Transcript Principles and Best Practices of Design Build

Faculty of Civil Engineering
Department of Economics and Management
CZECH TECHNICAL UNIVERSITY
IN PRAGUE 2011
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Introduction and Overview of Design Build (Understanding
the risk of Design Build
Procurement and Contracting for Design Build (What makes
it different?)
Selection Process for Client Success (Solicitation, Evaluation,
and Selection)
Creating the Right Team (Collaboration)
Creating the Right Performance Criteria (Creating the
project that the owner wants)
Responding to the Request for Proposals (Having a
successful process for reviewing and complete RFP's)
Overview of Conceptual Estimating (What cost information
is needed and controlling the cost risk)
Project Management for Design Build (What makes Design
Build different?)
Introduction and Overview of Design Build
(Understanding the risk of Design Build)
Why Design Build ?
Background and Motivation
• Increased level of project complexity
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The need for increased interdisciplinary interaction
Early involvement of participants
Levels and methods of communication
Compatibility within project teams
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Organizational
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Technological
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Building Information Modeling, Collaborative
Technologies, Interoperability Standards
Environmental
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Integration and Collaboration in Design and Construction
Green Design, High Performance Buildings,
Sustainability, LEED
Economic
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Availability to obtain financing, high unemployment,
Large number of firm down sizing or going out of
business
Procurement and Contracting for
Design Build
(What makes it different?)
Design Bid Build
Construction Management (agency)
Construction Management (at risk)
Design Build
Integrated Project Delivery
A comprehensive process including planning,
design, construction and other services,
necessary for organizing, executing and
completing a construction project.
Three fundamental owner decisions
• What project delivery system should I use?
• Which procurement method would be best?
• Which
contract format is best suited for this project?
Project
Feasibility
Facility
Owner’s
Profile
Critical
Owner
Decisions
Project
Performance
Criteria
Project
Delivery
System
Selection
Procurement
Method
Selection
Programming
& Scope Definition
Contract
Format
Selection
Team
Selection
Confirm Project
Scope and Program
Project
Financing
NOTE: Chart shows logic flow, not
timing or sequence of steps, which
vary depending on methods used.
Design &
Construction
Operation &
Maintenance
Always 3 or 4 major parties involved in the
project delivery process
 Owner (public or private)
 Designer (Engineer or Architect)
 Contractor
 Construction
these parties)
Management Firm (can also be one of
Determines the contractual relationships among
the parties.
Establishes when the parties become engaged.
Influences impact of changes and modifications
on project cost.
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Design-bid-build (Lump Sum or Unit Price)
Multi-prime (often under CM)
Construction management-at-risk
Construction Management agency
Design-build (DB, EPC, etc.)
Procurement Defined
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Method of pricing
(Project Delivery)
 Fixed-price
 Lump sum contract
 Unit price contract
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Cost-plus
 Cost plus percentage of
cost
 Cost plus fixed fee
 Cost plus fixed fee with
a targeted maximum
cost
 Cost plus incentive fee
Guaranteed Max Price
 GMP plus percentage
of cost
 GMP plus fixed fee
 GMP plus a fixed fee
plus share of savings incentive
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Method of award
(Procurement)
 Competitively Bid
contracts
 With designer doing
Project Supervision
 With CM – agency
 CM at Risk
 Design Build
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Negotiated contracts
 GMP
 Design Build
 Negotiated Lump sum
 CM at Risk
Sole Source/Direct Selection
Negotiated procurement
Competitive
• QBS – Qualification Based Selection
• BVS - Best Value Selection
• Low Bid
Owner
Sub Consultants
Characteristics
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Designer
Three linear phases:
Design, bid and build
Three prime players:
Owner, designer, constructor
Two separate contracts:
 Owner to designer
 Owner to constructor
Responsibilities
Owner Program, finance, management
Designer Prepares plans & specs, normal
services
Constructor Prime and sub construction
Contractor
Subcontractors
Design-Bid-Build
(DBB)
Traditional
Delivery
Construction
Management at
Risk (CM@Risk)
“Progressive”
Design-Build
(GMP)
Lump Sum
Design-Build
(LS)
Alternative Delivery
Design-BuildOperate/
Finance, etc.
Procurement and Contracting for
Design Build
(What makes it different?)
What Are the Design-Build Delivery Method's
Potential Advantages and Disadvantages?
1. Potentially less adversarial and more flexible.
2. Risks for design errors and omissions are shifted
from the owner to the design-builder, who presumably
can resolve them more efficiently.
