Design Build (DB)
In this article I will talk about the Design Build (DB) project delivery system. You see DB projects in various locations, some examples being highway projects and pre-engineered buildings. DB is typically used for non-complex projects, i.e. projects that are not multi-discipline. With this type of project delivery system, the Owner sets up a contract with a single entity (designer and contractor in one) to provide the design and construction of the project. Governments use DB extensively, with industry not so much as most projects are multi-discipline. Within an EPC contract we may hire a DB contractor to do portions of the project, like a site roads or pre-engineered buildings.
Bait & Switch
The majority of time a DB contract will result from a competitive bid process. If schedule does not allow for bidding, then the Owner could negotiate a contract. Also if it is propriety technology a DB contract could be negotiated. Before going out for bid, the Owner needs to develop selection criteria to be used to select the design-builder from the competitive bids. On one of our projects, government permitting was extremely important and vendor selection was based on the vendor who had the most experience in getting the permits we required. Other examples of selection criteria are company experience with this type of project, staff for the project and their experience, ability to get bonding and the amount of bonding money they can acquire. With proposed staff you have to be aware of the old bait & switch, where experienced senior people are proposed and after award you get junior inexperienced people.
A Single Entity
The delegation of responsibility and risk to a single entity works out very well for the Owners as it cuts down on the Owners personnel required to manage the project. However, if the contracts are not set up properly, specifications not clear, responsibilities not clearly defined, then there could be problems with the DB contract. As with all contracts there is the possibility of events not working out as planned and if parties are inexperienced with DB the chances of something going bad increase. These bad experiences will affect the Owners opinion of DB and whether he would use it again.
Most Owners are set up for Design-Bid-Build (DBB) and to go to DB will require them to restructure their procedures. With DBB, the Owner has to manage several contractors on the day to day activities of design, then the bid process, then the construction process. They typically have to settle disputes between designer and contractor. With DB the Owner develops the specifications then manages the single contractor on the overall schedule. There is only one contractor to communicate with. However, input to the design is limited which can be difficult for Owners to handle. Not all projects are suitable for DB so each project has to be looked at and a decision made if to proceed with DB. The Owner has to have the procedures in place, team members available for the upfront evaluations, and project responsibilities clearly defined. Doing this, allows all involved to have a pleasant DB experience.
Hereare 2 examples of DB from an Owners perspective. The first is a pre-engineered building we purchased for a new facility. It was just one part of the whole project. With this, we specified the building size, required openings, wall panels, design conditions, building / roof loads, building use, and other design information, then left it up to the DB contractor to come up with the required building. The DB contractor provided the foundation loads and anchor bolt pattern to us and we had a contractor build the foundation. The DB contractor then came in, erected the building, and finished the ir contract. To us this was a DB contract since we had to construct the foundations and complete the interior of the building using other contractors. To the DB Contractor he might have considered this an EPC contract since he had to engineer, procure and construct the building.
The 2nd example is a electrical substation we constructed. Here we specified the High Voltage, Medium Voltage, and Low Voltage power requirements, preferred equipment, special design considerations, and schedule. The DB vendor provided the final design of the equipment and building. The substation consisted of four modules which were assembled in a plant, all electrical equipment installed and tested ready for operation. The modules were unplugged at the connection points, shipped to site, reassembled on site, and plugged back together. The vendor provided the foundation loads and anchor points while we built the foundation and hooked up the substation to the existing cables. In this case, this was a long lead item on a fast track project and the typical DBB would not have worked. Again from our perspective, this was a DB contract and was part of a much larger complex construction effort. The substations were installed by us on foundations built by us, and final hook up was by us. To the DB Vendor he may have considered the project as EPC as he supplied us with an operating substation.
Since the contractor plays a major role in the design and construction, the costs can be defined and controlled. He can design to suit the field allowing him to address the field issues in the design office which is more cost efficient. By being innovative the contractor can improve his profit on the project. As he controls the schedule as well, he can fast track the project as required to save money or improve schedule. As the contractor is managing the design and construction they are now responsible for any errors and omissions. The design builder makes many decisions that the Owner would make under DBB due to the authority passed him. He does not need to ask the Owner for permission. The Owner delegates the responsibility to the contractor.
Can I Make Just One Little Change?
DB is a complex delivery approach that requires Owner to be knowledgeable & very involved. These are difficult for the Owner to manage as there is the temptation to jump in and give orders, which can not be done. The Owner and his team has to be prepared for this type of contract and realize their limitations. That being said their teams have to be involved as the designer may not have the necessary process knowledge and will have to depend on the Owner for direction. Owners do not like risk and if they can pass it on to others all the better. With DB they can pass more of the project risk to the contractor. The Owner pays for it but they are happy to pass the risk on.
Some DB Considerations
- Once the contract is signed, changes are difficult to do as they will cost the Owner money. As the contractor is involved in the design, changes can be made in the office rather than the field. Overall, the Owner will save money. With DBB, the Owner can make changes up to the time of award to the contractor.
- Procurement becomes complex. The Owner will require a DB contract written. As well the Owners usually have agreements with vendors which can become a problem for the Contractor. The Owner may decide to purchase the engineered equipment only, but then they are in the middle of a DB contract. It can get messy.
- Nowadays, depending on the size and type of project, the Owners usually pay the unsuccessful bidders a small stipend. It can cost the contractors a lot of money to prepare a bid and if they didn’t receive something, they would not provide a bid. If the Owner wants a quality bid, then they will have to pay the stipend.
- Allprojects have to be looked at to see if they are suitable for DB or if portions of it are and others not. Within an EPC contract you can be issuing a DB contract.
- There is flexibility in the contractor selection and which projects are suitable for DB.
- Thereis the single point of responsibility which the Owners like.
- The team concept is improved as the designer and constructor are the same company with the same common outcome.
- It provides for a faster project delivery as construction can start before the design is complete, the designer can use sketches instead of design drawings as the contractor knows what is to be done. Portions of the the design and construction can be fast tracked as required.
- There is a loss of checks and balances as there is little Owner input. Depending on the project, the Owner could set inspection points in the contract allowing the Owner to keep track of the schedule.
- Difficult for the Owner to manage as he does not have input and has reduced staff. Any input is liable to be a change notice. The Owner has to monitor the project progress which can be difficult to do.
- The Owner has to trust the Contractor. This is hard to demonstrate. Just saying it doesn’t make it so. He needs to use contractors he has used before. However this can be hard to do.
DB is best suited for new and renovation projects that are schedule sensitive and are very clearly defined. Not for complex projects. Transportation projects are DB as well as industrial items that are out of the engineers design capabilities, like a pre-engineered building.
Fundamentals of Project Management
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Fear has many names…...
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Kill the fear
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