Using Design-Build Contracts
Design-build contracts are an excellent contracting method widely used around the world. As the name implies, this type of contract is used when both design and construction take place simultaneously throughout the length of the contract. However, many owners tend to select other contracting methods instead because a design-build contract can present some challenges and situations in which the final cost cannot be easily determined or projected.
When Are Design-Build Contracts Used
Primarily, design-build is used when an opportunity exists for the owner or agency to save time by having construction begin before the final design has been completed. The traditional system of design-bid-build has been used for many years. It is based on the assumption that the owner has the design plans in hand before bidding out the construction on a project to the lowest bidder. Many projects could be more cost-effective if they could be implemented faster, thus the evolution of design-build.
Design-build contracts are usually written by the contractor who is in charge of the design and is also responsible for building the project. Typically the owner prepares a request for qualification where sources are analyzed under fair competition based on certain criteria and weighed factors. A design-build contract is usually the preferred contracting method under a tight schedule as it's intended to save time. This contracting method is also preferred by federal agencies with a need to fast track schedules as the final project can be obtained faster, and the return on investment is capitalized sooner.
Using a design-build contract, designers and builders work hand-in-hand to produce construction drawings and analyze a logical construction sequence. The design process is scheduled in phases, just as the builder is ready to start that particular phase.
Design-build contracting offers the following benefits:
- Reduces design time.
- Simplifies construction drawings.
- Value engineering alternatives are always up for discussion and analysis
- Reduces construction calendar.
- Minimizes communication channels with a single point of contact.
- Minimal change orders.
- Fast track schedule.
- Customized to actual site conditions easily.
- Identify long lead items earlier.
- Allows for the project to be repeated.
Design-build contracts can also produce some downsides to consider:
- The project outcome might not produce the expected result.
- A project that is not scheduled properly might be substantially delayed.
- The contract doesn't impact labor costs.
- Final costs can be reasonably higher than original estimates.
- Eliminates the possibility of using an integrated design.
- The counterweight between a contractor and the design team might be reduced, and some conflicts might appear.
- The architect’s vision could appear to favor the contractor.
- If the project’s inspector and the team are not experienced, problems could become frequent and costly repairs will be needed.
Variations to the Design-Build Concept
- Bridging: The owner develops a preliminary project design at a level of 30-50 percent.
- Turnkey: The owner requires outside expertise and then allows the entity to turn over the keys at project completion.
- Design-Build-Warranty (D-B-W): Combines a warranty provision with design-build.
- Design-Build-Maintain (D-B-M): Combines maintenance provisions with design-build.
- Privatization: A private entity designs, builds and maintains a section of roadway in turn for a toll or fee.
Issues relating to insurance and bonding affect the relationship between the design-build parties. Design professionals’ errors and omissions insurance usually exclude construction services, and contractors’ general liability policies exclude professional services. Certain states have anti-indemnity laws for construction projects that limit the parties’ contractual ability to redress this disparate impact. One solution is appropriate to cross agreements with the design professional and the contractor, supported by the design professional’s errors and omissions insurance.