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Preparing for

Design-Build Projects

Preparing for

Design-Build Projects

A Primer for Owners,

Engineers, and Contractors

Douglas D. Gransberg, Ph.D., P.E.

James A. Koch, Ph.D., P.E.

Keith R. Molenaar, Ph.D.

ASCE

PRESS

Library of Congress Cataloging-in-Publication Data Gransberg, Douglas D. Preparing for design-build projects : a primer for owners, engineers, and contractors / Douglas D. Gransberg, James A. Koch, Keith R. Molenaar. p. cm. Includes bibliographical references and index. ISBN 0-7844-0828-

1. Building—Superintendence. 2. Buildings—Specifications. 3. Contractors' operations. I. Koch, James A. II. Molenaar, Keith R. (Keith Robert) III. Title. TH438.G635 2006 690—dc 2005036434 Published by American Society of Civil Engineers 1801 Alexander Bell Drive Reston, Virginia 20191 www.pubs.asce.org

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vi Preparing for Design-Build Projects

 - ONE INTRODUCTION TO DESIGN-BUILD CONTRACTING Acknowledgments xiii - Design-Build: What and Why - Historical Perspective - Why Use Design-Build? - Design-Build Success Factors - References 

• TWO DEVELOPING DESIGN-BUILD PROJECT SCOPE - Design-Build Project Characteristics - Influencing the Development of Design-Build Project Scope - Design-Build Contract Model - Formalizing Project Scope - Summary - References
• THREE WRITING DESIGN-BUILD PERFORMANCE CRITERIA - Owner Objectives - Performance Criteria Development - Management Criteria - Schedule Criteria - Technical Criteria - Cost Criteria - Using Abductive Reasoning to Write Performance Criteria - Design Risk Allocation through Performance Criteria - References - QUALIFICATIONS OR REQUESTS FOR PROPOSALS FOUR PREPARING DESIGN-BUILD REQUESTS FOR - Design-Build Risk Types - Applied Risk Management in Design-Build - Contracting Strategy - Request for Qualifications/Request for Proposal Content - Request for Proposal Components - Considerations Design-Build Request for Proposal Contract Clause - Design-Build Award Events - Summary - References - FIVE DESIGN-BUILD REQUESTS FOR PROPOSAL CASE STUDIES - Case 5-1: To Spec or Not to Spec—Is That the Question? - Case 5-2: Keep Looking Until You Find the Right Answer - Case 5-3: All the Right Moves - Case 5-4: Trust Me. I Know This Will Work - Summary - REQUEST FOR PROPOSALS EVALUATION PLANNING SIX SELECTION PROCESS REQUEST FOR QUALIFICATIONS/ - Award Methods - Selection and Award Processes - Comparison of Methods - Evaluation Criteria - Scoring/Rating Systems - The Rating Process - Evaluation Documentation - Summary - References
• SEVEN DESIGN-BUILD PROPOSAL EVALUATION CASE STUDIES - Case 7-1: Let Me Really Strut My Stuff - Case 7-2: Making a Passing Grade - Case 7-3: A Bracing Thought - Case 7-4: Bait and Switch? - Case 7-5: Defending the System - Summary
  • EIGHT PREPARING DESIGN-BUILD PROPOSALS - Design-Build Proposal Preparation Sequence - Proposal Preparation by the General Contractor - Proposal Preparation by the Designer-of-Record - Preparing the Price Proposal - Closure of the Proposal Preparation Process - Summary

Contents vii

NINE SUMMARY OF DESIGN-BUILD CONTRACTING 251 Design-Build Basic Concepts 251 The Future of Design-Build 254 Reference 255

Appendix 1: A Design-Builder's Perspective on the Design-Build Request for Proposal Process in the Transportation Industry 257 Larry Hurley

Appendix 2: A Design-Builder’s Perspective on the Design-Build Request for Proposal Process in the Building Construction Industry 261 Barbara J.Jackson

