WISCONSIN LEGISLATIVE COUNCIL INFORMATION MEMORANDUM

Transcription

1 WISCONSIN LEGISLATIVE COUNCIL INFORMATION MEMORANDUM Design-Build in Public Construction INTRODUCTION There is increasing interest in authorizing governmental units to utilize the design-build method in public construction. Proposals to grant this authority present a number of public policy issues, including the threshold issues whether to grant the authority at all and, if granted, how and when the authority may be exercised. In the private sector, use of the design-build method is well established. Utilization of the method in the public sector has been less widespread because of legal and political constraints--lack of clear legal authority to use the method and doubts about the public policy of authorizing its use in the public sector. In Wisconsin, authority exists to utilize designbuild at the state level but generally not at the local level. Recent legislation proposed to extend design-build authority to local government. It is likely that legislation will be introduced in the Legislative Session to allow local governments to utilize design-build. THE CONCEPT Traditionally, public sector construction contracts have been awarded to the lowest responsible bidder using a competitive bidding process (sometimes referred to as the designbid-build method). Under this process, the construction project is first designed and contractors then submit bids to construct the project based on the design plans. The project is then usually awarded to the lowest responsible bidder. In contrast, under the design-build method the governmental unit contracts with a single entity to provide both the design and construction of the public works project. This process does not include selection by the governmental unit of a separate contractor based on competitive bids. Claimed advantages of the design-build method include: a single source of responsibility and accountability; guaranteed costs, reduced costs and early determination of those costs; faster project completion; improved risk management; fewer change orders; and increased staff productivity. Frequently cited advantages of the traditional design-bid-build method include: widespread understanding of the process; openness and No. IM-00-11

2 - 2 - competitiveness; process checks and balances; and clearly defined roles (the architect or professional engineer works directly for the owner and serves as the owner s representative or agent throughout the design and construction process). The design-bid-build and design-build methods are compared and contrasted in the following summary: CURRENT LAW At the state level, the State Building Commission may waive otherwise applicable competitive bidding requirements for state construction contracts if the commission determines that the use of innovative types of design and construction processes will make better use of the resources and technology available in the building industry and if the waiver is in the best interest of the state. 1 Under the waiver procedure, the building commission may utilize the design-build method. 2 In addition, the Department of Transportation (DOT) is authorized to enter into a design-build contract under the accelerated local bridge improvement program if specified process and approval requirements are met. 3 Source: Wisconsin Society of Architects (August 20, 1998). At the local level, cities, villages, towns and counties are generally subject to competitive bidding requirements 4 for construction contracts exceeding a specified dollar threshold. Because the design-build method has been characterized by the Wisconsin Supreme Court as incompatible with competitive bidding requirements, 5 the general consensus appears to be that cities, villages, towns and counties may not utilize the design-build process unless there is an exemption from the competitive bidding requirements or express authorization to utilize design-build exists. For example, Milwaukee County has express authority to let a contract for the construction of a sheriff' s department training academy using the design-build construction process. 6 An additional example is the authority of cities and villages to use the design-build method when contracting for acquisition of any element of a resource recovery and recycling facility. 7 RECENT LEGISLATION 1999 Enrolled Assembly Bill 133. The Biennial Budget Bill, as passed by the Legislature (1999 Enrolled Assembly Bill 133),

