DESIGN-BUILD WASHTO WYDOT
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1 DESIGN-BUILD An OVERVIEW for STATE DEPARTMENTS of TRANSPORTATION Prepared for WASHTO (Western Association of State Highway and Transportation Officials) WYDOT by Wyoming Department of Transportation June 2002 DESIGN-BUILD 1
2 DESIGN-BUILD An Overview for STATE DEPARTMENTS of TRANSPORTATION TABLE OF CONTENTS Preface and Acknowledgement... 3 Introduction... 5 Design-Build vs. Design-Bid-Build... 5 Appropriate Project Types... 6 Traditional Design-Bid-Build Process... 8 Newer Design-Build Process... 9 Procurement Methods Developing an RFQ/RFP Owner Concerns Legal Issue: Defective Designs Using Design-Build FHWA Rules and Regulations Conclusion Glossary WASHTO Survey: Design-Build DESIGN-BUILD
3 Preface The following information is provided for state department of transportation officials who are unfamiliar with the Design-Build process but are contemplating its usage. It is intended to serve as an introduction to the process, and accordingly, covers only major points while giving basic definitions. It is recommended that anyone giving serious consideration to proceeding with the Design-Build process first undertake a much more intensive review. More detailed information is available from numerous organizations, including the Federal Highway Administration (FHWA) Rules and Regulations, numerous other state departments of transportation that have successfully employed Design-Build, Design-Build Institute of America (DBIA), Associated General Contractors of America (AGC), Engineering Joint Contract Documents Committee (EJCDC), American Society of Civil Engineers (ASCE), National Society of Professional Engineers (NSPE), the insurance and surety industries, as well as others. Acknowledgement Various documents were used as reference material in the preparation of this overview. These include the course notebook for Successful Design-Build Project Delivery developed by the Design-Build Institute of America, the Construction Contractors Guide to the Design-Build Process published by the Associated General Contractors of America, the FHWA Notice of Proposed Rule Making, Rules and Regulations for Design-Build filed in the Federal Register on Oct. 19, 2001, and the notebook on Design-Build assembled by CH2M Hill. DESIGN-BUILD 3
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5 Introduction The term Design-Build is used to describe a process where a project sponsor (often a public sector agency such as a state department of transportation) engages a private contractor to perform both design and construction work under terms of a single contract. This is in contrast to the more traditional Design-Bid-Build process whereby the sponsor is responsible for completing all design work before the project is let to contract using the competitive bidding process. There are a variety of methods the sponsor (usually referred to as the owner ) may use to select a Design- Build firm. Likewise, there are a variety of arrangements that may be used by the firm to accomplish the work. The fundamental aspect of Design-Build is that one firm assumes the responsibility for both design and construction. Design-Build vs. Design-Bid-Build Of the several important differences between Design-Build and Design-Bid-Build, perhaps most notable is the separation of design from construction. With Design-Bid-Build, the owner -- either with inhouse staff or by use of a design consultant -- designs the project and puts together a plans and specifications bid package. Bids to build the project are then submitted by various contractors and the project is awarded to the contractor that submits the lowest responsive, responsible bid. DESIGN-BUILD 5
6 DESIGN-BUILD vs. DESIGN-BID-BUILD (continued) There are a number of reasons for considering the Design-Build process. Chiefly, these are: Faster project completion; Lower staffing needed by owner; Potential for less conflict between owner, designer and construction company; Potential for lower costs and/or higher quality; Often allows for more innovation. A study undertaken by the Construction Industry Institute identified a unit cost reduction of 6 percent and an overall project delivery time of 33 percent faster for Design-Build compared to Design-Bid-Build projects. Project Types Appropriate for Design-Build There is no clearly defined standard for determining which particular projects are most suitable for a Design- Build process. Each project should be looked at to determine its potential. Considerations include whether the project schedule is tight and what degree of control over design details does the owner want. Other factors include how much design has already been accomplished, and how much more design must be done. An additional factor is whether Design-Build is in line with state laws and regulations, and similarly, whether its use meets professional licensing laws and regulations. When federal highway funds are involved, a number of requirements come into play. These include: Compliance with provisions of the National Environmental Policy Act (NEPA); Use of federal procurement documents and contracting provisions; Suitable effort to meet disadvantaged business enterprise (DBE) requirements; Compliance with Buy America requirements, Davis- Bacon requirements and certain auditing requirements. 6 DESIGN-BUILD