Appendix 3: Sample Design-Build Contract Documents 267

Index 269

About the Authors 279

Foreword

When you are invited to write a foreword for a book by people as incredible as Doug Gransberg, Jim Koch, and Keith Molenaar, how can you refuse? I certainly couldn't. I have had the pleasure of knowing Doug and Keith personally for years through our mutual involvement in the Design-Build Institute of America, and we have worked together on a number of construction industry initiatives. I have always found their in-depth and practical understanding of design-build (actu- ally, of project delivery in general) to be unique, refreshing, and informative. In my own professional life, I have relied heavily upon their work, particularly their benchmarking-type studies. Although I have never worked directly with Jim, I have heard only glowing comments from his colleagues in academia and the construction industry in general. Again, how could I not want to write some introductory remarks on their behalf? Indeed, I consider it an honor. Besides, I got a sneak preview of this, their latest "work-of-love." I have read lots of how-to publications about design-build and have even written a few of them myself. Frequently, these books are too technical (i.e., too many chapters read like a technical journal), too legal and contractual (i.e., too many case cites and language that reads like a law review article), or too "sales- man-like" (i.e., selling how awesome design-build is and ignoring the difficult questions). In short, it is hard to find a treatise that is both informative and inter- esting to read, yet also lets the reader establish a baseline of understanding. Doug, Jim, and Keith know the subject of design-build so well that most issues are second-nature to them. This is evident here. Their discussions on so many different and important design-build topics are as good as anything that I have seen. They also have a skill that is missing in many academicians and engineers— their writing is crisp, interesting, and readable (no offense to those of you readers who are academicians and engineers). As I read this book, I routinely thought about what I had written on the subject and wondered, "Why didn't I say this as clearly as they did?" or "Why did I forget to mention that?" Their whole effort is simply superb.

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x Preparing for Design-Build Projects

Aside from the great writing and comprehensive text, there are three specific things that I particularly like about this book. First, in what is part of their clas- sic style of presentation, Doug, Jim, and Keith rely heavily on visuals to explain their points. Readers don't get lost in details and can even skim many chapters to get a decent perspective on their points. Second, the two chapters on case studies are first-rate, and the lessons learned are very informative. Finally (and to me most importantly), there is one chapter—Chapter 4, Pre- paring Design-Build Requests for Qualifications or Requests for Proposals—that is an absolute gem. I find that many industry people can talk about performance specifying, but very few have the ability to give practical advice on how to write a performance specification. This chapter is easy to understand and gives some of the best examples that I know of in terms of describing the concept. It is a prime example of how these three great educators are able to take their knowledge and teach others. I am admittedly a design-build "junkie" and love to read whatever I can about the subject. Those of you who hold similar views will definitely enjoy the journey through this book. Many readers are more targeted in focus and may be inclined to read the book in bits and pieces. My advice is to avoid taking any shortcuts. The best way to learn about design-build is to have a full understand- ing of how and why the system works and where the pitfalls can arise in imple- menting best practices. Doug, Jim, and Keith have done the industry a great service. They have taken their many combined years of experience and put them into a single place for the benefit of the rest of us. I hope that you enjoy their hard work as much as I did.

MICHAEL C. LOULAKIS, ESQ., DBIA PRESIDENT,WICKWIRE GAVIN, PC. VIENNA, VIRGINIA February, 2006

xii Preparing for Design-Build Projects

education seminar, titled Design-Build Contracting, across the nation and in several foreign countries. The one element that seems to be common to all those classes is the pressing need of engineers who work for owners, consulting firms, and con- struction companies to better understand the technical side of the DB process and be able to put it into context with the contractual side. Based on this experience and the authors' personal experiences on a variety of DB projects, this book was devel- oped to flow from an introduction to and history of DB, through the preparation of an RFP, and end with guidance on how to interpret that document and develop a winning proposal. The first two chapters set the stage and detail the owner's major task of devel- oping the project's scope of work and configuring it in a way that facilitates the development of definitive performance criteria, which is covered in great detail in Chapter 3. Next, the interconnection between the performance criteria and remainder of the RFP is covered in Chapter 4, followed by a synthesis of the salient points of the first half of the book illustrated through a series of actual DB case studies. The book then moves on to the crucial stage of DB evaluation planning (Chapter 6). In this chapter, the latest research on evaluation planning is reported in a fashion that allows all parties to understand the dynamics of this critical step in the DB process. This is followed by another series of case studies relating to the interaction between the owner's RFP and the design-builder's proposal. Chapter 8 describes how to interpret the RFP and write a winning DB proposal. Finally, the book concludes with two essays contributed by experienced design- builders on what, based on their first-hand experiences, is important about the RFP from the perspectives of the building and transportation industries. This book is intended to be a resource for owners, engineers, construction contractors, and architects who find themselves in need of guidance in develop- ing a DB project. It is unique in that previous books have either taken a global approach to the subject or have concentrated on the legal aspects of the contracts themselves. This book is intended to help those professionals who must actu- ally do the designing, building, and contract administration. It lays out all the options in a comparative manner that highlights the advantages and disadvan- tages of each option, so the reader has all the information necessary to make the business decisions inherent in the DB process. We would like to thank all of the DB professionals around the country who helped us gather case studies and allowed us to bounce ideas off them. Special thanks go to Dr. Barbara Jackson of California Polytechnic State University, San Luis Obispo, California, and Larry Hurley of CH2M-Hill Constructors, Inc., for their insightful essays regarding the design-builders' perspective on the importance of RFP documentation.

