By: Bruce Allender
There are a number of design-build formats to choose from —prescriptive, performance, and progressive (see table on page 48) — but owners who believe they can lower cost or otherwise improve the outcome by participating directly in design decisions while leveraging design-build's schedule and collaboration advantages often choose progressive design-build.
The “progressive” method works well when a project is complex or lacks definition. It provides flexibility that allows the owner and the design-build contractor to design and construct a project to budget. It also gives the owner a single point of contact, along with overall cost, schedule, performance, and process guarantees.
In progressive design-build, the design-build contractor is selected primarily based on qualifications. This translates into a lower procurement cost to the owner, when selecting the design-build contractor, than the other more traditional design-build procurement methods.
Instead of preparing documentation associated with requests for qualifications and requests for proposals for prescriptive- and performance-based procurement, the progressive design-build team completes the design to between 30% and 60% in collaboration with the owner and then submits a lump sum or guaranteed maximum price for the total project to the owner for approval. If the two parties can't agree on terms, including price, the owner can either use the partially completed design as the basis for completing the design and proceed with design-bid-build procurement or negotiate with another design-build team.
Because the proposal preparation cost is comparatively low, progressive procurement elicits more interest from the contracting community in competing for the project at the procurement stage of the project.
Finally, unlike other design-build contracts, owners have the option to have input in the selection of local subcontractors through a “best value” bidding process with the design-build team, rather than being restricted to considering only lowest cost. Examples of value-based criteria are team and individual personnel qualifications, safety record, and innovative solutions.TWO RECENT EXAMPLES
When faced with constructing its 30-mgd Nelson-Flanders Water Treatment Plant, the City of Longmont, Colo., wanted to:Be an integral part of the project delivery team; maintain responsibility for integration of the control system.Collaborate with the final design team and the contractor throughout the project so that all three entities could operate with common goals.Have the best possible financial position, with the maximum value delivered per dollar of budget while retaining control over the final product. This required that the design-build team allow the city to dictate elements of special importance to the city.
Black & Veatch and joint-venture partner Western Summit Constructors provided design and construction services in a two-phased, design-build open-book approach.
The first phase included design development to establish scope and schedule under a guaranteed maximum price of $43 million. Preliminary design and pricing were completed on a fast-track basis, which allowed for determination of a guaranteed maximum price within five months of notice to proceed. The guaranteed maximum price came in under budget.
In the second phase, the design-build team provided full design, procured engineered equipment, and provided onsite construction engineering, construction management, start-up, and performance testing. The plant was completed three months ahead of schedule and $2.8 million under the guaranteed maximum price.
“The relationships established for this project resulted in significant cost savings,” says Larry Wyeno, engineering administrator with Longmont's Public Works and Natural Resources Department.
In California, the San Bernardino Valley Municipal Water District used progressive design-build delivery to design and build a pump station in less than nine months.
The in-line, 108-cubic-foot facility is located adjacent to an existing 78-inch-diameter pipeline. It was designed to increase the hydraulic grade line in the pipeline to ensure continued delivery of water to an existing downstream pump station while also allowing deliveries to be made at high flow rates without pumping to a 144-inch-diameter feeder pipeline owned by another agency, the Metropolitan Water District of Southern California.
“This was our first design-build undertaking, within an extremely challenging timeline,” says Sam Fuller, chief engineer for Valley District. The project was implemented on a fast track. The basis-of-design report was developed collaboratively among the two agencies and design-build contractor Black & Veatch, with input continuously solicited from the owners during design development. This enabled them to order pumps before a gross maximum price was developed, and optimize the design for the specific pumps.
Black & Veatch provided engineering, procurement, construction, and commissioning services under a cost-based guaranteed maximum price of $9 million.RISK ALLOCATION
Owners need to understand the risks their advisors may recommend the design-build contractor take for a project. Fair allocation of risks is critical for any design-build contract, and risks should be allocated to the parties in the best position to manage them (see table at right). Risk management should include consideration of:Loss prevention — the measures taken to prevent adverse occurrencesLoss control — measures taken to minimize riskTransfer of risk to another party, typically in the form of insuranceManagement or absorption of risk, where transfer is neither cost-effective nor possible.
When owners push all risk and liability to the design-builder, the result is a more costly contract or, in some cases, lack of interest from design-build contractors.
Most contractors will work with the owner to establish fair risk allocation. Owners can also use standard contracts from the Engineers Joint Contract Documents Committee or the Design-Build Institute of America as templates for terms and to lower legal advisory costs.
In 2008, the Water Design-Build Council published The Municipal Water and Wastewater Design-Build Handbook, which provides more detailed information about design-build methods. For a copy, visit www.waterdesignbuild.org.
— Allender (email@example.com) is director of business development for alternative delivery in North America for Black & Veatch's water business and president of the Water Design-Build Council.