7 Additional details can be found in Federal Highway Administration (FHWA) Rules and Regulations. Who Should Assume Risk - Owner or Design- Builder? It s logical to assume that a certain amount of risk must be borne by the Design-Build firm. However, experience shows that some liability must be retained by owner; otherwise, an undue burden would be placed on the Design-Builder, resulting in time delays and additional costs. When pursuing highway and other linear projects, an issue for the owner will be how to determine where to assign risk for NEPA, right-of-way acquisitions, utility relocations, environmental documentation and compliance, archaeological and historical sites, hazardous materials and other related project constraints. More discussion about each of these topics follows. For linear roadway projects, a general rule of thumb is that the owner will typically complete about 25 to 35 percent of the preliminary design work, thus minimizing some risks, and avoiding others altogether, being placed on the Design-Builder. The owner completes this amount of design by using either in-house personnel or a bridging design consultant prior to requesting proposals from Design-Build firms to complete the design and then proceed to construction. NEPA documentation: Preparation of the NEPA document is often very time consuming and may significantly affect design. For this reason, a project owner often takes direct responsibility for completing this phase of the project preparation process prior to involving a Design-Build firm. Right-of-way acquisition: Right-of-way acquisition is also time consuming, thanks in part to the need to meet special federal and state requirements. Given this, it is often desirable for the owner to assume this risk and either have secured the right-of-way, or at least be able DESIGN-BUILD 7
8 to provide the Design-Builder with a definitive schedule for the right-of-way acquisition. Utility relocations: Prior to obtaining proposals from Design-Build firms, it is common for the owner to at least identify conflicting utilities and either relocate them or enter into an agreement with utility companies regarding relocation work. Hazardous material sites: Identification of hazardous material sites is a risk best assumed by the owner even though the Design-Build firm may be assigned responsibility for remediation efforts. Other risk factors: Various other risk factors, such as archaeological, biological, historic and paleontological requirements, vary from project to project, and responsibilities for obtaining necessary clearances need to be considered on a case-by-case basis. In summing up, when it comes to considering risks and responsibilities, the owner must take into account that assigning excessive risk to the Design-Build firm may create disputes as well as result in a higher price and longer completion time for the Design-Build contract. Traditional Design-Bid-Build Process Advantages In a couple of words, the advantage of staying with a Design-Bid-Build process can be described as familiarity and understanding. Design engineers are familiar with the process and contractors are familiar with it as well. Likewise, staff of the owner agency understand how it is done, as do legislators and members of the general public. Another advantage of Design-Bid-Build is its suitability for the competitive bidding process, which may be required in accordance with state statutes. Other advantages are: Having the design engineer working directly for owner; 8 DESIGN-BUILD
9 Adherence with legal precedents that have been established over time; Insurance and bonding mechanisms are well defined; Absence of legal barriers in procurement and professional licensing. Disadvantages Along with the advantages come some disadvantages. For starters, the owner must manage two contracts, with the owner assuming all responsibility for design adequacy and frequently being more involved in disputes. Conflict arises due to the owner, engineer and contractor having different objectives, with disagreements arising when the low bid is not the best value and when problems are created by bids being over budget. Not having the contractor involved in the design process makes it more likely for misunderstandings to arise, and ultimately, slow downs in project completion. Ultimately, Design-Bid-Build is generally more litigious than Design-Build. Newer Design-Build Process Advantages Perhaps the most commonly cited advantage of Design-Build is that it is necessary for the owner to deal with only one firm. Only one Request For Qualifications (RFQ) and one Request For Proposal (RFP) is needed, instead of the two contracts needed when the Design- Bid-Build process is employed with a design consultant and a construction contractor. Another often-cited benefit is having the design engineer and contractor working together from a relatively early stage of the project. The engineer and contractor can be unified when dealing with owner. Other advantages which may be gained include: Provides earliest knowledge of firm costs; DESIGN-BUILD 9
