go sour. Contract wording can be included that allows for a civil and organized parting of the ways - often with a caveat for payments being made up to that completed point. This is likely a rare situation (I've actually never seen it happen), but it's nice to know the option is available.



• The owner can avoid the dreaded double-markup. It's common in competitive-bid situations for a sub or supplier proposal (already marked-up by that company) to be rendered to the GC during bid time, only to be automatically marked-up again when added to the GC's spreadsheet. With DB, the sub & supplier quotes are generally shared openly with the owner - and may or may not (depending on the owner's arrangement with the GC - often a flat fee) be marked up again. Again, at least the owner has the option.



• One side-benefit from using standardized products and methods realized through value-engineering is the elevated quality of craftsmanship out on the job. Now stay with me on this one. It goes like this: now that the GC's crew and subcontractors are installing products with which they are more familiar, fewer mistakes are made in the field. With fewer mistakes comes less correction, fewer schedule interruptions, and decreased warranty problems (due to faulty installation) once the project is complete.



• The building process is more fun! Yeah, I know we're all not in this for the giggles, but when given the option, wouldn't you rather conduct the building process in the less stressful, less apprehensive atmosphere of DB as opposed to the more adversarial and mercenary surroundings of competitive-bid? Put another way: wouldn't you rather be working with someone you like than someone you don't?

• The owner loses the benefit of collecting 3, 4, or 5 (or whatever number) general construction bids for his project and no longer enjoys the historically comfortable "checks and balances" system inherent in competitive-bid. Entrenched in a doctrine of total trust in his teammates (particularly the GC), the owner does potentially leave himself open to abuse, through puffed-up pricing, substandard construction, or just a general skirting of a thorough construction process. This is, of course, a particular peril when the owner lacks adequate construction knowledge and/or unluckily finds himself in the hands of a less-than-reputable contractor (and, unfortunately, there are one or two out there).



• This next one is a hybrid of the "con" above - but not so scheming. Being no longer employed directly by the owner, the architect tends to fade into the background - allowing the GC greater latitude to run the show. Therein lies the risk to the owner. With the architect not omnipresently and doggedly monitoring the owner's interest throughout the project, the owner could conceivably end up with less of a project than he'd intended - through lapses in detail, specification, installation procedure, and overall quality. What's worse is that this degradation can be quite subtle and hidden - more the product of lack of attention to detail than premeditated deceit.



• Then there's the "what happens if the owner fires the GC" question. Is the architect (who remember is employed by the GC now) fired too?



• This next one is not so much a "con" as it is a habit to be broken. You see, with DB, the owner now has to learn to trust. Now, this isn't necessarily a bad thing, but it can be understandably difficult to do in the sometimes nefarious world of construction.



• Many architects aren't enthralled with design/build. Why? Because, as we spoke of earlier, the architect relinquishes control; control over the construction process... and they don't like this. The architect is no longer the first in line, enjoying free reign to create an unencumbered "take-it-or-leave-it" construction package only to coldly thrust it onto a competitive market to live or die come bid time. Their attitude often appears to be, "over-budget - who cares? I'll just draw it again ... and charge the owner for my additional time." Only in America.



• Depending on the type of project and where you live, there may possibly be laws that require your job to employ an independent designer, an open competitive bid process, or a GC who is properly licensed to perform DB (if the architectural/engineering is performed in-house). Courts have found in the past some DB contracts to be illegal and/or unenforceable, particularly if the contractor is not a licensed design professional, so be sure you understand your responsibilities and requirements.



• The owner may conceivably lose strategic legal and insurance advice now that the architect is employed by the GC. There are a variety of preprinted contracts and supplements that are available to owners for design/build projects (published through different professional construction associations and organizations), but there is still a need for interpretation according to your own state laws, insurance & legal requirements, and the practical applications for your particular project. And there are other considerations, such as insurance for architectural and engineering errors (that the GC probably doesn't have) and whether bonding protection should still be applied. These are holes that would need to be filled.

So, as you can see, there is more to the design/build decision than first meets the eye. It does seem likely however, that regardless the road you take, there is going to be some investigation and consternation that will surely arise. If you?d like more information on design/build, you can find it as close as your library and the INTERNET, or if you wish, you can contact the Design-Build Institute of America (DBIA) at:

The Design Build Institute of America
1010 Massachusetts Ave., N.W.,
Suite 350 Washington, D.C. 20001
Ph. 202-682-0110

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About the Author

With over 25 years in construction, primarily as an estimator and project manager, Steve Saucerman now writes, speaks and consults for the construction industry. He also teaches part-time in the Building Construction Technology division for Rock Valley College in Rockford, Ill. He has published two books and over 350 articles to date and his writing is featured in construction periodicals all over the world.

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