Faculty of Civil Engineering Department of Economics and Management CZECH TECHNICAL UNIVERSITY IN PRAGUE 2011

PRINCIPLES AND BEST PRACTICES

OF DESIGN BUILD

Faculty of Civil EngineeringDepartment of Economics and Management

CZECH TECHNICAL UNIVERSITY IN PRAGUE 2011

http://www.fsv.cvut.cz/index.php.en

http://www.fsv.cvut.cz/katedry/katedra2.php?Jazyk=En&Katedra=126

Design Build• Introduction and Overview of Design Build

(Understanding the risk of Design Build• Procurement and Contracting for Design Build (What

makes it different?) • Selection Process for Client Success (Solicitation,

Evaluation, and Selection)• Creating the Right Team (Collaboration)• Creating the Right Performance Criteria (Creating the

project that the owner wants)• Responding to the Request for Proposals (Having a

successful process for reviewing and complete RFP's)• Overview of Conceptual Estimating (What cost

information is needed and controlling the cost risk)• Project Management for Design Build (What makes

Design Build different?)

Why Design Build ?Background and Motivation

• Increased level of project complexity• The need for increased interdisciplinary interaction• Early involvement of participants• Levels and methods of communication• Compatibility within project teams

Introduction and Overview of Design Build (Understanding the risk of Design Build)

Four major Shifts occurs in Today’s Design/Construction Industry

Organizational Integration and Collaboration in Design and

Construction Technological

Building Information Modeling, Collaborative Technologies, Interoperability Standards

Environmental Green Design, High Performance Buildings,

Sustainability, LEED Economic

Availability to obtain financing, high unemployment,

Large number of firm down sizing or going out of business

Design Bid Build Construction Management (agency)Construction Management (at risk)

Design BuildIntegrated Project Delivery

Procurement and Contracting for Design Build

(What makes it different?)

Project Delivery Defined

A comprehensive process including planning, design, construction and other services, necessary for organizing, executing and completing a construction project.

Three fundamental owner decisions• What project delivery system should I use?• Which procurement method would be best?• Which contract format is best suited for this

project?

Project Delivery Process Framework

ProjectFeasibility

ProjectPerformanceCriteria

FacilityOwner’sProfile

CriticalOwner

Decisions

NOTE: Chart shows logic flow, not timing or sequence of steps, which vary depending on methods used.

Programming& Scope Definition

ProjectDeliverySystemSelection

ProcurementMethodSelection

TeamSelection

ContractFormatSelection

Design & Construction

Operation & Maintenance

ProjectFinancing

Confirm ProjectScope and Program

Project DeliveryAlways 3 or 4 major parties involved in the

project delivery processOwner (public or private)Designer (Engineer or Architect)ContractorConstruction Management Firm (can also be

one of these parties)

The Method Selected will:

Determines the contractual relationships among the parties.

Establishes when the parties become engaged.

Influences impact of changes and modifications on project cost.

Project Delivery Types

• Design-bid-build (Lump Sum or Unit Price)• Multi-prime (often under CM)• Construction management-at-risk• Construction Management agency• Design-build (DB, EPC, etc.)

“Procurement is the procedures and the process used to buy design and construction

services.”

Procurement Defined

Construction Contracts

Method of award (Procurement) Competitively Bid

contracts With designer doing

Project Supervision With CM – agency CM at Risk Design Build

Negotiated contracts GMP Design Build Negotiated Lump

sum CM at Risk

Method of pricing (Project Delivery)

Fixed-price Lump sum contract Unit price contract

Cost-plus Cost plus percentage

of cost Cost plus fixed fee Cost plus fixed fee

with a targeted maximum cost

Cost plus incentive fee

Guaranteed Max Price GMP plus percentage

of cost GMP plus fixed fee GMP plus a fixed fee

plus share of savings - incentive

Procurement Options

Sole Source/Direct SelectionNegotiated procurement Competitive

• QBS – Qualification Based Selection• BVS - Best Value Selection • Low Bid

Market Penetration of Major Project Delivery Systems

Design-Bid-BuildContractual Relationship

Characteristics Three linear phases:Design, bid and build

Three prime players: Owner, designer, constructor

Two separate contracts:Owner to designerOwner to constructor

ResponsibilitiesOwner

Designer

Constructor

Program, finance, managementPrepares plans & specs, normal servicesPrime and sub construction