10 Allows for continuous Value Engineering; Provides for faster project delivery; Possibly results in higher quality; Provides clearest assignment of risks; Generally results in fewer claims and less litigation. Disadvantages In contrast to the familiar feel of the traditional Design-Bid-Build process, Design-Build is a newer process which requires participants to negotiate a learning curve. Often, the greatest need for education and buy-in may be with owners personnel. When using Design-Build, owners are faced with having to make earlier and timelier decisions. Further, in some states, barriers to both procurement and professional licensing may be encountered. Some aspects of the Design-Build process may not be allowed unless statutes can be amended. Other disadvantages may include: A need for new insurance and bonding products; Resistance by those unfamiliar with system; A need to educate the public, legislators, local governments, engineering firms, contractors, and bonding and insurance companies. Procurement Methods Various methods of procurement may be used, with procurement in this context meaning how an agency goes about hiring or entering into an agreement with an engineering or construction company. Some of the most well-known methods are: Sole Source: When public-sector projects are involved, this type of procurement usually happens only in emergency situations; Qualification Based Selection: A problem may arise when public-sector agencies attempt to allow construction under same contract as design, without advertising for competititve bidding for at least the construction portion of a project; 10 DESIGN-BUILD
11 Low Bid, or Information For Bid: This is a method whereby a single bid to undertake a project includes at least partial design in addition to all of the construction work; Best Value Procurement: This is the most commonly used procurement method for obtaining Design-Build services. It is usually a two-step process with the owner issuing both an RFQ and an RFP before contract award is made to the Design-Build firm providing the best value. Design-Build - Best Value Procurement Under the traditional Design-Bid-Build model, and when design work is done by the owner (or by a consultant hired by the owner), the designer is selected on qualifications, while the contractor is selected via the low-bid process. However, Design-Build usually integrates the above two into a best value selection, combining technical aspects and price considerations. This method can be weighted towards qualifications, or towards price. Because selection methods can range from sole source to low bid, best value represents a middle of the road procurement method. Experience has also shown that: Selections tend toward price orientation when 30 percent or more of the design work is provided by the owner; Selections are more qualification based when less than 30 percent of the design is provided to the firm; When using Design-Build for the first time, owners tend to provide more design, but as they become more experienced, they tend to provide less design; The national trend is towards more Design-Build contracts, with projects of this type now constituting about 45 percent of the market. Types of Design-Build Firm Organization The organizational makeup of Design-Build firms varies. An integrated firm is one where both design and DESIGN-BUILD 11
12 construction functions can be accomplished. In other cases, a construction company will serve as prime while hiring an engineering consultant as subcontractor, or conversely, an engineering firm will serve as prime while bringing in a construction company subcontractor. Also possible is a joint venture with engineering and construction firms working together. Degree of Advance Design Varies for Design-Build The amount of preliminary design completed by the owner can and does vary significantly with individual Design-Build contracts. In the case of Direct Design- Build, a negligible amount of completed design or design criteria is provided. With Design Criteria/ Design-Build, only design criteria is provided. With Preliminary Design/Design-Build, the owner completes a portion of the design -- generally about 25 to 35 percent of the job -- before turning the remaining work over to the Design-Build firm. Developing an RFQ/RFP for a Design-Build Project When developing an RFQ and an RFP, the owner intent on going with Design-Build should consider needs and program requirements, and should determine what the cost would be to design and construct a similar facility. Also, the owner should consider whether conceptual or bridging design is more appropriate for the project. The latter term refers to the practice of the owner partially completing a design prior to issuing an RFQ/ RFP. The owner must decide whether a bridging design is needed, and if so, how far should it be advanced? Not surprisingly, design professionals generally favor conceptual designs, while Design-Builders believe bridging designs inhibit creativity and innovation. Other perceived frequently mentioned disadvantages of bridging designs are: They tend to stifle competition; 12 DESIGN-BUILD
