As the need for alternative water resources grows with the population, municipal clients need streamlined, cost-effective capital improvement solutions. Trends in the water and wastewater industry point to increased use of alternative project delivery methods such as design-build. These methods are projected to become prevalent by 2010 for most public-sector capital improvement projects.
Design-Build 101
The single-source approach of design-build consists of a firm or team of engineers and contractors who are fully at risk for the project cost, schedule, quality, and management. Using this approach, the owner has a single contract with the design-builder, who is responsible for the entire design and construction of the project. The owner is free to concentrate on the project instead of coordinating between the engineer and contractor. In most cases the owner hires a design-build criteria consultant to develop a preliminary design (typically 15 to 20 percent design completion), which is then sent to pre-qualified design-build teams to develop for the purpose of submitting a firm bid. A critical element is to not advance the design too far from the owner’s perspective to allow the design-build teams to provide creative solutions.
One of the major advantages of using design-build is the overall time savings compared to traditional design-bid-build. Research indicates that, depending on the project requirements and the experience of the overall project team, utilizing design-build time savings can be realized in the 10 to 15 percent range and as much as 30 percent due to the phased fast-track approach. Material procurement can commence early and the tendency to redesign becomes less of an issue since the engineer and the contractor engage with each other early and work as a true team with the owner to meet the project objectives. The client obtains early knowledge of the project costs, since the design-build teams submit their proposals and costs around the 25 percent design phase, and can make adjustments as necessary.
Design-build also provides a clear motivation to the design-build team to deliver a relatively higher quality project to the owner as compared to design-bid-build. The motivation is based on the single contract, which makes the design-build team completely responsible for the finished product. The design-build team cannot shift responsibility for design errors or construction deficiencies. Research by various institutions including Construction Industry Institute based at University of Austin, Texas CII, University of Colorado, and Penn State, have indicated that design-build can shave anywhere from six to 10 percent of the project costs compared to design-bid-build.
Since the engineer, contractor, and owner are involved as a team, and continuous refinement of the design concepts reflect a more cost-effective, practical solution to the owner’s goals, these savings are typically realized as noted above. Regular estimates at each progressive design phase also help maintain the project budget using creative alternate design solutions.
Design-build also encourages innovation, provided the owner utilizes the performance-based specifications during the bid phase, and the preliminary design is not advanced beyond approximately 15 to 20 percent design. Having the construction and engineering players evaluate options together for practicality, cost-effectiveness, and quality commensurate with the defined expectations of the owner, makes it easier for the design-build team to develop the right solution. The balance of conservative engineering with the latest state-of-the-art technologies from a construction perspective can, if executed properly, deliver an outstanding solution that is cost-effective and aggressively scheduled, with excellent quality.
Key Considerations
For any capital improvement project, there are unique factors that determine the right project delivery method. To evaluate these factors and devise the right solution, one might consider the following key aspects for their specific water/waste water projects:
Schedule
In today’s fast-paced world, with the need of urgency on many fronts, capital improvement projects are no stranger to the requirements of tighter than normal deadlines. If schedule is of paramount concern, then design-build or a variation could become a viable option.
Innovation
In a conventional design-bid-build environment, a proven yet usually conservative design philosophy is carried out to ensure a reliable, quality project. However, this typically does not take advantage of the latest technologies, which push the envelope of the normal comfort zone yet are balanced with adequate reliability and high quality.
A case in point is the performance-based 64 mgd surface water treatment plant for Casitas Municipal Water District (Ojai, CA), executed in 1999 using performance-based specifications. The design-build team utilized creative solutions to deliver the entire project for $8.2 million, using high filtration rates that are the norm in the oil petrochemical industry but have not been used commonly in the water-wastewater industry.
Design-build with performance-based specifications can lead to a more reliable, cost-effective life cycle cost-based solution with quality meeting the owner’s needs. Performance-based specifications essentially convey the end product requirements such as the client seeking a 10 mgd water treatment plant meeting all the requirements of the Surface Water Treatment Rule and federal and state regulations. No specific process requirements are imposed on the design-build bidders, as they are free to choose the most appropriate technologies to achieve the end product objective for the lowest life cycle costs in the shortest project duration. Thus consideration of design-build is appropriate as a project delivery option when the client seeks innovative solutions from industry practitioners.
Risk Transfer
One of the key concerns when using design-bid-build usually relates to the vulnerability of the owner as guarantor of the design’s adequacy and construction methods. If this is a critical issue, design-build may make sense because it transfers key risks of design adequacy and construction approaches to the design-build project team. This also helps reduce claims and scope changes when the design-build solicitation fully and clearly defines owner expectations.
Owner Experience with Alternative Delivery Methods
This is an extremely important factor in deciding whether to use an alternative project delivery approach such as design-build or construction management at risk. Often the factors noted earlier point the owner toward an alternative delivery method without consideration of owner and owner staff experience in delivery methods other than traditional design-bid-build. Lack of experience with alternative delivery approach in execution of capital improvement projects can lead to problems. It is strongly suggested that before an owner contemplates using an alternative approach on a medium-to-large project, its staff use the approach on smaller project to learn the nuances of execution, approach and mindset. Without that understanding, unrealistic expectations by owner’s staff can lead to at the very least misunderstandings if not outright project delivery failures.
Key Success Factors
It is worthwhile to consider the key factors that make a typical water/waste water project successful using design-build.
Control vs. Trust Considerations
Public agency owners who have not yet used an alternative project delivery approach should consider the delicate balance between maintaining project control and trusting the successful design-build team to deliver the intended end product. Here, project control in essence means to what extent should the owner allow flexibility by the design-build team to define items, i.e., should bolts be stainless or carbon steel, etc.
