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Construction Owners Breaking Away from Design-Bid-Build

Posted: August 7, 2018



Conley Smith,

Sr. Business Writer

If the Design-Build project delivery system needed a slogan, it could easily promote itself as the “change-order light” version of Design-Bid-Build. The system’s ability to deliver projects faster by overlapping phases of design and construction is one factor fueling its momentum and adoption in today’s construction industry. With fewer surprises and change-orders, this means costs and schedules can be nailed down earlier in the construction process.

Just how popular is the model? The Fails Management Institute (FMI) reports that the Design-Build (DB) project delivery system will represent nearly half—44%—of construction put-in-place (CPiP) spending across many market segments by 2021. They also predict spending in DB will increase 18% between 2018 and 2021, growing to a value range of between $274 billion to $324 billion.

Current State of the Industry

For now, the Design-Bid-Build (DBB) approach is still firmly entrenched as the most commonly used project delivery method in the United States, according to the Lean Construction Institute of America and other groups. This model centers around the traditional, low-bidder selection where design teams work directly with the owner to produce a set of construction documents for a competitive bidding process.

With Design-Build, owners get a turn-key project delivery model with a single point of responsibility residing with the General Contractor or Construction Manager for the whole construction process—from design to cost control to schedules. This includes managing all subcontractor trades, materials, owner provided products,etc.. Another selling point is that it requires a smaller time commitment from the owners. This means owners are less likely to get involved in conflicts between the contractor and the design team.

For more traditional projects like chain stores, the DBB model still makes sense. With fewer design surprises and a predictable schedule, DBB is still the mainstay for these projects. However, owners preparing for large commercial construction projects may reap big rewards by selecting the DB project delivery system.

What’s Driving This Change?

For the most complex projects, DB could be the perfect solution because owners only have to deal with a single source of responsibility for both design and construction. Industry insiders also tout its many benefits—from cost savings to streamlined schedules. Many of these projects are led by developers and construction companies. However, on mission-critical facilities like fire stations and data centers, you may see engineer-led, design-build teams.

A Penn State University study comparing different methods to deliver construction across the U.S. showed that projects using Design-Build had lower costs (over 6% in savings) and were completed 33% faster. Projects using DB were also much less likely to incur cost growth (5% less) and schedule growth (11% less), meaning fewer change orders. This could add up to a savings of $610,000 on a $10 million project.

For estimators, Design-Build will require an expanded role where they use a combination of both hard bid and conceptual estimating skills. As such, estimators would be called upon to do more interpretation of scope in the post-award stage. Many see Design-Build as an exciting approach to construction that uses collaboration to pave the way for big, creative ideas. But the bad news is that the estimator will have to perform quite a bit more estimates, budgets, and what-if scenarios to keep the project within the original budget parameters in a DB system.

State governments are also driving the DB model by passing legislation that facilitates the use of alternative project delivery methods. For example, Virginia legislators expanded Design-Build authority to all local governments. In fact, 38 states that enable the use of public-private partnerships are playing a significant role in boosting DB. In fact, many federal and state road and bridge agencies have been using the DB method for quite some time.

Resistance to Design-Build

Though exciting, some see the negatives to Design-Build is that it offers less transparency and may result is higher prices than if it were competitively bid. There is also the belief that the owner loses all control over the project. In addition, when the design team works for the contractor, the normal checks and balances on quality may be upset as the design team answers to the contractor rather than the client.

However, some DB arrangements are considered open-book where the owner is regularly informed through presentations and can provide feedback and have issues addressed contractually. The other compliment to the DB method would be the owner representative role, where a trained industry professional represents the owner on projects either as a one-off consultant or potentially representing a multitude of projects for the same owner.

New Models Become More Mainstream

Clearly, DB is gaining traction in the development and construction industry. As owners seek to tighten budgets and timelines, DB will become less of an alternative delivery model. While the FMI survey showed that 82% of owners say they’ve used or plan to use DBB in the next five years, 58% also said the same of DB. Another 67% predict a growing use of DB, even if they don’t plan to use the system.

Most would agree when it comes to using more collaborative delivery models like Design-Build, BIM (Building Information Modeling) will be a natural fit as it aligns with delivery models that encourage collaboration and integration. If you’d like to learn more about the growing use of BIM and how it is impacting estimating, be sure to download On Center Software’s white paper, “Is Takeoff Dead?



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