13 Contractor innovation is not available during the preliminary stage of design; They require significant front-end time and cost; Owner is responsible for conceptual design; Two design teams -- which may have differing ideas -- are involved in overall project development. However, bridging designs do offer some advantages, some of which are: They allow owner input in design decisions; They allow use of standard designs; They reduce design costs for Design-Build firm; They make it easier to select firm based on low bid and reduce the necessity of technical evaluation. Items Included in RFQ/RFP Development Numerous items are typically found in the two-step process of developing an RFQ /RFP. The documents can start with a project description along with a statement of objectives to help define what requirements the successful team will be expected to meet. Other information in RFQ portion includes project location and schedule, as well as the makeup of the selection team (sometimes called a jury ) and a schedule for issuance of the subsequent RFP. Usually, the RFQ document also includes: How selection of the Design-Build firm will be made and what factors will be used; Process for writing the RFP, including an outline of requirements for qualification statement; Requirements of Design-Build contract. Additional items in the RFP portion include requirements of both the proposal and the contract. Usually, these items fall into the following areas: Program and project requirements (often presented in narrative form); Performance requirements (generally favored over perspective specifications); DESIGN-BUILD 13
14 Design and construction requirements (which may include design submittals and review time minimums). Other items include how to handle any addenda to RFP which may be necessary, and how to present any preliminary design information provided by the owner. Also, how will any process of clarification be handled? It is very important that the owner knows and communicates comprehensive and clear program and performance requirements. Design requirements and specifications expected of the Design-Builder should be clearly spelled out. Failure to provide accurate information can lead to disputes and add cost to the contract. How Will the Award be Determined? A number of questions will arise when the time comes to determine how a Design-Build firm will be selected. These include: Who will evaluate proposals? Who will make the award? What factors and weights will be the basis for technical evaluations? How will cost be factored in? Will the selection team (or jury) decide or just make a recommendation? Typical Items in RFP Requirements Numerous decisions will need to be made when setting requirements for RFPs. For example, eligibility standards may need to be set. Stipends or honoraria may be paid; if so, it must be determined how many firms will be paid and how much these payments will be. A schedule for the RFP will need to be determined. If any meetings are to be held prior to the proposal submittal deadline, when and where will they be conducted and how many will be needed. Further items to consider: What form(s) will be used for proposal submittal? Will alternates be allowed, and if so, how will they be handled? 14 DESIGN-BUILD
15 What are the submittal requirements? Will presentations be required or allowed? If addenda become necessary, how will they be issued and when? What will be the selection criteria? Items in Contract General Conditions Delineation of responsibilities of the owner as opposed to those of the Design-Builder is an important item to address. Other notable detail items include the preferred hierarchy of documents, design submittal reviews, the owner s right to use design and how extra work orders will be handled. Requirements may be set for a number of topical areas, including, but not limited to, disadvantaged business enterprise (DBE), quality assurance/quality control (QA/QC), warranties, insurance, bonding and standard of care (for the Design-Builder). Differing site conditions should also be addressed. Standard forms of agreements for Design-Build contracts have been devised by several groups including the Design-Build Institute of America (DBIA), American Institute of Architects (AIA), Associated General Contractors of America (AGC), Engineering Joint Contract Document Committee (EJCDC), American Society of Civil Engineers (ASCE) and the National Society of Professional Engineers (NSPE). Other Items to Consider Several variations are available when it comes to contract pricing. One is the lump sum method, another is the guaranteed maximum price, and yet another is reimbursable costs plus incentives. Whichever method is used, risk sharing between the owner and the Design- Build firm needs to be fair, balancing risk with reward. Likewise, there are various methods of negotiated Design-Build procurement. These include making the selection based solely on qualifications, or based on best value, or based on best and final offer. In any case, it DESIGN-BUILD 15
