Progressive Design-Build
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1 Progressive Design-Buid Progressive Design-Buid Design-Buid Procured with a Progressive Design & Price A Design-Buid Done RightTM Primer 1
2 Progressive Design-buid Progressive Design-Buid Design-Buid Procured with a Progressive Design & Price A DESIGN-BUILD DONE RIGHT TM PRIMER Background Design-buid has been used in the private sector for decades, particuary in the industria and process industries (often known as EPC or engineeringprocurement-construction). In executing their designbuid projects, private sector owners typicay contract with their design-buiders eary in the project s ife. They not ony want to take fu advantage of the designbuider s expertise, but aso want to work coaborativey with the design-buider to deveop a design that meets the project s goas. Recognizing the benefits of having the best team working on their behaf, private sector owners typicay seect their design-buiders primariy on quaifications. Whie most private sector owners utimatey expect their design-buiders to provide price, schedue and performance commitments, they defer obtaining these commitments unti after the design has been sufficienty defined enhancing the opportunity for coaboration, teamwork and the ikeihood of project success. Once the parties have negotiated and agreed upon the commercia terms of their reationship, the owner can be more assured that the design-buider s commitments wi be honored the design-buider s continuum of invovement creates ownership and eads to reiabe commitments. The concept here is that the design-buider heps create it and wi therefore support it. This effort essentiay aigns expectations up front before executing the work of design and construction, thus significanty reducing the misaigned expectations for scope, cost and schedue between the owner and design-buider. Athough pubic sector owners have embraced designbuid since the ate 1990s, they often approach their design-buid reationships differenty than most private sector owners. Pubic sector owners oftentimes require that a fina project price be estabished at the time the design-buider is seected, demonstrating how they wi meet the owner s requirements within the estabished budget. Design-Buid Project Deivery In reviewing this primer keep in mind that project deivery is a comprehensive process incuding panning, programming, design, construction and consideration of operations and maintenance required to execute and compete a buiding faciity or other type of project. When choosing design-buid project deivery, an owner can choose from among various approaches for procurement and contracting as outined on page 5. Design-buid utiizing a progressive procurement and contracting approach is the basis of this primer. Regardess of the design-buid approach seected, industry studies have shown that projects deivered through design-buid perform far better in terms of cost, quaity and schedue than those using design-bid-buid and construction management at-risk. Throughout this primer you see reference to the term Design-Buid 2 Done Right. This refers to design-buid performed according to DBIA Best Practices, regardess of the procurement or contract approach. Photo credit: Veterans Memoria Bridge in Martin County, Forida
3 Progressive Design-Buid What is Progressive Design-Buid? One appication of design-buid deivery is via a stepped, or progressive process (commony referred to as Progressive Design-Buid or PDB). PDB uses a quaifications-based or best vaue seection, foowed by a process whereby the owner then progresses towards a design and contract price with the team (thus the term Progressive ). Whie procurement aws vary for pubic owners, some have the fexibiity to impement a PDB procurement approach that essentiay repicates that used by private sector owners. PDB core features incude the foowing: The design-buider is retained by the owner eary in the ife of the project and, in some cases, before the design has been deveoped at a. The design-buider is generay seected primariy, if not excusivey, on quaifications and the designbuider s fina project cost/price and schedue commitment is not estabished as part of the seection process. The design-buider deivers the project in two distinct phases with: (a) Phase One incuding budget eve design deveopment, preconstruction services and the negotiation of a firm contract price (either ump sum or guaranteed maximum price) for Phase Two; and (b) Phase Two incuding fina design, construction and commissioning. Phase One Services are aso caed Preiminary or Preconstruction Services. The design-buider first coaborates with the owner and its consutants to create or confirm the project s basis of design, programming requirements and then advances that design. Design and other project decisions are based on cost, schedue, quaity, operabiity, ife cyce and other considerations, with the design-buider providing ongoing, transparent cost estimates to ensure that the owner s budgetary requirements are being achieved. At the point in time where the design has been advanced to an appropriate eve of definition that aigns with the owner s requirements, the design-buider wi provide a forma commercia proposa (incuding the overa contract price) for Phase Two services. The proposa is often estabished when the design is approximatey 40 to 60 percent compete, but it can occur anytime (incuding as 3