Owner

Designer Contractor

Subcontractors

Sub Consultants

Project Delivery Options

Design-Bid-Build(DBB)

Construction Management at Risk (CM@Risk)

Lump SumDesign-Build

(LS)

“Progressive”Design-Build

(GMP)

Design-Build- Operate/

Finance, etc.

Traditional Delivery

Alternative Delivery

What Are the Design-Build Delivery Method's Potential Advantages and

Disadvantages?



Potential Advantages of Design-Build

1. Potentially less adversarial and more flexible.2. Risks for design errors and omissions are shifted from the owner to the design-builder, who presumably can resolve them more efficiently.3. The constructor is involved in the design process and can contribute valuable insights as to constructability and value engineering.4. The owner or the design-builder can order long lead-time items earlier in the process with greater certainty.5. Faster project delivery. 6. In a market with rising material costs, the owner or design-builder can achieve earlier procurement at lower prices.7. The potential for claims, particularly delay claims, is significantly reduced.

Potential Disadvantages of Design-Build

1. Less control by owner over design process.2. Owner no longer has architect to assist it in contract

administration.3. Ensuring scope and quality of work within a specific budget

much more difficult.4. Results may depend on design-build experience of constructor

and architect and their experience working together previously.

5. May limit field of contractors and subcontractors willing to compete.

6. Because of the more subjective method of constructor selection, the price at the front-end of a design-build project may be higher (possibly 3% to 5% higher) than the price of a design-bid-build project. However, the owner may make that difference up at the back end in reduced claims, value engineering, and other considerations.

7. Bond premiums and the design-builder's fee/profit are higher than under design-bid-build.

What Are The Project Owner's Particular Concerns In Using Design-Build

• The Owner’s basic concerns are similar to any construction project and relate to quantity (scope), quality, price, and schedule.

• Some concerns, such as differing site conditions and environmental, are unaffected by whether a design-build or design-bid-build method is used.

• The Owner’s concern most affected by design-build is to obtain a project of a known quality and specific scope at a fixed price that is reasonable.

• A special Owner concern is that entities with substantial resources stand behind all obligations in the design-build contract. This is a particular concern with ad hoc design-builders who offer services through limited liability companies with no resources of their own.

• The Owner also has a special concern that professional liability insurance protects against errors and omissions and is for the benefit of the Owner, who is not in privity of contract with the architect.

Review of Some Selected Contract Issues

1. Ownership of Work Product

2. Design Development Process

3. Waiver of Consequential Damages

4. Professional Liability Insurance

5. Changes and Payment for Disputed Changes

6. Compensation for Delay

In US there are many standard construction contracts: major one by the following organizations.

AIA – American Institute of ArchitectsDBIA – Design Build Institute of AmericaAGC – Associated General Contractos

22

Ownership of Work Product

1. AIA provisions are the worst

2. Should modify all to give owner greater rights

Design Development Process

1. All are too sketchy and give owner little control

2. Additional control to a point is good, but too much owner involvement is not good due to costs of administration, potential to create claims

Waiver of Consequential Damages

Should always get waiver of home office overhead claims. DBIA document does not waive home office overhead claims.

Professional Liability Insurance

Should always require. AIA and DBIA documents do not expressly require

Ensure coverage extends from beginning of project to sufficient period after project completion (e.g., five years)

Compensation for Delay

Limit to owner-caused delays for which written notice given, that impact critical path, and that are not reasonably avoidable

DBIA and AGC documents require owner to compensate for some force majeure. Delete those provisions

Changes and Payment for Disputed Changes

AGC and DBIA approaches not acceptable to owner. AGC is worst.

