In January the Department of Commerce reported a 3.3 percent drop in overall construction spending. This included a 4.3 percent drop in nonresidential construction, the biggest drop in 15 years. Reported by the Associated Press, this included a 2.3 percent drop in overall government construction spending and a whopping 6.6 percent decline in federal construction spending.
For nonresidential builders this was is a huge hit, one that is a continuation of dire economic news over the past several months. What is most troubling, however, is that the decreased spending on construction means decreased work opportunities for employers and employees.
Nonresidential builders have stayed away from even worse numbers experienced by the residential market, whose bottom fell out at the end of the housing bubble, but the outlook appears shaky at best. Even with such uncertainty, however, construction is not — and does not have to be — a pit of unemployment and lost opportunity among certain segments of the building and construction industry.
For federal and state construction projects, the future has a bright spot with the passage of the American Recovery and Reinvestment Act on Feb. 18. In what could potentially create nearly $70 billion in new construction projects, nonresidential construction companies could find themselves working again. For design-builders, it could be a big boon for projects — as well as for employment — as the country feels its way through an uncertain 2009.
While the distribution of funds as a result of the bill are not completely clear, the bill includes up to $5.8 billion for water/wastewater projects, $8.2 billion for military construction and an additional $43.9 billion for transportation projects.
Crucial to design-build’s success is the ever-present search for projects that can be completed on time, under budget and without the cost and aggravation of litigation. These are the hallmarks of design-build and illustrate how this preferred method of project delivery is the best fit for these challenging times. It’s the quickest route for owners, architects, engineers, specialty contractors and a whole host of suppliers to get back to work.
A key aspect of this silver lining is engaging all of the construction players early as design-build typically does in the construction process, according to Tom Sorley, president and CEO of Rosendin Electric and DBIA’s immediate past chairman.
“As far as the construction industry is concerned, typically the standard design-bid-build process doesn’t engage the full lifecycle of construction — the full team — associated with what the built environment like design-build does,” he says. “Design-build gets [everyone] involved at an optimal stage early in programming, early in the project, [and] the individual subcontractors, specialty contractors are on board.”
At the same time, these individuals bring the vendor and the supply chain components on board. With the design progressing the same time as construction, everyone is involved up-front.
“Now we’ve got the architects, the engineers, the contractors, supply chain, the vendors; we’ve got the whole gamut of people,” Sorley says. “With that full gamut, now all of a sudden we start opening up the doors for many other folks like the material handlers that transport materials to the job from the supply houses, the vendor offices [down to workers who provide] the copies that are made for submittals and review, and trailers that are set up for jobsite.”
As a result, speed becomes a factor throughout the process, adding to design-build’s appeal even further. In 2008, Clark Construction’s completion of Nationals Park in Washington, D.C., experienced this first-hand.
Matt Haas, project executive for Clark, told DATELINE last year that Clark told the Washington, D.C. Sports Commission that they needed to award early contracts “before they would normally be biddable.” For the stadium project, this included almost 10 different contractors and specialty contractors but equaled nearly half of the cost of the entire project. This, however, eliminated risk early in the process and had multiple components working simultaneously to move the project forward.
In addition, with so many components working side-by-side through the design-build process, the ancillary suppliers were put to work early as well. Hass noted the use of a computer-aided model to complete a structural design. This allowed for an early steel order, which put the steel manufacturer right to work, basically from a computer model.
In Minnesota, the story was similar. Perhaps the design-build success story of 2008, the St. Anthony Falls Bridge that replaced the I-35W bridge that collapsed in 2007 brought design-build to the forefront as never before. Flatiron Constructors Inc., in a joint venture with Manson construction, delivered the bridge with a combination of speed and efficiency and under budget.
In September 2008, the last concrete for the main span of the bridge was poured leaving mostly the finishing touches to be done — painting, installing signs, landscaping, paving surrounding streets and grinding the surface of the bridge, painting lane stripes on the entrance and exit ramps and so on. Nearly 5,000 in all came to see progress and hear a final report from the project managers on Sept. 6. Just 12 days later — three months ahead of schedule and less than a year from initial construction — the bridge opened.