4 Progressive Design-Buid ate as 90 to 100 percent design competion), depending on the amount of contro the owner desires to maintain over the design definition. Phase Two Services are aso caed Fina Design and Construction Services. Once the owner and designbuider agree upon commercia terms (incuding the project s price and schedue), the design-buider wi compete the design and construction of the faciity in accordance with those commercia terms. The design-buider wi aso be responsibe for any testing, commissioning, and other services that have been agreed upon. bright ine between Phase One and Phase Two Services, the pragmatics of expediting project schedues often require that some Phase Two work be started before the commercia proposa has been agreed upon. As a resut, many PDB projects aow the design-buider to proceed on eary work packages for discrete eements of the physica work (e.g., procurement of ong ead items, demoition or site work) before Phase Two authorization. If, for any reason, the parties cannot reach agreement on the Phase Two commercia terms, then the owner may consider an off-ramp option where it can use the design and move forward with the project through another contract strategy. As discussed more ater, a PDB reationship can be estabished with the parties entering into two separate contracts for each phase of work or a singe contract that covers both phases. Aso, whie there appears to be a Terminia 2, San Francisco Internationa Airport Why Woud an Owner Choose PDB? Owners with fexibiity as it reates to procurement aws may find the foowing vaue-added with PDB: Streamines and simpifies the procurement process, which encourages competition and has a schedue benefit to the project benefiting both the owner and the design-buider. Enabes the owner to provide substantia input on the design and buyout decisions, as it coaborates with design-buider during design deveopment and buyout (excuding key trade partners). Lessens pressure from the owner in terms of the time required to review and act upon design submittas, as this is typicay being done during Phase One, before the contract s commercia terms (incuding contract price and schedue) have been guaranteed by the design-buider. Shortens the overa project schedue with a quicker procurement process and opportunity to use eary work packages in phasing the work. GMP offers the owner transparency into the designbuider s proposa cost (incuding the pricing for risk and contingencies) and the utimate cost for fina design and construction. 4 Offers the owner an off-ramp shoud the owner fai to accept the design-buider s price or other commercia terms. Provides a coaborative way to estabish singe point of responsibiity and eiminate an owner s Spearin Doctrine iabiity risk. Whie a the above attributes can be important, PDB is an exceent option when an owner wants to use designbuid but remain activey invoved in the design decisions. One appication of design-buid deivery is via a stepped, or progressive process (commony referred to as Progressive Design-Buid or PDB). PDB uses a quaifications-based or best vaue seection, foowed by a process whereby the owner then progresses towards a contract price with the team (thus the term Progressive ).
5 Progressive Design-Buid Potentia Obstaces to PDB? Despite the positive attributes, there are severa reasons that a pubic owner may not be interested in, or even abe to use, PDB. Among these reasons are the foowing: Restrictive procurement reguations. If the pubic authority has the abiity to use quaifications-based seection (QBS), PDB can be an optima choice. However, if the procurement reguations ony aow for the typica two-phase best vaue source seection process, PDB may not be permissabe. Awarding without fu competition on the overa design-buid contract price. PDB cas for the owner to seect the design-buider argey on the basis of quaifications, without the benefit of price competition on the overa design-buid contract price. Some owners find awarding a construction contract without fu price competition to be poiticay impractica, and prefer to have price factored into the seection process. They may aso fee uncomfortabe in negotiating the commercia terms of the arrangement. Exercising the off-ramp. Owners may be uncomfortabe in exercising the off-ramp in the event the parties cannot reach commercia agreement on the design-buider s proposa. Subcontractor procurement chaenges. Procurement reguations may require subcontractors to be procured competitivey. This can imit coaboration and deprive the project of vauabe subcontractor input during the design process. Lack of interest in changing approaches. Owners may fee that the best vaue design-buid process works we and that there is no reason to try something different. The PDB Procurement Process 5
6 Progressive Design-Buid The PDB Procurement Process As with any variation of design-buid, when an owner decides to use PDB, it shoud have a singe fundamenta procurement objective seect the right team, using a process that is as streamined and simpe as possibe based upon appicabe reguations. Who is the right team? The team that wi work we and coaborativey with the owner. The team that offers the best chance to meet the owner s project goas and required outcomes. The team that the owner beieves is trustworthy, fair, quaified and transparent. In accompishing this objective, an owner wi either use pure QBS processes or best vaue seection processes, typicay by ooking at what is prescribed by its procurement reguations. QBS is based soey on non-price seection factors, such as quaifications and past performance of the team members, key trade partners and key personne, project approach and creativity. No price information is evauated whatsoever. Under QBS, some owners may ask for price information on items ike the Phase One compensation or the design-buider s fee. This information wi be in a separate submission from the quaifications/technica proposa, but unike a best vaue procurement, it wi not be evauated as part of the seection process. Instead, the owner wi open this submission ony after determining the winning designbuider, and wi use this information for negotiating the contract with that design-buid entity. There are severa procurement decisions an owner needs to make, regardess of whether using QBS or best vaue seection. One is whether to conduct a one-step or two-step seection process. One-step can be quite efficient for QBS, particuary if there is itte technica information being asked of the proposers. One-step