3. The constructor is involved in the design process and
can contribute valuable insights as to constructability
and value engineering.
4. The owner or the design-builder can order long leadtime items earlier in the process with greater certainty.
5. Faster project delivery.
6. In a market with rising material costs, the owner or
design-builder can achieve earlier procurement at
lower prices.
7. The potential for claims, particularly delay claims, is
significantly reduced.
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Less control by owner over design process.
Owner no longer has architect to assist it in contract
administration.
Ensuring scope and quality of work within a specific budget
much more difficult.
Results may depend on design-build experience of constructor
and architect and their experience working together previously.
May limit field of contractors and subcontractors willing to
compete.
Because of the more subjective method of constructor
selection, the price at the front-end of a design-build project
may be higher (possibly 3% to 5% higher) than the price of a
design-bid-build project. However, the owner may make that
difference up at the back end in reduced claims, value
engineering, and other considerations.
Bond premiums and the design-builder's fee/profit are higher
than under design-bid-build.
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The Owner’s basic concerns are similar to any construction project
and relate to quantity (scope), quality, price, and schedule.
Some concerns, such as differing site conditions and
environmental, are unaffected by whether a design-build or designbid-build method is used.
The Owner’s concern most affected by design-build is to obtain a
project of a known quality and specific scope at a fixed price that is
reasonable.
A special Owner concern is that entities with substantial resources
stand behind all obligations in the design-build contract. This is a
particular concern with ad hoc design-builders who offer services
through limited liability companies with no resources of their own.
The Owner also has a special concern that professional liability
insurance protects against errors and omissions and is for the
benefit of the Owner, who is not in privity of contract with the
architect.
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Ownership of Work Product
Design Development Process
Waiver of Consequential Damages
Professional Liability Insurance
Changes and Payment for Disputed Changes
Compensation for Delay
In US there are many standard
construction contracts: major one by
the following organizations.
AIA – American Institute of Architects
DBIA – Design Build Institute of America
AGC – Associated General Contractos
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AIA provisions are the worst
Should modify all to give owner greater rights
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All are too sketchy and give owner little control
Additional control to a point is good, but too much
owner involvement is not good due to costs of
administration, potential to create claims
Should always get waiver of home office overhead
claims. DBIA document does not waive home office
overhead claims.
Should always require. AIA and DBIA documents do
not expressly require
Ensure coverage extends from beginning of project to
sufficient period after project completion (e.g., five
years)
Limit to owner-caused delays for which written notice
given, that impact critical path, and that are not
reasonably avoidable
DBIA and AGC documents require owner to
compensate for some force majeure. Delete those
provisions
AGC and DBIA approaches not acceptable to owner.
AGC is worst.
AIA approach more owner-friendly and reasonable
Procurement and Contracting
for Design Build
(What makes it different?)
How to attract the Best Design-Build Competitors?
• Ensure the impartiality and integrity of selection
process
• Pay stipends
• Make the shortlist short
• Streamline the Phase Two proposal submission
requirements
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Model Ownership
Design Creep
Work Flow
Level of Model Detail
Release of Proprietary Information
2-D Drawings Required for Permitting
Acceptance as Contract Documents
Contractual Relationship Definitions
Small / Non-complex Project
Multiple Software Platforms
I Don’t Want to be First
Selection Process for Client Success
(Solicitation, Evaluation, and Selection)
Generally Two Type of Selection Processes are
Used:
Qualifications Based Selection (QBS) and
Best Value Selection (BVS)
Qualifications Based Selection (QBS)
What Is It?
• Select a service provider through a competition
based on qualifications rather than price
• Pick the provider who is the best and most
uniquely qualified for the project at hand
Qualifications Based Selection (QBS)
Why Should I Use It?
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Best chance of success on your project
Higher impact on your project
Remove the “mystery” of the bid
Greater certainty that the project is priced appropriately
Fewer disputes
Qualifications Based Selection (QBS)
Where Did it Come From?