AIA approach more owner-friendly and reasonable

How to attract the Best Design-Build Competitors?

• Ensure the impartiality and integrity of selection process

• Pay stipends• Make the shortlist short• Streamline the Phase Two proposal

submission requirements



Resistances…

1. Model Ownership2. Design Creep3. Work Flow4. Level of Model Detail5. Release of Proprietary Information6. 2-D Drawings Required for Permitting7. Acceptance as Contract Documents8. Contractual Relationship Definitions9. Small / Non-complex Project10. Multiple Software Platforms11. I Don’t Want to be First

Generally Two Type of Selection Processes are Used:

Qualifications Based Selection (QBS) and Best Value Selection (BVS)

Selection Process for Client Success (Solicitation, Evaluation, and Selection)

Qualifications Based Selection

Qualifications Based Selection (QBS)

What Is It?

• Select a service provider through a competition based on qualifications rather than price

• Pick the provider who is the best and most uniquely qualified for the project at hand



Why Should I Use It?

• Best chance of success on your project• Higher impact on your project• Remove the “mystery” of the bid• Greater certainty that the project is priced

appropriately• Fewer disputes



Where Did it Come From?

• Long recognized as the preferred method for selecting A/E service providers

• On federal projects using traditional delivery it is allowed for A/E selection under the Brooks Act

• Numerous states have enacted “mini” Brooks Acts


Professional Services• Not all professionals are the same • You wouldn’t select a doctor or lawyer based on “minimum qualifications/best price”• Even among highly skilled architects and engineers some are more uniquely qualified for a given project

• With traditional delivery, A/E services are usually a relatively low portion of overall project costs• Quality design services set the tone for a successful construction project when using traditional project delivery

Before the project is defined it is difficult to price• It is money well spent• Good planning and design result in few disputes and change orders during construction

Best Value Selection

Best Value Selection (BVS)

• Most common strategy for acquiring design-build services

• Much more prevalent in public sector than QBS• Only authorized Federal process for design-build• Best practice: Two-phase process

– Phase One: Dominated by assessment of team qualifications– Phase Two: Dominated by assessment technical/management excellence

–Phase One: assessment of team qualifications

–Phase Two: assessment technical/management excellence(How is the project going to be built?)

Two Phase Best Value Selection (BVS)

Make Phase One brief and inexpensive, driven by qualifications –Qualifications-driven –Short list only 3 most highly qualified teams –Make past performance of competing teams predominant

selection factor

Use evaluators that are qualified, trained, and free of bias

Many acceptable Phase Two processes out there –Weighted criteria –Fixed price competitive design –Integrated assessment and trade-off (Federal model)

Establish the process prior to release of RFPDisclose the process to competitorsFollow the process as published

Process Best PracticesBest Value Selection (BVS)

Collaboration to Integration• True integration is more than agreeing to

partner• Successful integration requires a commitment

to understanding how people/organizations work

• Teams must work from best practices to the benefit of the integrated project team

• Decisions based on what is right and fair

Creating the Right Team (Collaboration)

Collaboration to Integration

Col*lab`o*ra"tion\, n.The act of working together; united

labor.Webster's Revised Unabridged

Dictionary, ©1996, 1998 MICRA, Inc.

Overcoming the 5 Dysfunctions• Building Trust• Mastering Conflict• Achieving Commitment• Embracing Accountability• Focusing on Results

Lessons Learned -Leadership

Formal and Informal Partnering Complex issues are easier to discuss Issues are not avoided Shared experience builds the “bank account” Focus on the needs of the person in the front line Solve problems first then how pay for it

Lessons Learned -ProcessPerformance Based vs. More Prescriptive

Value Engineering After Contract Award with Shared Savings

Expedited Design Review Conferences

Understand How to Assemble a High Performing Team

Need for a High Performing Team

• Urgency due to “fear of escalation”• Strict budget and schedule, but not specific scope• Maximize scope• Qualification-based selection of the most experienced, best qualified team

High High-Performing Teams• Teaming based on competence AND character• Who works well with who; collaborative spirit• Productivity, collaboration and happiness skyrockets with positive team dynamics• Place high value on integrity, initiative, teamwork & leadership• Encourage creativity, productivity & accountability

Get The Right People On The BusMake Sure Everyone Is In The Right Seat

Design Build Is Not For Everyone

Teams

Why do TEAMS fail?

