There’s been a push in recent years for public agencies to move from the traditional Design Bid Build (DBB) delivery model to approaches that do a better job of serving project owners.
For years, school districts and other public entities relied on the DBB delivery model for capital projects. They would begin the process by contracting with a design firm, which would develop the architectural plans. The design would be put out for bid, and owners were not entirely sure where prices might fall relative to the original budgetary target. Once construction bids came in and a general contractor was chosen based on a low bid, the owner would embark on a separate contractual relationship with that vendor. This lack of integration did more than cost the district time and money; it lowered its discretionary choices and raised its risk profile.
Other models that had been used effectively in private market sectors soon found their way into the public market by way of newly introduced legislation. One was the Lease-Leaseback (LLB) delivery method. But LLB has been in the news for all the wrong reasons lately – specifically related to several pending lawsuits – which have compelled school districts to seek other approaches. (It should be noted that the LLB methodology has recently been revised and is now a contractually stable way to deliver projects.) While the LLB model is worthy of study, we’ll leave this interesting and complicated topic for another blog.
Instead, we’ll focus here on the other popular alternative to DBB: the Design Build model.
Design Build (DB) officially emerged in California with the 2001 passage of legislation that freed the state’s school districts from the restrictions of DBB when project costs exceed $10 million. On September 2, 2015, the California Legislature successfully passed AB 1358 authorizing school districts, until 2025, to procure Design Build contracts for public works projects in excess of $1 million. The DB option gives districts certain safeguards and shifts more of the risk toward contractors.
Here’s a quick look at the key benefits of the DB model when applied to large-scale public projects:
Focus of Responsibility. Design Build creates a single point of responsibility, since design and construction are jointly overseen by one entity. Owners have only one point of contact to whom to take their questions or concerns. A single vendor that delivers design and general contracting services is known as a Design Build Entity, or DBE. Errors and omissions that would typically be covered by the owner are now held within the DBE’s contract responsibilities. This could be between ten to fifteen percent of the construction contract value. The DB model minimizes the chance of important architectural or construction details getting missed, since the processes are aligned and overseen by a single DBE.
Time and Cost Efficiencies. Schedules are streamlined because of the sequencing of design, procurement and construction. The public agency also avoids having to bid out design then construction separately, so there are time savings at that juncture as well. In addition, the DBE is able to leverage key project relationships early with mechanical, electrical and plumbing contractors who may have insight into emerging technology and manufacturing, which may lead to efficiencies. Designs are developed with the full participation of the builder, which tends to result in cost-effective design choices. In addition, the owner’s ability to gather cost information earlier in the process can lead to significant cost savings with a stipulated sum model.
I’ve personally worked on several sizeable DB projects on behalf of school districts and have seen the DB model evolve. Some districts are now starting to opt for a slightly altered framework known as Progressive Design Build, which gets DBEs involved without having fully developed building expectations in mind. They select on a qualifications model only and work with owners to develop the plans and budget according to their needs.
VPCS’s ability to set clear expectations and guidance for use of this procurement model can serve any owner well. As program and project managers, we’ve helped owners navigate the difficult choices early so that success can be achieved at each step of the process.
By Mony Thach