is not appropriate if the deiverabes required from proposers are substantia. Two-step is more typica for QBS on compicated projects or best vaue seection, as proposers wi be spending time and resources to respond with more detaied technica proposas and owners must thoroughy evauate these proposas. The two-step process contempates the deveopment of a shortist (typicay the three most highy quaified teams), argey based on corporate quaifications and past performance, key trade partners and resumés of key personne. The second step contempates the submission of technica proposas, with the proposa focusing on what the owner needs to meet its objective of seecting the right team. Proprietary one-on-one meetings are often used in two-step processes. It is an exceent way to have confidentia discussions about ideas deveoped by the proposers and get a sense of how proposers interact within their team, as we as with the owner s team. Whether the owner uses a one-step or two-step process, there is a strong benefit in the owner conducting forma interviews. After a, because the point of a integrated design-buid project deivery is to get the right team on board, the owner shoud have an abiity to assess how that team presents itsef. Best vaue seection chooses the design-buider based on both non-price and price factors. Because the entire design-buid contract price is not under consideration, the types of price factors are imited such as the Phase One compensation and design-buider s fee noted above. Because these are reativey sma doar vaues in reation to the utimate design-buid contract price, the weighting for the price factors is generay quite ow (e.g., 5 to 20 percent or treated as a trade-off and not weighted at a as with the federa mode) in comparison to the non-price factors. Photo credit: Champion Petfoods Kentucky DogStar Kitchens in Auburn, Kentucky 6
7 Progressive Design-Buid Contract Issues Unique to PDB There are some important differences with PDB contracts. The first difference is the form of contract. Some owners wi start their contractua reationship with the design-buider with a Phase One Agreement which, as the name indicates, just covers the Phase One Services. They find that this streamines getting the design-buider under contract. Such owners are comfortabe with deveoping and negotiating another contract, for Phase Two Services, as part of the commercia proposa process. Other owners prefer to have a singe design-buid contract that addresses both Phase One and Phase Two Services and is signed at the start of their reationship with the design-buider. Among other benefits, this approach can make it easier to execute eary work packages, as the terms and conditions reated to procurement and construction are aready covered by the contract. For exampe, DBIA s Document No. 545, Progressive Design-Buid for Water/ Wastewater Projects, uses a singe design-buid contract approach. Regardess of which approach is used, the parties are advised to focus on the preiminary services part of the reationship, as eements of that work go to the heart of the PDB reationship. Topics that are commony addressed incude: Scope of Phase One work, incuding cost modeing. The contract (often through an exhibit) wi specificay state what work the design-buider wi perform for Phase One, incuding the extent and frequency of cost estimating and modeing. Abiity of the design-buider to use and rey upon owner-furnished information. Because the design-buider is getting invoved eary in the design process, there is a question as to how to treat information obtained by the owner before the design-buider was invoved (ike geotechnica reports and technoogy decisions). Working coaborativey, most owners and design-buiders make informed decisions about the cost-benefit of having the design-buider vaidate previousy done studies and then treat findings appropriatey in the contract. Eary work packages. The contract shoud address the processes for deveoping and authorizing eary work packages. This incudes procuring subcontractors, evauating sef-performance of the design-buider and determining how to proceed if the owner exercises the off-ramp. Design-buider sef-performance. The contract wi address the appicabiity of sef-performance, particuary in reation to subcontractor procurement requirements. Subcontractor and vendor procurement and their invovement in Phase One. The contract shoud address how (and when) subcontractors and vendors wi be procured and the owner s roe in that process. This may be heaviy infuenced by statute. Likewise, the parties need to address the roe that these parties may pay in Phase One and how this reates, if at a, to their invovement in Phase Two. Commercia proposa. This important eement of Phase One shoud be thoroughy addressed in the contract, particuary in terms of the form of the proposa and information that the design-buider is to submit. Off-ramp. The option for an owner to consider an off-ramp shoud be ceary addressed, incuding the rights of the owner to use Phase One information for subsequent procurements associated with the project. Finay, the parties need to determine the process for obtaining performance and payment bonds from the design-buider. Work and prices are being estabished a number of different times Phase One, eary work packages and Phase Two. Often the bond wi be provided once construction starts, athough some owners wi require a bond at the contract inception (Phase One) and have the pena sum increased as work is added. Parties shoud consut with ega counse and bonding consutants on the best way to approach. 7
