New York: Things to Remember When Talking Design-Build

November 18, 2015 | Andrew Ausel

Like so many other states nationwide, New York is grappling with the challenge of updating their aged infrastructure in a time- and cost-efficient manner. To frame this issue and draw insight from the players seeking its solution, the Urban Land Institute (ULI) hosted two panels comprised of transportation experts – one from the public sector, the other from the private sector. The premise of the discussion centered on how P3s and design-build can help solve this challenge and the risks involved with each. And while the two draw many similarities, we thought it important as the only organization that defines, teaches and promotes design-build best practices, to point out some important aspects of design-build when comparing innovative project delivery methods.

While virtually all Public-Private-Partnerships (P3) are design-build, not all design-build contracts are P3s

While some often use the terms P3 and design-build nearly interchangeably, they are not.  Instead they should considered tools in the same tool box. While the two are similar in the fact that both P3 and design-build contracts require the design and construction work to be done by the same entity, some design-build projects are limited to just that, while P3s often also include the financing and sometimes maintenance aspects of a project. With this distinction, owners can distinguish some of the associated challenges of design build and P3s, which leads nicely into our next point.

Design-build doesn’t necessitate maintenance of the facility or road.

During the discussion, one panelist identified the challenge of private entities leaving “public agencies at risk when private parties fail to perform adequately” in keeping infrastructure in a state-of-good-repair. However, design-build contracts are recognized for their ability to define risks and often do not require the design-builder to maintain the facility after it is completed. Design-builders are given one very defined and comprehensive task, and as such, many of the accountability concerns of P3s or even design-bid-build often do not manifest under the design-build delivery method.

Similarly, some have argued that design-build teams will do only the contractually required minimum which can result in a project of lesser quality. However, this is usually the result of choosing the lowest bidder; the quality of a project is more accurately enhanced by using performance-based specifications and best value selection. Choosing the highest quality firms over the lowest-bid and creating performance-based specifications are proven methods to drive high quality performance.

In the end, the public actually doesn’t end up paying more than they said they would pay up front.

This is a common myth affiliated with most forms of alternative delivery, especially design-build. Payment agreements often used by design-build contracts, such as Guaranteed Maximum Price (GMP), will often set the price of a job higher than other delivery options that are less considerate of delivery risks. But a GMP accounts for potential challenges and overruns and as a result, provides the owner with a more realistic projection of what the project will cost. As a result, design-build projects tend to prevent the scope of projects from “creeping” up on owners as the project evolves.

Research has shown that projects with “more integrated teams had less schedule growth (4.4% less by project duration).” And, “projects with more cohesive environments had less cost growth (2.3% of budget) and higher-rated quality and turnover experience by the owners” (Charles Pankow Study). Furthermore design-build done with a GMP encourages cost efficiency as any savings created by alternative technical concepts or innovative construction methods are distributed to the design-builder.

Design-build has been shown to work well when dealing with multiple stakeholders and competing visions.

During the ULI panel, New Jersey’s Transit assistant executive director of Capital planning and programs Steve Santoro warned that some projects involving multiple jurisdictions could be further complicated by private involvement. “It depends on the scale,” Santoro stated. “As it gets bigger, it gets more difficult.” However, this challenge is one that is regularly overcome by the efficiencies of design-build. Large projects are going to be difficult no matter how you slice it, but creating a singular point of contact for both design and construction work is an easy solution to many logistical problems. Design-build enhances collaboration and helps to resolve competing interests, which is especially valuable when a facility will be used by multiple parties that may have varying interests.

In the end, DBIA advocates for the effectiveness and proven capabilities of design-build. And while our mission does suggest that we favor it over the other delivery methods, our mission does not preclude an understanding that other delivery methods may be better suited for different projects. But when considering innovative delivery methods such as design-build, it is important to recognize the advantages provided and how they fit into project needs and goals. With budget shortfalls and cost efficiency at an all-time premium for many projects today, design-build project delivery can provide each owner with distinctive collaboration and integration to deliver results on-time and on-budget.

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