General
 
There are numerous delivery systems available for Owners to choose for their projects. One such method is DESIGN BUILD. In this approach the design services and the construction operations are performed under a single contract between the Owner and the Design Builder. A popular reason for selecting this approach is that there is a single point of responsibility and thus greater perceived certainty in the likely overall cost.

In recent years, the Design Build system has gained popularity but the level of Owner acceptance varies around the world. It is noted that in some countries virtually all significant infrastructure is implemented by Design Build, whereas in others it is in its infancy. The experience gained in many countries enables us to consider the type of challenges involved with Design Build and the best practice approach to facing these challenges.

Even though the Design Build system has its advantages, it does not fit all situations. Each method of project delivery has its features, advantages and disadvantages for each individual Owner, but none fits all situations. In Design Build, the Owner must understand that he gives up a level of control (depending on the process, the Owner can still exert a level of control i.e. “over the shoulder reviews”) over the final design process in favor of potential schedule advantages, financing options and introduction of innovative design and construction techniques. FIDIC recognizes the Design Build delivery system as a sound approach to the construction of infrastructure; but, does not recommend it above other systems.

The owner and procurement

The Owner has a primary obligation to understand the complexity of this delivery method by becoming an Informed Purchaser and to be committed to the additional upfront efforts required to clearly define the scope of the project and procure the services of a DESIGN BUILD team. The Design Build delivery system is not a substitute for Owner involvement.

If the Owner has an in-house engineering staff they should develop the parameters for procurement. Otherwise, the services of an independent Consulting Engineer (CE) should be used. The FIDIC policy paper “The Informed Purchaser” has many points which are applicable in securing a Design Build team, as well as a Consulting Engineer.  

FIDIC recommends that the selection of a Design Build team should always be on the Basis of Value and not just apparent least cost. Price alone should never be used as the criteria for selecting the design build team unless the project scope is very clearly defined. However, if that level of definition is available, FIDIC would recommend that the conventional Design-Bid-Build method may be more appropriate and likely result in the best value to the Owner.

As Governments and Industry downsize and eliminate in-house capability to manage projects, they sometimes find transferring design management to the contractor to be attractive. The transfer of risk is also attractive to some Owners; however, FIDIC recommends “Risk Management” rather than “Risk Transfer”. Under Risk Management the Owner and the design builder agree to place each risk with the party in the best position to manage that risk during the project.

The Design Build process involves a number of distinct phases which include:

• Planning, investigation, and conceptual design
• Procurement (negotiation)
• Implementation
• Operation

• Full compliance with the procurement specification or tender.
• Quality and track record of the total design-build team, including the design professionals.
• Quality of planning and design - how well the project will work.
• Quality and durability of materials offered.
• Life-cycle costing.
• Constructability.

• A review of available site data, and advice on what additional data is required;
• A concept design (or review and extension of owner's concept design);
• Preliminary designs and drawings, sufficient to indicate sizes, arrangements, capacities, etc. for tender pricing (refer to FIDIC scope definitions, in preparation [2]);
• Specification references;
• No, or limited, responsibility for design accomplished during the proposal stage (limited information, but contractor uses this design to bid);
• Limited Bill of Quantities (BOQ), with some items indicated by rates or units (e.g. reinforcement);
• Procedures to address quantity adjustments;
• Input to contract terms and conditions, design coordination, value engineering, construction engineering, client liaison, etc.

The owner needs to have enough preliminary design to “level the playing field.” As a guide, the extent of design input necessary to provide a reasonable order of tender accuracy, may be in the range of 15% to 30% of a full design.

2. Agreement

The CE should contract with the contractor on a standard form of agreement. This will include terms of payment and an accepted order of accuracy of design information provided by the CE. The level of Professional Liability coverage should not be excessive. It is important that the Contractor understands and accepts the preliminary nature of the tender design and includes due contingencies in his tender. It is important that the agreement for tender design recognizes that the CE will continue to produce the final design should the bid be successful.

3. Fees

The CE must be paid for the tender design services. FIDIC has issued a Practice Note on the subject of the Consultant in Design-build Contract. It is indicated in this note that the Consultant should never work without compensation. While many fee structures exist, FIDIC recommends the following options. Payment should be in full for the time inputs, or the CE may share in the contractor’s bidding risks through acceptance of a cost recovery basis which translates as 60% to 70% of the full fee for time inputs. (The fees may be converted to lump sum.)
 
In cases where a cost recovery basis is agreed and the contractor’s bid is successful, the CE is subsequently paid the balance of the tender design fee, plus a bonus of equal amount. For example, if the agreed fee is 70% of full rates for tender preparation, then where the bid is successful, the CE is due the balance of 30% plus a further 30% as a bonus, and thus is paid 130% in total.
 
In the case of the successful bid, the CE is subsequently engaged to complete the design and construction phase services under a separate fee arrangement, at a fee agreed prior to bidding and allowed in the bid. This fee for final design will reflect the payment already received for the input to tender.
 

The consulting engineer as prime contractor

In this model the CE holds the direct contract with the Owner and must have financial, managerial, and technical skills as well as equipment and manpower resources whether in-house or through subcontractor arrangements to properly execute the entire project. As the prime contractor, his obligations as engineer are not to be compromised. The Prime should use the same good business practices in this model that a constructor would use in the earlier described model.

The consulting engineer as the agent of the owner

This model is the most traditional role for the CE and services are contracted under a Professional Services Agreement. As stated earlier, in order for a successful DESIGN BUILD process to be realized there must be a clear definition of the work including a preliminary design in the range of 10% to 30% depending upon the project type. In this approach the CE would develop sufficient detail for the Owner’s documents such that the prospective DESIGN BUILD constructor’s proposals would be consistent to the point of making a rational selection. However, if the work cannot be quantified for pricing or the Owner cannot live with a substitute, then the work must be fully designed or specified and FIDIC recommends that the conventional Design-Bid-Build method would be more appropriate. The Owner’s CE may also function as a technical advisor throughout the project by providing such services as:

• Procurement
• Design review
• Quality control during construction
• Payment verification
• Dispute resolution
• Assistance during commissioning.

References

1. FIDIC Policy Paper: Informed Purchaser, FIDIC, 2005:
   www1.fidic.org/about/statement18.asp
2. FIDIC Definitions of Scope, in preparation.