3 - 3 - authorized a design-build construction process for certain public works projects undertaken by the Milwaukee Metropolitan Sewage District. 8 The authorization was item vetoed by Governor Thompson. In his veto message, Governor Thompson noted that the process included in the budget legislation would allow the selection of a design-build construction team on bases other than project costs and effectively permitted sole source procurement and evaluation of a single contractor s proposal rather than a group of qualified finalists. 9 He also noted the extreme latitude permitted by the vetoed provisions. He concluded by stating: I believe that designbuild construction can bring efficiencies and cost-savings in public works projects and I encourage the Legislature to consider legislation making it available to all governmental units in the state Senate Bill Senate Bill 198 was introduced by Senator Gary George (D- Milwaukee) and others; cosponsored by Representative Antonio Riley (D-Milwaukee) and others. It was referred to the Committee on Economic Development, Housing and Government Operations. A public hearing on the proposal was held on February 9, 2000; no further action was taken on the proposal during the Legislative Session. Senate Bill 198 authorized cities, villages, towns, counties and metropolitan sewerage districts (and technical colleges and federated public library systems) to let public works contracts under the design-build method when the estimated cost of the contract exceeds $1 million. Senate Bill 198 specified a procedure to be used by local governmental units in order to use the design-build method: Publication of a notice that includes a project statement describing space needs and design goals for the project; detailed submission requirements; selection procedures; composition of the selection panel; and whether a stipend will be offered to unsuccessful design-build teams and the amount of any stipend. Following receipt of bids, initial selection by the local governmental unit of five or fewer design-build teams based on factors including background, experience and qualifications of team members and the quality of the initial proposal. Following an interview of and presentation by each team, final selection by the local governmental unit of a design-build team if it is determined that at least one of the finalists will be able to construct the project satisfactorily. Criteria to be used in making a final selection included quality of the proposed design, extent to which the proposal demonstrates compliance with the project statement, estimated cost of the project and a guaranteed maximum price for the project. Under the bill, a design-build team that enters into a contract with a local governmental unit for a public works project using the design-build method must obtain bonding to guarantee completion of the project. The public hearing on Senate Bill 198 generated substantial testimony on both sides of the issue. Even supporters of the design-build process urged additional work on the legislation before final consideration. Some of the areas cited as needing additional attention are identified in the discussion of design-build issues that follows. ISSUES In deciding whether to grant authority to local governments to utilize design-build, a key issue for policymakers is the degree of discretion provided local government in utilizing the method. The issue reflects a number of concerns, including:

4 - 4 - Design-build might be used for projects where it is not cost effective; Local expertise and resources may be insufficient in some cases to adequately utilize design-build; and Design-build, if not carefully exercised, may give the appearance of favoritism (or, perhaps, result in favoritism). The discretion issues can be addressed legislatively through definition and procedure: for example, by defining precisely the designbuild concept, defining when design-build may be used and establishing the process for using design-build. The provisions of 1999 Senate Bill 198 and areas cited as in need of additional attention by the proposal include examples of specific responses to these issues. Among the areas cited as possibly needing additional attention in Senate Bill 198 were: definition of design-build and other key concepts; public notice procedures; initial local governing board resolution requirements (including, for example, a finding that use of the process for a particular project is in the public interest and why); projects eligible for the method, based on criteria such as type, size and complexity; information to be requested in statements of qualifications; criteria to be used in initial and final selection of design teams; compensation of design teams and ownership of proposals; and bonding requirements. Another issue, raised at the public hearing on 1999 Senate Bill 198, is the effect of local governments utilization of design-build on small- to medium-sized businesses that do not have the financial resources to have in-house design teams; there is concern that only a relatively few, large contractors will be awarded contracts. The public hearing on Senate Bill 198 also elicited concern from the labor community. In some states, credentialling regulations for design professionals have raised questions about which entities and credentialled individuals may offer design services in connection with the design-build method. Because design-build is already used in private sector projects in this state and may be used for State Building Commission projects, any credentialling related issues under Wisconsin law already exist; however, further consideration of design-build by the Legislature may heighten awareness of the existence of any such issues. In summary, many of the issues raised by legislation authorizing the design-build method arise from concerns that the process be utilized when it is cost effective and in a manner that does not result in, or give the appearance of, favoritism. In addition, the prospect of more widespread use of the method by the public sector has raised concerns about the consequences for certain sectors of the economy. A source of information on the design-build method is: Design-Build Institute of America This memorandum was prepared on October 19, 2000, by Don Dyke, Senior Staff Attorney, Legislative Council Staff. This Information Memorandum is not a policy statement of the Joint Legislative Council or its staff.

5 - 5-1 Section (19), Stats. 2 See J. F. Ahern Co. v. Building Commission, 114 Wis. 2d 69, 336 N.W.2d 679 (Ct. App. 1983). 3 Section (5n), Stats., as created by 1999 Wisconsin Act 9. According to the Legislative Fiscal Bureau, the Sixth Street bridge in Milwaukee is currently the only bridge to which this provision applies. 4 Sections (29), 60.47, 61.55, and 62.15, Stats. 5 J.F. Ahern Co. v. Building Commission, supra. 6 Section (13), Stats., as created by 1999 Wisconsin Act 9. 7 Sections and , Stats. 8 SECTIONS 1641m, 1641no and 1641q. 9 Journal of the Assembly at 461 (October 27, 1999). 10 Id. WISCONSIN LEGISLATIVE COUNCIL One East Main Street, Suite 401 P.O. Box 2536 Madison, WI Telephone: (608) Fax: (608) leg.council@legis.state.wi.us