Fewer Contracts and More Coordination Point to Design-Build Becoming Even More Popular

When contractors and owners elect a certain project delivery method for their project, it can affect all aspects of the construction, including costs, time to complete the project and amount of exposure to liabilities for each involved party. Owners and designers have long viewed the “Project Delivery Method” as the comprehensive process including planning, design and construction required to execute and complete a building facility or other type of project. Choosing the right project delivery method is integral to a successful project. Currently, there are at least four types of common project delivery methods: construction management at risk (CMR), design-bid-build (DBB), design-build and multi-prime (MP). There is a growing trend showing the more traditional design-bid-build product delivery method is losing its appeal and other options, like the design-build delivery method, are taking its place.

To understand why the design-build process is growing in popularity, it is helpful to discuss three areas where the four processes are different: number of phases and essential parties, number of essential contracts and the liability exposure under the contracts within each method.

NUMBER OF PHASES AND ESSENTIAL ‘PRIME’ PARTIES

Traditional design-bid-build is the familiar, drawn-out process where the owner of the property contacts a designer to create plans and specifications. Once complete, the owner takes the plans and specifications and begins the bidding process. After a bid is accepted, only then can construction begin. The CMR and MP methods use similar processes, though the owners may contract to different parties instead of contracting with the general contractor (we’ll discuss this more later). Under design-bid-build, CMR and MP methods, a minimum of three players is necessary in every project: the owner, designer and the contractors in their various forms.

The design-build method uses an “integrated” process, whereby the designers and contractors are one-and-the-same entity. The process of designing and constructing occurs simultaneously and thus eliminates the lag time between an owner’s receipt of a design and the acceptance of a bid. Also, because there is only one entity performing the design and construction, the only two necessary “prime” parties are the owner of the project and the design-build entity.

NUMBER OF ESSENTIAL CONTRACTS

Another closely related factor to the number of phases and essential parties is the number of contracts created during the project. The traditional design-bid-build project first requires the owner to form a contract with a designer that will design the building or project in isolation and without any input from the construction team. CMR operates similarly again; however, it allows for input from the construction team as to what materials would be the most cost-effective and merchantable for the desired purpose. In these two processes, two contracts exist: one between the owner and designer and one between the owner and construction-management constructor.

MP requires the owner to contract directly with each contractor and subcontractor instead of with one general contractor. Under this process, a minimum of two contracts exists between the owner and the designers and contractors, likely increasing as the size of the project increases.

Conversely, the design-build process merges the designer and builder into one entity. Because the one entity handles both jobs, the contracting process is streamlined and results in only one contract between the owner and design-build entity.

LIABILITY EXPOSURE UNDER THE CONTRACTS

As the volume of contracts involved in the project increases, the more fragmented the liability exposure becomes. In the design bid-build, MP and CMR methods, the owner first secures the designs from the designing entity. When the owner hires the constructing entity, he or she warrants to the constructing entity that the designs and specifications are sufficient for its hired purpose. The designer and the contractors are independently responsible for their work product, but the owner is still held responsible for any representations made to either entity. Although the CMR method attempts to foster the communication between the designer and contractors, no contract exists between the two and, therefore, liability remains on the owner for all
representations made. Further, any change orders, which frequently arise, and any other “gaps” are solely the responsibility of the owner.

Design-build removes the wall that is frequently erected when construction projects go wrong. Frequently during litigation involving the design-bid-build process, designers will attempt to avoid liability by pointing the finger at the contractors and vice-versa. Design-build, by creating a merged entity including the designer and the contractor, places the responsibility of designing and constructing with that one entity, which facilitates problem resolution instead of gearing up for an adversarial proceeding. Therefore, the design-builder is responsible not only for designing the project so that it will satisfy the desired standards, but it must also complete the project required by the owner in the contract.

As for “gaps” with the design-build process, they are essentially eliminated. The entity is performing both roles. Should the owner provide the design-builder with prescriptive designs and specifications, however, the design-build contractor is the party
responsible for discovering any inconsistencies with the performance standards by which they are bound. Any consistencies found will be the financial responsibility of the owner.

FEWER BUMPS

It is easy to see why the design-build process is growing in popularity. Costs are decreased by streamlining the process in many ways: an overlapping process of concurrent designing and constructing, fewer required contracts, and the ability of the contracting entity to adapt to the changes in design and construction. Although liability exposure is more concentrated in the design-build entity than in the other methods, the benefits of coordination between the designer and contractor will surely outweigh its detriments.

In addition to making the project delivery process easier, fewer bumps along the way will surely decrease the time and costs associated with the completion of a project. As we follow the trend toward a more design-build-focused construction industry, we will likely experience a positive effect on the litigation process, where claims will arise only between two parties as opposed to the requisite three parties in a traditional design-bid-build-based action.