Acknowledgments

The authors would like to acknowledge all those who helped shape the manner in which this nation developed and implemented design-build contracting over the past two decades. Their work in taking an idea that had reached its time and creating the legal, technical, and political environment in which it could be leveraged to the best advantage of owners, designers, and builders alike formed the basis from which this book was written. In many ways, they influenced the contents of this work both directly and indirectly. The authors would like to recognize an admittedly incomplete list of those individuals who have been par- ticularly helpful to the creation of this book:

• our colleagues in academia, for the research in the project delivery field
• our colleagues in the legal profession, for the development of new design-build contract models
• the dynamic champions of innovation in owner, designer, and builder organizations who stack their necks out and took the chance that there might be a newer, better way to deliver this nation's needed construc- tion projects.

First, we want to acknowledge Jeff Beard, first executive director of the Design Build Institute of America, and Mike Loulakis of Wickwire Gavin, P.C., who developed the first set of design-build model contracts and championed the cause to change state and federal laws to permit alternative project delivery; Mark Grammer of the U.S. Army Corps of Engineers and Jim Ward of the Naval Facilities Engineering Command, who stepped up and championed the use of design-build in their military construction projects; Gerald Yakowenko of the Federal Highway Administration, Steve DeWitt of the North Carolina Depart- ment of Transportation, and Rick Smith and Jeff Carpenter of the Washington State Department of Transportation, who led the charge to implement design- build in the transportation sector; and Tony Songer of Virginia Polytechnic

xiii

ONE

Introduction to

Design-Build Contracting

In the last decade of the twentieth century, design-build (DB) contracting became more widespread across the United States as well as around the world. Forming a contract where the project's owner contracts for both design and construction from a single entity significantly alters the project delivery culture; it moves the designer-of-record position in the project delivery process from being a direct, contractual advocate for the owner to some contractual relationship with the builder. Many design professionals and owners feared that this would result in the destruction of the designer's responsibility to furnish a design that maximizes quality within the project's budgetary constraints. To use the vernacular, the fox would be guarding the henhouse. As the process evolved, this concern was found to be groundless. However, owners found that ensuring project quality created a shift from the design-bid- build (DBB) prescriptive specification culture to the DB performance criteria culture. Owners also found that the technical portion of the DB contract was developed during the preparation of the project's request for proposal (RFP) and further defined by the winning design-builder's proposal design approach. Thus, to effectively accrue the potential benefits of using this project delivery approach, both public and private owners need guidance based on practical experience to prepare their RFP, and the design and construction professionals who form DB teams need guidance in how to properly interpret DB RFPs and to responsively prepare their own DB project proposals. This book is an attempt to furnish that guidance and the necessary background to implement it. The book has three major objectives. First, it will disaggregate the DB process, define and quantify each component to the process, and then present them in an integrated method that allows the reader to follow the DB RFP development pro- cess in an orderly fashion. This is done to give the reader an in-depth analysis of the subtleties and nuances that are inherent in DB project delivery and an under- standing for the potential impact of the myriad technical and business decisions that must be made to successfully promulgate a DB project. Next, the book will

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2 Preparing for Design-Build Projects

give design-builders and their design and construction professionals an inside look at the owners' thought processes and an understanding of the methodology by which risk is distributed in DB contracts. This will allow them to more carefully and responsively prepare winning DB proposals. Finally, the book will present case studies from actual private and public DB projects that illustrate various key points in an instructive fashion that allows the reader to synthesize the common issues that arise in most DB projects. This is done in a manner that promotes the passing on of lessons learned from the industry's past experience and allows both owners and design-builders to profit from the experiences of past projects.