This all occurred as the construction industry continued to decline. But design-build continued to move forward with the project, and perhaps opened the door for many design-build projects in the coming year, in which all components, from owners to contractors, specialty contractors and suppliers, are watching closely.
“In my opinion there’s a lot more people to get to work in the design-build model, because so much of design and construction takes place at the same time,” Sorley says. “Now, all of a sudden, we’re working with an owner so we’re looking for innovative ideas, so we bring the vendors in, the vendors begin to cut loose with an owner to hit timelines on production and delivery and they cut lose factories and now switch gears [to the] manufacturer.”
As the country gets a closer look at the specifics of the American Recovery and Reinvestment Act, they’re hoping the stage has been set for a state and local governments to look at design-build as their best and most economical alternative and see it as the norm. With the appeal of all players participating early in the process, it’s an opportunity to get more people to work sooner, rather than later.
Sean Haynes, president of Lifecycle Construction Services Inc., knows this well. His company focuses solely on the federal government. Even more specific, about 90 percent of his work is with the Department of Defense. It’s a situation that he says “has cushioned us from a lot of the down side of construction that others are experiencing.”
With longer procurement cycles, by the time they start working on two-phase proposals until the actual award, he’s had several projects come to fruition. Last year alone, Lifecycle bid on five, five-year contracts and won four of them. And all of his work is design-build.
“We’re looking at least a 200 percent increase in staffing this year,” Haynes says. “We’ve tracked all the stimulus and broken it down for how we think it will affect certain projects.”
For example, they have a five-year contract with the General Services Administration and they’ve already received feedback that GSA could receive up to $7.8 billion from the stimulus package. “I think we’re going to see direct flowdown from some of that onto some of our contract with them,” he says.
Lifecycle also does a lot of work with the Air National Guard and has been told that they will have additional work heading in their direction.
“We don’t chase anything that’s not design-build; our focus has been solely federal design-build and more specifically pretty much, Department of Defense design-build, with exception of the GSA,” he says. “By kind of narrowly focusing on that market, all my team have pretty much been doing that exclusively for the majority of their careers.”
And it’s paying off with projects, which translates to additional jobs. But it’s focused on a business model, he says, that is all about efficiency, which is in great demand as most have such tight budgets.
“If you look now, you can probably say that 70 to 80 percent of the Department of Defense … projects are going design-build,” he says. “We focus on design-build, we want to become the very best we can at it, and I think that translates well. We’re not coming to design-build because it’s the latest fad. That’s what we do.”
Some may view design-build as outsourcing the risk to the design-builder, and they take on that risk, Haynes says. “But in my opinion, it’s less risky because we’re able to control and manage that process.”
Sorley notes that so much work in a regular design-bid-build environment only happens after design is complete, documents are put out for bid, the project is awarded and the submittal process is complete. With design-build, he says there is a “solutions mindset” that enters the process.
“Our experience is over time, design-build — as opposed to design-bid-build — working with owners and general contractors … allows us fundamentally the ability to be more creative in the solutions that we gather, whether it’s a City Center project [in Las Vegas], a large complex, multifaceted project like that, or whether it’s an individual office building in one of the major metropolitan places that we happen to work,” he says. “At the end of the day, the ability to be involved at the front end of the job and begin to work with someone in terms of what their objectives are from performance and tie that in with our experience in constructability, it makes for a better job all the way around — pricing, quality, schedule and the experience of the construction project itself.”
The future of course, is still tentative. The stock market continued its slide through February, and for some it appeared that the economic picture either lacked clarity, or simply looks ominous for the future. But with design-build, it’s proving itself as a part of the design and construction industry that can hold its own. And while doing so, it benefits all of the working parts of that process, from owners, architects and engineers to suppliers, their employees and specialty contractors, right down to the individual who connects the wires that provide power to these new structures.
“If you’re looking to put people to work,” Sorley says, ”design-build is the way to do it.”
Todd Rich and Shawna Bray contributed to this report.
For a complete report on the St. Anthony Falls bridge, see the October 2008 issue of Design-Build DATELINE.