• Long recognized as the preferred method for
selecting A/E service providers
• On federal projects using traditional delivery it is
allowed for A/E selection under the Brooks Act
• Numerous states have enacted “mini” Brooks Acts
Qualifications Based Selection (QBS)
Professional Services
• Not all professionals are the same
• You wouldn’t select a doctor or lawyer based on “minimum
qualifications/best price”
• Even among highly skilled architects and engineers some are more
uniquely qualified for a given project
• With traditional delivery, A/E services are usually a relatively low
portion of overall project costs
• Quality design services set the tone for a successful construction
project when using traditional project delivery
Before the project is defined it is difficult to price
• It is money well spent
• Good planning and design result in few disputes and change orders
during construction
Best Value Selection (BVS)
• Most common strategy for acquiring design-build
services
• Much more prevalent in public sector than QBS
• Only authorized Federal process for design-build
• Best practice: Two-phase process
– Phase One: Dominated by assessment of team
qualifications
– Phase Two: Dominated by assessment
technical/management excellence
Two Phase Best Value Selection (BVS)
–Phase One:
assessment of team qualifications
–Phase Two:
assessment technical/management excellence
(How is the project going to be built?)
Process Best Practices
Best Value Selection (BVS)
Make Phase One brief and inexpensive, driven by qualifications
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–Qualifications-driven
–Short list only 3 most highly qualified teams
–Make past performance of competing teams predominant selection factor
Use evaluators that are qualified, trained, and free of bias
Many acceptable Phase Two processes out there
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–Weighted criteria
–Fixed price competitive design
–Integrated assessment and trade-off (Federal model)
Establish the process prior to release of RFP
Disclose the process to competitors
Follow the process as published
Creating the Right Team
(Collaboration)
Collaboration to Integration
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True integration is more than agreeing to partner
Successful integration requires a commitment to
understanding how people/organizations work
Teams must work from best practices to the benefit
of the integrated project team
Decisions based on what is right and fair
Col*lab`o*ra"tion\, n.
The act of working together; united labor.
Webster's Revised Unabridged Dictionary,
©1996, 1998 MICRA, Inc.
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Building Trust
Mastering Conflict
Achieving Commitment
Embracing Accountability
Focusing on Results
Formal and Informal Partnering
Complex issues are easier to discuss
 Issues are not avoided
 Shared experience builds the “bank account”
 Focus on the needs of the person in the front line
 Solve problems first then how pay for it
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Performance Based vs. More Prescriptive
Value Engineering After Contract Award with Shared
Savings
Expedited Design Review Conferences
Need for a High Performing Team
• Urgency due to “fear of escalation”
• Strict budget and schedule, but not specific
scope
• Maximize scope
• Qualification-based selection of the most
experienced, best qualified team
High High-Performing Teams
• Teaming based on competence AND character
• Who works well with who; collaborative spirit
• Productivity, collaboration and happiness
skyrockets with positive team dynamics
• Place high value on integrity, initiative, teamwork &
leadership
• Encourage creativity, productivity & accountability
Get The Right People On The Bus
Make Sure Everyone Is In The Right Seat
Design Build Is Not For Everyone
Why do TEAMS fail?
LACK OF TRUST
between the team members
Creating the Right Performance Criteria
(Creating the project that the owner wants)
RFP Best Practices
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Determine selection factors specific to your project
Divulge all selection factors and order of importance
in the RFP
Use only the factors as published
Make technical/management excellence dominate
the selection—not price
More RFP Best Practices
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Use performance-based requirements
Use Build to Budget or similar technique to enhance
the focus on technical excellence
Best Value—talk the talk and walk the walk
Responding to the Request for Proposals
(Having a successful process for
reviewing and complete RFP's)
Tips for Best Value Selection (BVS) Competitors
Know the owner’s strategy
• Know the process
• Try to shape the solicitation, not the process
• Be ready to identify & explain past performance
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More Tips for Competitors
Make sure your proposal conforms to the entire RFP
• Many owners won’t consider alternate proposals
• Big surprises may be fatal
• Little issues can be just as fatal
Know what to expect from the owner during the
process
• Lingo—discussions, weaknesses, deficiencies
• Why won’t they answer your questions?
• Why won’t they call and ask questions?46
Overview of Conceptual Estimating
(What cost information is needed and
controlling the cost risk)
The “purpose of conceptual
estimating’ is to predict the costs
of construction work before the
work is done.
Detail estimating has the same definition for
estimating. All estimating is attempting to do
the same thing. Predict the costs before the
work is done. Mirror the cost of Construction.
Detail Estimates
• Estimates from 100% complete plans & specifications
Conceptual Estimates
• Any estimate from less than 100% plans & specifications
• Typically starting when design is 25% completed
The previous curve names four
Conceptual Estimates with the end
result being a Detail Estimate
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Order of Magnitude Estimates
Square Foot or Cubic Foot Estimates
System Estimates
Unit Price Estimates
These four names are not the definitive names for
Conceptual Estimates. DBIA has a list, ASPE has
their list, and others also have a different list.
An example is:
ACCE
 Order-of-Magnitude
 Budget
 Definitive
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Individuals - client, the boss, or any other person hearing an
estimate, generally remembers the number and often it is the first
number quoted them.
When defining the level of accuracy, estimators also generally try
to error on the high side because of the note above. It is much
easier during the process to come down than ask for more funds
or budget.
The number of cost estimates required will be
project/owner specific, and will generally be linked to
the various design phases of the project. A cost
estimating approach to a typical project, which dictates
the number and timing of cost estimates, can be
summarized as
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Pre-Design Phase
Schematic
Design Development Phase
Contract Documents Phase
Prior to the commencement of programming and/or
design, the cost estimator prepares a cost model and
budget cost plan for the project.
The cost model establishes a construction budget and
defines how the project budget is to be allocated
among various building systems.
The cost model also confirms the project scope and
identifies any costs or work to be funded separately.
The cost estimator works as an integral member of
the design team to evaluate design decisions
made throughout the design phases against the
pre-established cost model. This approach allows
the cost management team to provide an
integrated value engineering process throughout
the design phase.
At the end of the schematic design and design
development stages, the cost estimator produces a
comprehensive cost estimate. The estimate is
compared against the cost model developed
during the pre-design phase of the project.
Further cost estimates are prepared upon completion
of the 50% and 100% construction document stages.
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Time
• Location
• Size
• Shape
• Learning Curve (Repetitive Design)
• Use
• Quality
• Materials
• Other
Estimates are based on the cost of existing projects
that were built in the past
Price-level changes over time
The need to project costs of future projects
Many organizations publish construction cost data on
regular basis:
• US Department of Commerce
• US Department of Labor
• ENR
• Turner Construction Company
• Handy-Whitman Utilities
Cost Indices
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Published by R.S. Means and ENR
Used to update old cost information
Uses
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1.To update known historical costs for new estimates
2.To estimate replacement cost for specific assets
3.To provide for contract escalation
Limitations
1.They represent composite data, the average of
many projects.
 2.They fail to recognize technological changes.
 3.There is a reporting time lag.
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Some factors affecting cost in different locations are:
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1. Transport cost
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2. Taxes
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3. Labor supply and local productivity
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4. Codes and local inspection
Construction costs also vary in different regions of the USA.
ENR and Means publish, periodically, the indices of local
construction costs in the major cities.
City
Boston
Chicago
New York
Cost Index
1120
1400
1700
As the quantity built increases, the unit cost
decreases
As a building gets larger, its square foot costs
drop
40’
Bldg B
Area =1500ft2
Perimeter = 180ft
10’
Bldg A
Area
= 1500ft2
Perimeter = 160ft
40’
30’
50’
10’ High Wall
15’
Bldg. A
Wall cost = $10/sf x 160’ x 10’= $16,000
= $10.67 per sf floor area
Bldg B
Wall cost = $10/sf x 180’ x 10’= $18,000
= $12.00 per sf floor area
15’
Special Systems
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Conveying Systems
Special Systems
Chimney Stacks & Shafts
Special fixtures & equipment
Occupancy
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Hospitals
High Loaded Roads
Etc.
Increased productivity by doing repeated work.
105
100
95
Time per Unit
90
85
80
75
70
65
60
0
5
10
Number of Units
15
20
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Economy
Average
Custom
Luxury
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Over the Counter or Mass Manufactured – Standard Grade
Designer – Medium Grade
Custom Manufactured or Fabricated – High End
Luxury – Out of this world
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For the Masses
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For the Few
Hard to quantify but should be evaluated
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Quality
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Soil condition
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Weather Condition
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Competition
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Productivity
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Scope and Pricing Review
Estimating Trending
The Future of Conceptual Estimating and BIM
Scope Review happens at multiple levels
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Overall Project
Individual Elements
Pricing Review happens at different times during design
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At a minimum (4 times) during each of the major design periods
Trending costs is a generally accepted approach
Project Review
• Review of available
documents
• Make a site visit
• Review current market
trends
• Begin review of projected
project schedule
• Review possible staff
requirement
• Begin generating
responsibility matrix
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Arrange Subcontractor input
Review Program requirement
Look for problem areas –
hazardous materials
Review costs of permits and
process
Outline all site conditions
Begin review of major system
requirements
What are the long lead equipment
and materials
System Scope Definition
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What major systems are needed
Material Scope Definition
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Begin Outline Specification
• To be used in trending
Quality Scope Definition
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Set level of quality in systems and materials i.e.
exterior system/materials
Review
Material Pricing – Use Unit Price
• Include the full value of all of the work
General Conditions Pricing
• Can be defined early
• Need organization and schedule
Contingency – begin setting amount
Fee and Margin – begin setting amount
Start trending log
Begin generation of quantities from square foot
Review of building square footage
Start comparison checks for “reasonableness”.
• Floor covering material square foot match
building square foot.
• Check ceiling material with both flooring and
building square footage.
• Building area vs. number of floor times building
foot print.
• Building perimeter is linear foot number that is
compared to cladding, parapets, etc.
• Define floor heights and again comparing to
cladding, curtain wall, glazing requirements
• Site requirement
• Parking area
• Landscaping area
• Etc.
Compare to all conceptual estimate
Trend both small and large ticket items. Concentrate
on the big items. (Both quantity, quality, and dollars)
Make sure the level, experience, and quality of the
subcontractors you are relying on. They also must
provide pricing reviews and trending.
Complete with the subcontractor their detail
scope of work.
Complete with the subcontractor outline
specifications – these outline specs set
quality levels
Complete with the subcontractor their first
level of quantities (to be trended as design
develops)
Review past project costs in these areas, make
comparison to new project
Review pricing guide costs to subcontractor pricing for
“reasonableness”
Ask the questions about contingencies in their pricing.
Balance Contingency and level of design
How much contingency is being built into
other pricing
Have the subcontractor included contingency
Ownership and control of contingency is
important
“Contingency is to help correct problem, not to be
used by the owner or designer to enhance or
grow the project.”
Tools for trending conceptual estimates
during the design process
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Trend Log
Trend Estimate Reports
Trending is needed to maintain control of the
budget. It allows the design process to
continue uninterrupted because of budget
fallout.
Addition and changes in design can have a
“domino effect” on costs if not trended.
Trending should be an introduction to
new estimates
New estimates are needed if major
systems change or are expanded
New estimates are needed if trends show
ever increasing changes to quantities,
square footages, quality, and additions
New estimates are a way to get owner’s
attention
New estimates are not intended to create
shocks and if preliminary estimates have
been accurate, and trending responsive,
the new estimate will act to continue
budget alignment.
“People tend to remember the first numbers you
give them”
“The people you are presenting a conceptual
estimate must understand at what level of
accuracy the conceptual estimate is at.”
The Project Cost will be
$ 5,295,933,18 !
“We estimate this project will
Cost approximately $ 5.3
Million. We’re 80% confident
That the final cost will be
Between 5 and 6 million. The
Estimate is based on …….”
Project Management for Design Build
(What makes Design Build different?)
“Under no circumstances should the Design-Builder use
open bidding.”
“…by involving qualified Specialty Contractors during the
design phase, the Specialty Contractor can contribute
towards developing a scope that better represents the
Owner’s actual requirements, which can lead to much larger
saving and overall value.”
Optimize Owner Involvement
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Formal design reviews occurred at 30% and 60%.
The primary stakeholder had third party
representation at all design meetings.
The Design-Build team presented regular design and
construction updates to the stakeholders
Stakeholder agreements set the budget
requirements.
The GMP was based on 60%(+) documents. The
D/B wanted 30%, but the Owner wanted 50% or
even 100%.
Optimizing Owner Involvement
• There was no loss of control because the
team members were shoulder to shoulder –all
on the same floor.
• The design never got ahead of us; there were
no surprises.
• When we achieved cost savings, we
redistributed the savings to add more scope.
Generating Schedule and Cost Savings
• Level of design effort
 To bridge or not to bridge
 Multiple packages
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Scope definition
Purchasing
Phasing and scheduling
Processes
Purchasing process
Purchasing process
Bid packages
 Prequalification of subcontractors
 Design schedule reflected process
 Design level varied
 Team review of bid results
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Don’t make process too complicated –Adds cost
Don’t make process too lengthy–Adds cost and time
Make process flexible and manageable –Allows for
innovative thinking
Consider the intangible costs–Bureaucracy complicates
Get the right people on the team
Develop trust between all on the team
Gain and maintain momentum
Develop process to fit Budget, Schedule, and Quality
SHOW UP WHERE THE WORK IS BEING DONE
 Preplanning
 Design
 Construction
 Commissioning