16 should be remembered that state and federal statutes often restrict the extent of negotiated procurement for public entities, which generally have to use a form of competitive procurement. Varying methods available for making competitive procurement selections are described as follows: Weighted matrix, which establishes weight for both technical aspects as well as cost; Fixed budget with best technical proposal; Adjusted low bid; adjusts offer price based on technical merit; Low bid for equivalent designs; Lowest price for technically acceptable proposals. Owner Concerns Not surprisingly, communicating clearly and effectively is key to undertaking a successful Design-Build effort. Good two-way information flow is necessary right from the start of the process when project announcements and advertisements are prepared. Other areas of concern in this regard include working to ensure the quality and completeness of any RFQs and RFPs which are assembled, as well as conducting productive meetings with individuals or groups. Communications savvy is also important in knowing how to handle and answer questions, deciding whether to make in-person presentations and knowing how to create useful addenda. Design completion and owner review/approval How, and to what degree, the project owner will be involved in completing the design portion of a Design- Build project is also an important concern. One item which hinges on the amount of involvement is what resources must be budgeted for contingencies and changes. Generally, the final design and contract documents are the responsibility of the Design-Builder, with the owner reviewing and approving those products to ensure compliance with the RFP and Design-Build contract. 16 DESIGN-BUILD
17 The owner may accomplish some or all of this quality assurance work by using a peer review process. Regardless of what method is used for checking the quality of the design, the Design-Builder will continue to maintain liability for the design. It will be incumbent upon the owner to review and approve any change orders which may become necessary. Owner provides limited quality assurance Although not responsible for making design decisions, the owner will provide prudent oversight but not detailed inspections. When it comes to specifications, using performance, instead of perspective, is desirable. Further, the owner should plan to perform tests and provide inspections only to confirm design assumptions made by the Design-Builder; otherwise, the performance of in-depth inspection and testing will be one of the requirements of the Design-Builder. Modifications and changes Because changes always carry the potential for increasing costs, it is recommended that the procedure for explaining and defining how the owner can go about making changes be set forth in writing. Unless otherwise specified, the Design-Builder should have the right to make changes with notification to owner. At the same time, the Design-Builder should continually engage in Value Engineering for the project. Legal Issue: Who pays for defective designs? Design-Bid-Build Under the traditional Design-Bid-Build process, the owner typically provides to the contractor an implied warranty of adequacy of plans and specifications, with the contractor in turn warranting the adequacy of plans and specifications to subcontractors. In this scenario: The contractor only has to prove the design was defective and that it cost money; DESIGN-BUILD 17
18 The owner has a much more difficult time proving professional negligence of the design firm; The owner must prove malpractice or professional negligence and that a standard of care was not met; Design professionals usually have limited liability and are often somewhat thinly capitalized, making it impossible to pay for major mistakes. Design-Build One-stop shopping is a term often used when it comes to addressing the issue of responsibility and liability; the Design-Builder is totally responsible to owner for both design and construction. Beyond that, there is the issue of whether there will be warranties, and if so, what they will cover and for how long. Using Design-Build Factors to consider with Design-Build Numerous factors must be considered when undertaking a Design-Build project. These include state procurement statutes, federal procurement requirements (when federal funds are involved), state licensing statutes and regulations, types and amounts of insurance coverage, bid and performance bond requirements, and FHWA rules and regulations. Contract issues with Design-Build Details in Design-Build project contracts typically address items such as performance requirements, warranties for product acceptability, and standards of care. An important issue is assigning responsibilities in case of defective work. If disputes arise, will resolution be attempted using mediation or arbitration? If these measures become necessary, who will pay attorney fees? The contract should also address how termination for convenience will be handled. Generally, the owner retains the right to take this action, but details to be out- 18 DESIGN-BUILD
19 lined include how associated costs will be handled and who owns any design work which has been completed. State professional licensing and contracting statutes In most states, licensing statutes were originally codified to set a strict distinction between design and construction, and generally, have not been updated to reflect increasing usage of Design-Build. Unfortunately, violation of statutes may have criminal implication as well as negate contracts. Due to concerns about the Design-Build philosophy among legislators, members of trade groups, and others, a need for increased public education and awareness exists, as does a need to update applicable laws. State procurement statutes Similarly, procurement laws in most states reflect the competitive sealed bidding process for construction, and conversely, the selection of professional services based solely on qualifications, and not price. As is the case with licensing laws, procurement laws have not kept pace with the increased Design-Build usage, and as a result, contracts which violate these laws may not be enforceable. Again, an identifiable need exists to update applicable laws. Insurance requirements and associated problems When using Design-Build, the overall risk management assessment includes the issue of insurance and bonding requirements and the decisions about risk allocation. Like other sectors, the insurance industry has lagged behind the trend of increased Design-Build usage, although available insurance products are now expanding. The owner still needs to compare benefits against costs. Typically any coverage which may be obtained for errors and omission excludes construction errors. Likewise, commercial general liability coverage exclude DESIGN-BUILD 19
20 design errors, as do performance bonds. In these cases, special coverage or riders may be needed. Types of primary insurance coverage required are: Commercial general liability; Professional liability; and Property damage. It is important to remember that surety bonds do not constitute insurance, and that design firms often lack the capital to secure bonds. Many surety companies are unwilling to bond Design-Build projects. Further, these firms generally do not underwrite bond issues to cover design liability, and they have concerns about the confusion between design and construction claims. Surety companies also: Often require higher premiums and tighter underwriting; Often bond only construction; Require coordination of bonds with insurance coverage for errors and omissions coverage. Observers report that the surety industry is now beginning to respond to usage of Design-Build. An in-depth review of desired insurance coverage, bonds and other products available is needed before Design-Build is used. FHWA Rules and Regulations on Design - Build Docket No. FHWA On Oct. 19, 2001, the FHWA filed a Notice of Proposed Rule Making (NPRM) in the Federal Register for Design-Build Contracting. The final rules will amend 23 CFR Parts 627, 635, 636, 637 and 710. The deadline for written comments to this notice of federal rule making was Dec. 18, The final rule will establish prescribed policies and procedures for utilizing the Design-Build contracting method on federal-aid highway projects, and the final 20 DESIGN-BUILD
21 rule will need to be followed any time federal funds are to be used for state DOT Design-Build contracts. When this publication was produced, the final rule had not yet been published. Items mentioned in the NPRM For starters, the monetary amount of a project is required for Design-Build approval, unless approved under Special Experimental Projects Number 14 (SEP- 14), Innovative Contracting. Design-Build contracts must comply with section 102 of the NEPA of 1969, and must include opportunities for Value Engineering and DBE participation. Standardized changed condition clauses include: Differing site condition; Suspensions of work ordered by the engineer; Significant changes in the character of work; Other sections of the NPRM address procedures for licensing and qualification of contractors, advertising for bids, bid opening and bid tabulations, award of contract and concurrence in award, and subcontracting and contractor responsibilities. Also addressed are participation in progress payments, authorizations, product selection, warranty clauses, quality assurance procedures and right-of-way acquisition. The notice also includes a definition of terms and questions and answers. CONCLUSION Design-Build is a good alternative method of project delivery that deserves consideration but is not necessarily the only valid solution. All available mechanisms deserve consideration and another type of solution may be more appropriate for a particular situation. DESIGN-BUILD 21
22 Glossary Adjusted low bid: A form of best value selection in which qualitative aspects are scored on a 0 to 100 scale expressed as a decimal; cost is then divided by qualitative score to yield an adjusted bid or cost per quality point. Award is made to offeror with the lowest adjusted bid. Best value selection: Any selection process in which proposals contain both cost and qualitative components and award is based upon a combination of cost and qualitative considerations. Clarifications: A written or oral exchange of information which takes place after the receipt of proposals when award without discussions is contemplated. The purpose of clarifications is to address minor or clerical revisions in a proposal. Competitive range: A list of the most highly rated proposals based on the initial proposal rankings. It is based on the rating of each proposal against all evaluation criteria. Communications: Exchanges, between the contracting agency and offerors, after receipt of proposals, which leads to the establishment of the competitive range. Contracting agency: The agency which represents the owner for the Design-Build project. Competitive acquisition: An acquisition process which is designed to foster an impartial and comprehensive evaluation of offerors proposals, leading to the selection of the proposal representing the best value to the contracting agency. Deficiency: A material failure of a proposal to meet a contracting agency requirement or a combination of significant weaknesses in a proposal that increases the risk of unsuccessful contract performance to an unacceptable level. Design-Bid-Build: The traditional project delivery method where design and construction are sequential steps in the project development process. Design-Build contract: A single contract which provides for design and construction services. 22 DESIGN-BUILD
23 Glossary (continued) Design-Builder: The entity contractually responsible for delivering the project design and construction. Discussions: Written or oral exchanges that take place after the establishment of the competitive range with the intent of allowing the offeror to revise its proposal. Fixed price/best design: A form of best value selection in which contract price is established by the owner and stated in the Request For Proposals document. Design proposals and management plan are evaluated and scored, with award going to the firm offering the best qualitative proposal for the established price. Modified Design-Build: A variation of Design-Build in which the contracting agency furnishes offerors with partially complete plans (generally 30 to 35 percent complete). The Design Builder s role is generally limited to the completion of the design and construction of the project. Organizational conflict of interest: If due to other activities or relationships with other persons, a person is unable or potentially unable to render impartial assistance or advice to the owner, or the person s objectivity in performing the contract work is or might be otherwise impaired, or a person has an unfair competitive advantage. Prequalification: The contracting agency s process for determining whether a firm is fundamentally qualified to compete for a certain project or class of projects. The prequalification process may be based on financial, management and other types of qualitative data. Prequalification should be distinguished from short listing. Price proposal: The price submitted by the offeror to provide the required design and construction services. Proposal modification: A change made to a proposal before the solicitation closing date and time, or made in response to an amendment, or made to correct a mistake at any time before award. Proposal revision: A change to a proposal made after the solicitation closing date, at the request of, or as DESIGN-BUILD 23
24 Glossary (continued) allowed by a contracting officer, as the result of negotiations. Qualified project: Defined by the FHWA. Request For Proposals (RFP): The document that describes the procurement process, forms the basis for the final proposals and may potentially become an element in the contract. Request For Qualification (RFQ): The document issued by the owner in Phase I of the two-phased selection process. It typically describes the project in enough detail to let potential offerors determine if they wish to compete and forms the basis for requesting qualifications submissions from which the most highly qualified firms can be identified. Single-phase selection process: A procurement process where cost and/or technical proposals are submitted in response to an RFP. Short listing is not used. Short listing: The narrowing of the field of offerors through the selection of the most qualified offerors who have responded to an RFQ. Solicitation: A public notification of an owner s need for information qualifications, or proposals related to identified services. Stipend: A monetary amount sometimes paid to the most highly qualified unsuccessful offerors. Technical proposals: The portion of a Design-Build proposal which contains design factors, layout, aesthetics and specifications for materials. Tradeoff: A method of source selection which allows you to select the source which represents the best value. This process permits an exchange between cost and noncost factors and allows you to accept other than the lowest priced proposal. Two-phase selection process: A procurement process in which the first phase consists of short listing (based on qualifications submitted in response to an RFQ) and the second phase consists of the submission of cost and technical proposals in response to an RFP. 24 DESIGN-BUILD
25 Glossary (continued) Weakness: A flaw in the proposal that increases the risk of unsuccessful contract performance. A significant weakness in the proposal is a flaw that appreciably increases the risk of unsuccessful contract performance. Weighted criteria process: A form of best value selection in which maximum point values are preestablished for qualitative and cost components, and award is based upon high total points earned by the offerors. Reference: Terms as defined in FHWA Docket No. FHWA dated Oct.19, DESIGN-BUILD 25
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27 SURVEY on DESIGN-BUILD Usage Among WASHTO States During the spring of 2002, a questionnaire on usage of Design- Build was submitted to the 18 WASHTO states. For each state, the questionnaire was directed to the state DOT s representative for the Sub-Committee on Design. Each representative was asked whether his or her state had used Design-Build, and if so, how many times, and what was the total cost of all of the Design-Build contracts to date. The representatives were also asked whether their state was considering using Design- Build in the future, and if so, how many contracts were anticipated, and what was the estimated total cost of the future contracts. A Questionnaire on usage of Design-Build was submitted to all WASHTO State DOT s. The sub-committee on Design Representative, for each State, was used as the initial contract. Responses were received from all 17 States. The questions included were as follows: 1. Number of Design-Build Contracts to date: 2. Total cost of all Design-Build Contracts to date: 3. Number of future Design-Build Contracts being considered: 4. Estimated total cost of future Design-Build contracts being considered: For each individual project, the following information was requested: Project Number Name: Length: miles Type of Work: Contract Amount: $ 5. Percent design completed prior to Design-Build Contract: % 6. Included in Design-Build Contract: a. Environmental: Yes No b. Design-Build Survey In addition, for those states where Design-Build had been used, the representatives were asked to provide details about the individual Design-Build projects, including the project name and number, the length of the project, what type of work was accomplished, and what was the contract amount. Additional details included what percent of the design work was completed prior to the beginning of the Design- Build contract and whether the contract required the Design-Build firm to undertake environmental clearance, utility relocation, right-ofway acquisition, warranties, and quality control/quality assurance work. Respondents were also asked what year the Design-Build contract was issued and what year the ensuing construction was completed. See Page 28 for Summary of Response DESIGN-BUILD 27
28 SUMMARY of RESPONSE WASHTO states were split exactly in terms of whether they had yet undertaken any Design-Build contracts. Nine states (Alaska, Arizona, Colorado, Hawaii, New Mexico, Oregon, South Dakota, Utah and Washington) had used Design- Build at least once. Nine states (California, Idaho, Montana, Nebraska, Nevada, North Dakota, Oklahoma, Texas and Wyoming) had not used Design-Build. Two respondents from two states indicated that although their state had not yet used Design-Build, they intend to do so. Other respondents indicated their state is prohibited statutorily from using Design-Build. In general, the states which have used Design-Build in the past are considering using it again. There is a wide range of dollar amounts anticipated for future Design-Build contracts. The smallest contract reported was worth about $20 million, and the largest surpassing $1.5 billion (in both Utah and Colorado). Respondents indicated the average percent of design completed prior to letting a Design-Build contract was in the percent range. No states included the environmental process in the Design-Build contracts, and in most cases, utility locates were not included in the Design-Build contracts, but the actual relocations were. In addition, right-of-way acquisitions were usually not included in the Design-Build contracts, and slightly more than half of the states have included warranties in their Design-Build contracts. Almost all states included QA/QC (Quality Assurance and Quality Control) in their Design-Build contracts. 28 DESIGN-BUILD 28 DESIGN-BUILD
29 28 DESIGN-BUILD
30 WYOMING Department of Transportation 28 DESIGN-BUILD
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