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Design-Build: Does It Guarantee Project Success?
By Michael C. Loulakis, Esq.


The rapid increase in the use of design-build around the country is a testament to the benefits of this project delivery system. Single point responsibility for design and construction gives the owner an opportunity to receive early commitments for total project cost and speedier project delivery - while at the same time lowering the potential for disputes and change orders. It also makes design-build the system of choice when the success of the project is dependent upon output, throughput and other performance guarantees.

But is design-build the best choice for every project? The most frequently published case studies discuss success stories - projects where the parties understood what design-build does and does not deliver. This has lulled some owners into thinking that design-build is a cure-all for anything that can go wrong on a project. The reality is that owners who misuse the design-build process, or don't understand the limitations of it, are likely to be seriously disappointed.

When you understand the issues that can create problems in a design-build relationship, you can better determine if this is the best system for your project. Whether you are an owner or someone who provides services to owners, make sure that the key factors driving the project can be best accomplished through design-build and the procurement and contracting methodology for the project. You should also remember that project success will not be determined solely by what project delivery system you use, but by how the overall project is managed and administered. Consider these thoughts.

Project Drivers

The design and construction of each project are controlled by a combination of unique factors and drivers. Some of these drivers are project specific - such as those affecting price, schedule and quality. Others are dictated by the personality of the owner and how it wants to manage the project. Project delivery systems are intended to establish a framework to help the owner achieve these drivers, with some systems being better than others at meeting specific drivers.

Consider, for example, an owner who wants to use design-build to accomplish three goals: (1) get a value-engineered design; (2) eliminate any claims; and (3) obtain the lowest price possible. All of these goals are well suited to the design-build process. Add to the equation the owner's expectation that it will control the design - by using detailed, restrictive specifications developed by its A/E before the design-builder became involved. Can design-build be used in this scenario? Certainly. Will the owner's objectives be met? Hardly.

The owner's need for control seriously jeopardizes each of the project drivers. An owner stifles the ingenuity and creativity of the design-builder's team when it requires the team to use its design ideas. As a result, the ability of a design-builder to achieve meaningful value engineering or cost savings is seriously impeded. Finally, the owner will likely be held responsible for any faulty design elements, eliminating the single point of responsibility benefit of design-build.

May other examples show how misaligned project drivers can result in an unsuccessful design-build project. A number involve owners who select design-build for early project completion, yet insist on actions that delay the process (such as starting construction after all design is completed). In short, if you are an owner who (a) distrusts your service providers, (b) cannot make decisions to keep pace with tight schedules, and (c) micro-manages by committee, you should choose another delivery system.

Relationship of Procurement & Contracting Methodology

The design-build process merely establishes the roles and relationships among the key members of the project team. Owners sometimes forget that in order for specific project goals to be achieved, the delivery system must be compatible with the owner's contracting methodology (e.g., lump sum, cost plus with GMP) and procurement process (e.g., direct selection, competitive best value). If any of these three elements are out of alignment, the owner's expectations are not likely to be met.

If speedy project delivery is the major driver for selecting design-build, the owner should seriously consider using a procurement strategy based on qualifications and competitive negotiations - with price competition, if any, limited to fee and general conditions expenses. Owners interested in selecting the design-builder on the basis of a fixed low price usually spend significant time in the procurement process, eroding much of the timesavings obtained in the merging of design and construction.

Matching an owner's high quality expectations with its procurement and contracting preferences can also be problematic. When a design-builder is selected primarily on price, it may have little incentive to spend its money or time to consider life cycle costing issues or to give the owner quality that exceeds what is being specified. If quality is a significant driver, qualifications of the design-build team should be part of the selection process, as well as proposed life cycle costing approaches. Likewise, if the owner wants more control over what is being designed - which is particularly important in projects with rigorous architectural standards (such as courthouses and luxury hotels) - it should consider selecting the design-builder on qualifications, with a GMP set after the design has evolved and the owner feels comfortable with what it is ultimately buying.

Attributes of Successful Projects

Project success is not determined solely by the choice of delivery systems. Professor Victor Sanvido recently conducted a study on project delivery for the Construction Industry Institute. This study showed that the best performing projects have the following attributes:

Likewise, the worst performing projects were characterized by:

It is clear that if a design-build project has all of these "worst-performing" features, it will probably be troubled.

What Should You Do?

If you are thinking about using design-build, what should you do? A successful project owner will begin by carefully considering whether its unique personality and goals can be addressed through design-build. You may do this analytically - by using a selection matrix process to compare the attributes of available delivery systems to the project drivers and your personality. If design-build scores well, then choose a procurement and contracting plan that takes advantage of this system's strengths. Think through what you realistically need to review, approve and control in the design and construction. If your needs are too severe and restricting to the design-build team, they may impact your long-term project goals.

Above all, don't delude yourself into believing that simply by calling your project "design-build" you have a fail-safe mechanism for meeting all your needs. You must carry the principles of design-build forward into your procurement, contracting and management of the project.

Michael C. Loulakis is a nationally respected authority on design-build and an attorney in the firm of Wickwire Gavin, P.C. He advises owners, contractors, design professionals, and sureties on construction law issues. He may be contacted at Wickwire Gavin, P.C., 8100 Boone Blvd., Vienna, VA 22181; Phone (703) 790-8750 or by e-mail at mloulakis@wickwire.com.

Mr. Loulakis has also recently developed a highly acclaimed project delivery tutorial entitled "Construction Project Delivery Systems: Evaluating the Owner's Alternatives." It can be ordered through the Design-Build Institute of America Phone (202) 682-0110.

Article copyright 1999, Wickwire, Gavin, P.C. Originally published in the firm's Summer 1999 issue of "Legal Foundations" newsletter. Reprinted by RA&MCO Insurance Services with permission.

The information in this and all other RISK Administration and Management Company articles is intended for information purposes only and does not constitute legal advice. For legal advice and assistance, please contact competent counsel in the jurisdiction of your professional practice.

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