In a municipal environment, public employees typically are accustomed to defining minute details that tend to be inflexible and usually conservative. This control can give the owner’s staff the sense of proven quality design they have been accustomed to for many years. Often, they would rather continue to utilize such design, rather than consider options based on new technology that may not have a proven track record but may be more appropriate for a particular application.
In a typical design-build project with appropriate performance-based bid requirements, the owner is essentially ready to place a significant amount of trust in the design-build team for the “Black Box” they promise at the bid stage. Most owners do not feel comfortable with this approach and want to define the project “adequately” enough to avoid surprises. This tends to take some of the key advantages away from design-build, especially if the owner’s design consultant advances the design beyond say, 25 to 30 percent design — solidifying the design to the point that creative solutions are no longer viable for the design-build teams. These “draw-build” design-build projects tend to be higher risk projects for the practitioners, carry higher risks for assuming the owner’s consultant’s design, and place the design-builder in the position of simply “rubber stamping” the project.
Project Selection Based on Lowest Bid
Alternative project delivery approaches such as design-build should not be awarded solely on the lowest capital improvement price basis. Doing so often leads to poor results. Alternative project delivery approaches work best when a “Best Value” approach, in which the selection criteria include the experience and qualifications of the proposed project team as well as price are both included. The Design-Build Institute of America (DBIA) recommends a minimum qualification weighting of 50 percent.
Beware of Shotgun Weddings
Design-build lends itself to practitioners teaming with firms that have complementary areas of expertise. Normally this is determined by the practitioners themselves. However, there are times when the owner prefers that a specific engineer be part of the design-build team. The bid documents stipulate the prequalified engineers that contractors may select from.
Such “shotgun weddings” tend to be prone to failure. First, the two firms may not have a history of working together or in the specific roles needed for the project. Secondly, a prequalified engineer may be held in high regard by the owner, yet lack experience in the fast-track and design-to-budget mindset of design-build. It is best left to the contractors and engineers to decide whom to partner with. In addition, such forced partnerships can simply reflect back on the owner if things do go wrong, since the contractor’s engineer was required by the owner. The finger pointing typically avoided in the design-build delivery method comes back into play, as the owner is placed in the middle of disputes between the engineer and the contractor.
Proven Project Manager a Must
It is paramount that the proposed design-build project team have a proven design-build project manager in the lead. A successful design-build project manager requires unique capabilities that focus not only on the fundamentals of cost, schedule and quality but due to the typical fast-track approach on design-build jobs, he/she also has to be a team builder and motivator who can make decisions on partial information. He/she also has to stay focused on how far the creativity envelope may be pushed and yet balanced with high-quality end product design that is completed in a timely manner to accomplish the project milestones. And as on conventional design-bid-build projects, excellent oral and written communications skills are an important consideration for the project manager.
Performance-Based Specifications vs. Prescriptive Specifications
Obtaining maximum benefits hinges upon using good performance-based specifications during the bidding phase. The specifications should focus on performance instead of defining requirements in a prescriptive manner. As long as requirements are clearly defined, yet allow flexibility in delivering the performance-based specifications, bidders most likely will deliver creative solutions with the lowest life-cycle costs. If the owner provides design drawings and specifications exceeding 50 percent complete, creative solutions are minimized and in all likelihood the solutions will not be the lowest life-cycle costs.
Sole-Sourcing Equipment
Though many owners have a list of preferred vendors or equipment manufacturers due to existing systems or previous experience, it is in their best interest to include an “or equal” option in the bidding documents for best pricing, from the preferred vendors to the design-build teams. Additionally, owner procurement should be avoided if possible. It simply muddies the picture and allows potential excuses from the design-builder if the project is not executed successfully.
Payment Terms
Due to the fast-track nature of most design-build projects, the owner should consider an effective streamlined project accounting system to ensure timely payments to the design-build team. Cash flow is the lifeline of every contractor, and design-build project delivery places an even higher importance on prompt concurrence on amounts owed and release of payments.
Clear Risk Assignments
Clearly defined and assigned risks should be noted in design-build bid documents. These should be somewhat negotiable. As a basic principle, risks should be assigned according to who can manage them best. Those risks that are not identified and/or assigned tend to increase project contingencies by the design-build teams. It is best to discuss them early, preferably before the project is awarded, to have clear understanding among all parties. Not clearly identifying risks and the parties responsible for them can lead to serious challenges during the project execution phase. It can also lead to higher bids since bidders tend to want to cover risks that can be placed on their shoulders in a Design-Build environment if not clearly spelled out.
Dispute Resolution Clauses
Dispute resolution procedures also should be spelled out clearly in the prime agreement. Design-build is a relatively new delivery approach for many public sector owners and can lead to disputes in uncharted territories. A well-defined dispute resolution procedure can help keep the project on schedule, and is highly recommended for design-build projects.
Regular Partnering Sessions
Design-build and its variations have a much higher chance of success if trust among all stakeholders is built solidly, and the team members work together well. Regularly scheduled partnering sessions ensure that project challenges are handled in a timely manner, and also reinforce the team’s positive accomplishments. Clear communications are essential to project success, and partnering brings better understanding of everyone’s expectations and accomplishments. The commitment to partnering starts with the project’s leadership, as they set the tone for everyone who reports to them. If the commitment is genuine, it can mean the difference between a successful project and one that fails.
INFO: HDR (www.hdrinc.com)
This article is adapted from a chapter in the book, “Good to the Last Drop: A Practitioner’s Guide to Water Reuse.” Prepared by HDR Engineering, Inc. for the American Public Works Association (APWA), and appears here with their permission.