Benefits and Pitfalls of Government Design-Build Project Delivery
The federal regulations and procurement framework for design-build project delivery concerning direct government procurements, and indirect federal projects where the government provides funding but does not procure the construction, has been in place for the past twenty-two years (The Clinger-Cohen Act passed in 1996, part of Federal Acquisition Regulation at subpart 36.300 et seq.) Design-build delivery can provide a streamlined project to federal agencies at many times better value than a design-bid-build delivery
In the next three years, design-build projects are expected to to be just about 20% of all of the total U.S. Construction Put in Place ($1.2 trillion of the $5.4 trillion estimated total; See Fails Management Institute June 2018 Market Study ) Highway and road projects are expected to make-up fourteen percent of the design-build delivered projects over the same time period (Ibid.) As the twenty-fifth anniversary of design-build procurement at the federal level approaches, we can take a few minutes to look at a couple of the benefits and pitfalls for contractors of design-build projects.
Generally speaking, design-build projects take less time to complete than traditional design-bid-build projects. This benefit is realized by eliminating a second procurement process, reducing the errors and omissions in the drawings, and allowing for concurrent design and construction.
Despite Federal Acquisition Regulation subparts 36.303-1, Phase One, and 36.303-2, Phase Two setting for the criteria for evaluating proposals in phases, the evaluation of the criteria is necessarily subjective when the government is awarding a negotiated contract on best value. The constraints on the wide discretion of the awarding body are that the decision cannot be arbitrary or capricious, contrary to established procedures, or unsupported by substantial evidence (5 U.S.C. § 706(2)) Meeting this burden during the protest process is a more challenging burden of proof.
Because the design team and the contractor are under the same umbrella, often times working together during the programming phase of a project, design-build projects generally have less litigation. A significant reason is that one of the main points of tension, design vs. contractor, is removed in a design-build project.
Making sure that the design-build team, and the project, is protected by the appropriate insurance coverage can be a challenge for the design-builder. In our experience, most of the design-builders are traditionally general contractors that contract with a design or engineering firm to be part of the design-build team. For example, this creates a potentially problematic situation if a project specific insurance policy will have to cover general and professional liability, which is a non-standard type of coverage requiring savvy brokers, builders, designers, and underwriters. Care must also be taken when negotiating the design-build contract with the awarding agency to include language and insurance requirements appropriate for both the professional liability side (“design”) and the general liability side (“build”).
Despite presenting unique challenges, design-build delivery can provide a streamlined project to federal agencies at many times better value than a design-bid-build delivery.