LACK OF TRUST

between the team members

RFP Best Practices• Determine selection factors specific to your

project• Divulge all selection factors and order of

importance in the RFP• Use only the factors as published• Make technical/management excellence

dominate the selection—not price

Creating the Right Performance Criteria (Creating the project that the owner wants)

More RFP Best Practices

• Use performance-based requirements • Use Build to Budget or similar technique to

enhance the focus on technical excellence• Best Value—talk the talk and walk the walk

Tips for Best Value Selection (BVS) Competitors• Know the owner’s strategy • Know the process• Try to shape the solicitation, not the process• Be ready to identify & explain past

performance

Responding to the Request for Proposals (Having a successful process for

reviewing and complete RFP's)

Tips for Best Value Selection (BVS) Competitors

More Tips for Competitors Make sure your proposal conforms to the entire

RFP• Many owners won’t consider alternate proposals• Big surprises may be fatal• Little issues can be just as fatal

Know what to expect from the owner during the process• Lingo—discussions, weaknesses, deficiencies• Why won’t they answer your questions?• Why won’t they call and ask questions?46

Overview of Conceptual Estimating (What cost information is needed and

controlling the cost risk)

The “purpose of conceptual estimating’ is to predict the costs of construction work before the

work is done.

Detail estimating has the same definition for estimating. All estimating is attempting to do the same thing. Predict the costs before the work is done. Mirror the cost of Construction.

Types of Construction Estimates

Detail Estimates• Estimates from 100% complete plans & specifications

Conceptual Estimates• Any estimate from less than 100% plans &

specifications• Typically starting when design is 25% completed

Estimate/Accuracy Curve Illustrates different Estimates and their

Occurrences.

Conceptual Estimates

• Order of Magnitude Estimates• Square Foot or Cubic Foot Estimates• System Estimates• Unit Price Estimates

The previous curve names four Conceptual Estimates with the end result being a Detail Estimate

Conceptual Estimates

An example is:

ACCE Order-of-Magnitude Budget Definitive

These four names are not the definitive names for Conceptual Estimates. DBIA has a list, ASPE has their list, and others also have a different list.

Conceptual Estimating, always Define the Level of Accuracy

Individuals - client, the boss, or any other person hearing an estimate, generally remembers the number and often it is the first number quoted them.

When defining the level of accuracy, estimators also generally try to error on the high side because of the note above. It is much easier during the process to come down than ask for more funds or budget.

Number and Timing of Conceptual Estimate

The number of cost estimates required will be project/owner specific, and will generally be linked to the various design phases of the project. A cost estimating approach to a typical project, which dictates the number and timing of cost estimates, can be summarized as

• Pre-Design Phase • Schematic• Design Development Phase • Contract Documents Phase

Pre-Design Phase

Prior to the commencement of programming and/or design, the cost estimator prepares a cost model and budget cost plan for the project.

The cost model establishes a construction budget and defines how the project budget is to be allocated among various building systems.

The cost model also confirms the project scope and identifies any costs or work to be funded separately.

Schematic/Design Development Phase

The cost estimator works as an integral member of the design team to evaluate design decisions made throughout the design phases against the pre-established cost model. This approach allows the cost management team to provide an integrated value engineering process throughout the design phase.

At the end of the schematic design and design development stages, the cost estimator produces a comprehensive cost estimate. The estimate is compared against the cost model developed during the pre-design phase of the project.

Contract Document Phase

Further cost estimates are prepared upon completion of the 50% and 100% construction document stages.