8 Progressive Design-Buid Preparing to Impement PDB: Hepfu Tips As with design-buid, an owner shoud carefuy consider what it needs to make the PDB process successfu. A few suggestions are as foows: 1. Assess the appropriateness of PDB for the project. Owners shoud gain a fu understanding of PDB and conduct a proactive/objective assessment of the characteristics of its project and determine if PDB is the appropriate deivery method for its project. 2. Understand procurement imitations. Whie some pubic sector owners have a cear abiity to use QBS, most pubic sector owners are required to consider price within the source seection process. Likewise, many owners are required to compy with statutes that address subcontractor procurement. It is critica for the owner to fuy appreciate its procurement opportunities and imitations in formuating a procurement pan, and engage experienced in-house or outside ega counse to faciitate. 3. Have a strong cost estimator on your design-buid team. Conceptua cost estimating is an important and difficut ski. The owner needs to ensure that the design-buider has competent resources in this regard, aowing seamess evauation of the 8 reasonabeness of the design-buider s cost modeing and price proposa. 4. Make an eary decision on subcontractor procurement and design-buider sefperformance. These issues can be major factors in determining whether organizations are interested in competing. Moreover, if the owner decides that it wants to have most, if not a, subcontractors competitivey procured, this issue coud infuence the abiity to obtain coaboration and design innovation, given that subcontractors are often the repository of such knowedge. 5. Ensure that your team is wiing and abe to coaborate and trust. Whie any form of designbuid requires coaboration, fexibiity and trust, these factors are often the very essence of why an owner has chosen PDB. The owner s team members shoud understand the importance of coaboration, and senior management needs to ensure that coaboration and integration is supported and carried out throughout performance of the project deivery process. A Word About Design-Buid Done Right As discussed above, the principes of Design-Buid Done Right appy to a variations of design-buid, incuding PDB. PDB is another too in the toobox for owners, and, consistent with Design-Buid Done Right principes, the owner needs to make an informed decision as to which approach is most appropriate for its needs. Regardess of which approach is used, experience shows that project success is predicated on the parties using the principes expressed in Design-Buid Done Right such as: (a) seecting the most quaified team; (b) etting the design-buider use its ingenuity and experience to deveop design soutions; (c) weighting price significanty ess important than non-price factors; and (d) seeking best vaue soutions, such as energy efficiency, durabiity, sustainabiity and ease of maintenance. Design-Buid Done Right teaming phiosophies of integration and coaboration, as we as environments based on trust and fexibiity characterized by integrity and honest communication and mutua respect for and appreciation of diverse perspectives and ideas, are aso critica to design-buid success. Stated simpy, if a project team can operate in accordance with Design-Buid Done Right vaues, there is a significanty improved ikeihood of superior project outcomes under design-buid of any variation, incuding PDB. DBIA endorses a variations of design-buid when done according to best practices and not on a pure ow-bid basis. The approach seected depends on the appication and needs of the owner.
9 Progressive Design-Buid DESIGN-BUILD DONE RIGHT AND CERTIFICATION Certification provides the ony measureabe standard by which to judge an individua s understanding of "design-buid done right. DBIA certification in design-buid project deivery educates owners as we as designers and buiders on teamcentered approaches to design and construction. Owners want successfuy executed design-buid projects and are ooking for a demonstration of both reevant continuing education and experience both of which can be gained through DBIA certification. DBIA offers two types of Cer tification. DESIGN-BUILD PROFESSIONAL Attaining the DBIATM requires from two to six years of hands-on experience of pre and post-award design-buid. Credentia hoders who dispay DBIA after their names come from traditiona design and construction backgrounds; they are private or pubic sector architects, engineers and construction professionas. Some attorneys and academic practitioners who speciaize in design and construction generay and design-buid specificay may aso fufi the DBIA requirements. Unike the DBIATM credentia, obtaining the Assoc. DBIATM does not require hands-on fied experience. Instead, this credentia is focused on three key types of individuas who possess a different type of experience: (1) pre-award professionas focusing on critica aspects of the design-buid process such as business deveopment and acquisition/procurement; (2) seasoned professionas who are new to design-buid project deivery, but not new to the design and construction industry; and (3) emerging professionas such as recent coege graduates with reevant educationa background in the AEC industry. For more information, visit w w w.dbia.org/cer tification 9
10 DESIGN-BUILD DONE RIGHT TM PRIMER A DESIGN-BUILD INSTITUTE OF AMERICA PUBLICATION Copyright October 2017 DBIA extends a specia thanks to a of the industry eaders who heped shape this document. A specia thanks is extended to the foowing key authors: Michae C. Louakis, Esq., DBIA President/CEO, Capita Project Strategies, LLC Reston, Virginia Peter Kinsey, DBIA President, Infrastructure & Transportation The Haske Company Jacksonvie, Forida Geoffrey W. Neumayr, SE, P.E. Deputy Airport Director, San Francisco Internationa Airport San Francisco, Caifornia Craig H. Unger, DBIA Principa, Unger Security Soutions Knoxvie, Maryand And The Progressive Design-Buid Task Force Cover Photo Credit Air Traffic Contro Tower, San Francisco Internationa Airport
Progressive Design-Build
Progressive Design-Build Progressive Design-Build Design-Build Procured with a Progressive Design & Price A Design-Build Done RightTM Primer 1 Design-Build Progressive Design-build Design-Build Procured
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