Design-Build: What and Why

Although widely accepted, DB project delivery is not the traditional system in the United States. It requires a slightly different lexicon (set of terms) that is critical to establishing a common understanding of the process. An historical analysis of delivery systems provides a perspective of the motivation of project delivery nuances. A fundamental premise found throughout this book is that DB has advantages and disadvantages. It has a greater potential for success on some projects but is, in fact, not appropriate for all projects. Several national and international studies describe better-than-average project performance with the use of DB, but confirm that certain project characteristics are indicators that a project may not be well suited for DB delivery. Lastly, there are several consistent project characteristics that have been seen repeatedly on successful projects.

Design-Build Defined

Single Point of Responsibility

Design-build delivery takes many forms. Differences in financing structures, procurement procedures, the level of design at the time the design-builder is hired, the teaming arrangements internal to the DB team, and the responsibility for the operation and maintenance of the end facility are just a few of the differ- ences that cloud the DB definition. However, there is one common thread that all DB delivery systems share—a single point of responsibility for both design and construction. The owner is seeking a "one-stop shop" for the design and construction requirements and the design-builder assumes the risks and respon- sibilities for this contractual arrangement. Figure 1-1 illustrates the concept for the DBB and DB delivery models. Figure 1-1 depicts the DBB model in which there are two contracts—one between the owner and the designer and one between the owner and the con- tractor. This separation of contracts provides for checks and balances between design quality and construction cost but it also often results in an adversarial rela- tionship between parties, particularly between the contractor and the designer with whom there is no contractual relationship. Design-build, on the other hand, provides for one contract and one line of communication between the owner

4 Preparing for Design-Build Projects

• Execution of design and construction,
• Closeout and start-up.

Procurement Method: The process of choosing designers, constructors, and various specialty consultants, including

• Assessment of technical qualifications,
• Assessment of price proposals,
• Definition of the "best value,"
• Final selection of project participants.

Contract: The form of agreement in a construction project, including the participants'

• Requirements, obligations, and responsibilities,
• Allocation of project risk,
• Payment procedures.

The Design-Build Contract

A DB contract fundamentally differs from a DBB contract in the manner in which risk and responsibility for design details are shifted from the owner to the design- builder. In a DBB contract, the owner contracts a designer to develop the final construction drawings, as depicted in Figure 1-1. The owner, in essence, owns the details of the design and guarantees that the plans are constructable and free from design errors and omissions. In a DB contract, on the other hand, the design- builder, in essence, owns the details of the design and is responsible for providing design documents as well as a constructed facility that is free of defects. In both delivery systems, the designer-of-record is legally obligated to deliver a project that meets all applicable codes and standards within a reasonable standard of care. Fig- ures 1-2 and 1-3 depict simple models comparing DBB and DB contracts and their place in the design and construction process. The models are an oversimplification of the process but they very clearly convey several important nuances of the deliv- ery systems. Appendix 3 contains a list of the model contract formats developed by the Engineers Joint Contract Documents Committee (EJCDC). The fundamental difference between the contract modes is how and when the construction plans and specifications fit into the contact. In the DBB system, the final plans and specifications form the technical basis of the contract and define the scope of work and the price proposal. A fundamental assumption of this system is that the plans are complete, constructable, and free from defects—often a difficult task. In the DB system, the plans and specifications are a deliverable of the contract; the owner's RFP and the corresponding design-builder's technical and price proposals form the technical basis of the contract. This is a fundamen- tal difference. The owner's RFP can range from a verbal request to one, single design-builder, to a formal, printed RFP that may contain boilerplate contrac- tual language and substantially complete plans and specifications. Likewise, the

Introduction to Design-Build Contracting

Figure 1-2 Design-bid-build contract model.

technical and price proposals can vary greatly in detail depending upon the owner, the design-builder, and the project. The following chapters greatly expand on the details of the DB contract, focusing on comprehensive RFPs, technical proposals, and price proposals and the interrelationships between them.

Performance Criteria

Design-build is not the primary delivery system in the United States, although some owners, architects, engineers, and contractors apply it exclusively or con- sider it their default delivery mechanism. Generally, DB is considered an alterna- tive delivery system. As such, owners must consider why they are choosing to use DB delivery rather than their traditional method or another alternative delivery methods. Likewise, architects, engineers, and constructors must carefully con- sider which aspects of their standard practice may be applicable to DB delivery and which practices must be adopted to successfully implement this alternative delivery system. This book focuses on those aspects of DB that are different from DBB and can improve the potential for project performance and success, particu- larly in the area of preproject preparations. Another critical aspect of the DB contract model in Figure 1-3 is the con- cept that the project scope is described by definitive, project-based performance criteria rather than comprehensive construction plans and specifications. This is

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