Common Elements of Conceptual Estimates that drive Overall Costs

• Time• Location• Size• Shape• Learning Curve (Repetitive Design)• Use• Quality• Materials• Other

Time

Estimates are based on the cost of existing projects that were built in the past

Price-level changes over timeThe need to project costs of future projects

Many organizations publish construction cost data on regular basis: • US Department of Commerce• US Department of Labor• ENR• Turner Construction Company• Handy-Whitman Utilities

Cost over Time

Cost Indices Published by R.S. Means and ENR Used to update old cost information

Uses 1.To update known historical costs for new estimates 2.To estimate replacement cost for specific assets 3.To provide for contract escalation

Limitations 1.They represent composite data, the average of

many projects. 2.They fail to recognize technological changes. 3.There is a reporting time lag.

Location

Some factors affecting cost in different locations are: 1. Transport cost 2. Taxes 3. Labor supply and local productivity 4. Codes and local inspection

Construction costs also vary in different regions of the USA.

ENR and Means publish, periodically, the indices of local construction costs in the major cities.

ENR Regional Index

City Cost Index

Boston 1120

Chicago 1400

New York 1700

Size

As the quantity built increases, the unit cost decreases

As a building gets larger, its square foot costs drop

Shape

10’ High Wall

Bldg. AWall cost = $10/sf x 160’ x 10’= $16,000

= $10.67 per sf floor areaBldg BWall cost = $10/sf x 180’ x 10’= $18,000

= $12.00 per sf floor area

Bldg A Area = 1500ft2

Perimeter = 160ft30’

50’

Bldg BArea =1500ft2

Perimeter=

180ft

40’

10’

15’ 15’

40’

Use & Occupancy

Special Systems• Conveying Systems• Special Systems• Chimney Stacks & Shafts• Special fixtures & equipment

Occupancy• Hospitals• High Loaded Roads• Etc.

Learning Curve or Cost Savings of Repetitive Design/Work

60

65

70

75

80

85

90

95

100

105

0 5 10 15 20

Number of Units

Tim

e p

er U

nit

Increased productivity by doing repeated work.

Quality

• Economy• Average• Custom• Luxury

Materials & Equipment

• Over the Counter or Mass Manufactured – Standard Grade• Designer – Medium Grade• Custom Manufactured or Fabricated – High End• Luxury – Out of this world

Level of Design

• For the Masses

• For the Few

Other

Hard to quantify but should be evaluated• Quality• Soil condition• Weather Condition• Competition• Productivity

Planning for Conceptual Estimating

• Scope and Pricing Review• Estimating Trending• The Future of Conceptual Estimating and BIM

Scope and Pricing Review

Scope Review happens at multiple levels• Overall Project• Individual Elements

Pricing Review happens at different times during design• At a minimum (4 times) during each of the major design periods• Trending costs is a generally accepted approach

Scope Review

Project Review• Review of available

documents• Make a site visit• Review current market

trends• Begin review of projected

project schedule• Review possible staff

requirement• Begin generating

responsibility matrix

• Arrange Subcontractor input• Review Program requirement• Look for problem areas –

hazardous materials• Review costs of permits and

process• Outline all site conditions• Begin review of major system

requirements• What are the long lead equipment

and materials

Scope Review

System Scope Definition• What major systems are needed

Material Scope Definition• Begin Outline Specification• To be used in trending

Quality Scope Definition• Set level of quality in systems and materials i.e.

exterior system/materials

Pricing Review

Review Material Pricing – Use Unit Price

• Include the full value of all of the work

General Conditions Pricing • Can be defined early• Need organization and schedule

Contingency – begin setting amount

Fee and Margin – begin setting amount

Start trending log

Pricing Review

Begin generation of quantities from square foot

Review of building square footage

Start comparison checks for “reasonableness”.• Floor covering material square foot match

building square foot. • Check ceiling material with both flooring and

building square footage.• Building area vs. number of floor times building

foot print.• