Transcript Design-Build - Virginia Association of Governmental Purchasing

Demystifying Design-Build
Virginia Association of
Governmental Purchasing
March 22, 2007
By: Thomas R. Folk
Reed Smith LLP
Phone: 703-641-4294
E-mail: [email protected]
Design-Build
 Design-build is a construction project delivery
method that provides an alternative to the traditional
design-bid-build delivery method and the
construction-manager delivery method.
 Under design-build, the owner has a contract with
the design-builder, who provides both A/E and
construction services
 Owner typically has developed program and
conceptual design prior to contract with designbuilder, and typically contracts with design-builder
when at about 30% design development
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Design-Build (con’t.)
 Design-build is widely used in the private sector
 Design-build becoming more prevalent in federal
sector
 Design-build was rare, but now used more by
Virginia public entities due to the Virginia PublicPrivate Education Facilities & Infrastructure Act of
2002 (“PPEA”) and 2006 amendments to the
Virginia Public Procurement Act
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Design-Build by Virginia Public
Entities - PPEA
 Design-build may be used under Virginia
Public-Private Education Facilities
Infrastructure Act of 2002 (“PPEA”), Va.
Code § 56-575.1, et seq.
 Under the PPEA, design-build, procured by
competitive negotiation, is the prevalent
project procurement and delivery method
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Design-Build Under Virginia Public
Procurement Act - Commonwealth
 Section 2.2-4306 of the Virginia Public
Procurement Act (“VPPA”) gives the
Commonwealth authority to use design-build
 Commonwealth must act in accord with
implementing procedures adopted by
Virginia Secretary of Administration, which
are in Chapter 11 of The Construction and
Professional Services Manual
 Limitations to certain types of construction
and requirement for written approval
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Design-Build Under Virginia Public
Procurement Act – Other Public Bodies
 Section 2.2-4308 of VPPA gives authority to
other public bodies to use design-build
 However, stated statutory preference is for
traditional competitive sealed bidding and
design-bid-build
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Prerequisites Under VPPA
1. To do design-build, must be fixed price or not-toexceed price contract
2. Public body must use Architect/Engineer to advise
and assist with RFP and selection process
3. Public body must get approval from DesignBuild/Construction Management Review Board in
Richmond
4. Before July 1, 2006, public body had to make
award to the lowest cost acceptable proposal
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Amendments Made by Senate Bill 732, Effective
July 1, 2006, Make Design-Build A Bit Easier
1. Governing body of locality with population
in excess of 100,000 can get one-time
determination from DesignBuild/Construction Management Review
Board in Richmond for multiple projects
2. May now make “best-value” award rather
than “lowest cost”
3. Must use procedures consistent with twostep competitive negotiation
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What Are the Design-Build Delivery
Method's Potential Advantages and
Disadvantages?
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Potential Advantages of Design-Build
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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Potential Disadvantages of DesignBuild
1. Less control by owner over design process.
2. Owner no longer has architect to assist it in contract
administration.
3. Ensuring scope and quality of work within a specific budget
much more difficult.
4. Results may depend on design-build experience of constructor
and architect and their experience working together previously.
5. May limit field of contractors and subcontractors willing to
compete.
6. 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.
7. Bond premiums and the design-builder's fee/profit are higher
than under design-bid-build.
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What Are The Project Owner's Particular
Concerns In Using Design-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
design-bid-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 designbuilders 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.
What Standard Form Documents Are
Available And What Ones Do Owners
Prefer?
 The AIA, DBIA and AGC documents are the
primary standard-form design-build
documents used in the private sector.
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What Standard Form Documents Are
Available And What Ones Do Owners
Prefer? (con’t)
 None of these documents were drafted by
an owner’s group or with the primary interest
of owners in mind. Each set of documents
has provisions favoring the constituency
whose organization drafted them. Each set
has differences with the other, some of
which are more preferable to the owner. All
these standard documents generally should
be modified by an owner before agreeing to
their use.
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AIA
Formerly AIA A191-1996 series, with A201 General
Conditions
Now AIA A141-2004 series
(A141, A142, B142, B143, G704 (DB))
No use of A201General Conditions now. No separate
documents for fixed price and costs plus fee contracts.
Instead, exhibits to AIA A141 offered for these
purposes.
(Exhibit A to A141 - Terms and Conditions, Exhibit B Determination of the Cost of the Work, and Exhibit C Insurance and Bonds.)
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DBIA
 DBIA No. 525-1998 (Lump Sum)
 DBIA No. 530-1998 (Cost Plus Fee-GMP)
 DBIA No. 535-1998 (General Conditions)
Use DBIA No. 525 or No. 530
with General Conditions at No. 535
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AGC
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AGC No. 410-1999 (Cost Plus Fee with a GMP)
What Standard Form Documents Are
Available And What Ones Do Owners
Prefer? (con’t)
 Except as to provisions on ownership/use of
documents, professional liability insurance, and
arbitration, where the AGC document has been
more favorable to the owner, prior to 2005, the DBIA
documents were preferable to owners because the
AIA A191-1996 document was both cumbersome in
its two-part format and unfavorable to the owner.
The DBIA Nos. 525, 530 and 535 documents were
easier to use and relatively even-handed, although
still slanted toward the design-builder and needing
modification.
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What Standard Form Documents Are
Available And What Ones Do Owners
Prefer? (con’t)
 The AIA's 2004 design-build contracts (A141, A142,
B142, B143, and G704(DB)) are a tremendous
improvement over the 1996 AIA documents and are
now preferable to the DBIA documents from an
owner’s perspective. However, the new AIA designbuild documents still have major shortcomings from
an owner's perspective. Owners’ attorneys now
generally prefer to use the AIA A141 document and
modify it. Particular areas needing modification are
ownership/rights of use for documents, professional
liability insurance, the design development process,
and arbitration.
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Some Selected Issues
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1.
Ownership of Work Product
2.
Design Development Process
3.
Waiver of Consequential Damages
4.
Professional Liability Insurance
5.
Changes and Payment for Disputed
Changes
6.
Compensation for Delay
Ownership of Work Product
1. AIA provisions are the worst
2. Should modify all to give owner greater
rights
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Design Development Process
1. All are too sketchy and give owner little
control
2. Additional control to a point is good, but too
much owner involvement is not good due to
costs of administration, potential to create
claims
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Waiver of Consequential Damages
Should always get waiver of home office
overhead claims. DBIA document does not
waive home office overhead claims.
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Professional Liability Insurance
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
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)
Compensation for Delay
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
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
Changes and Payment for Disputed
Changes
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
AGC and DBIA approaches not acceptable
to owner. AGC is worst.

AIA approach more owner-friendly and
reasonable
Conclusion
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
Increasing use of design-build

PPEA and amendments to VPPA make use
by public entities easier

Design-build method has advantages and
disadvantages

Pay close attention to contract documents,
and modify AIA, DBIA and AGC documents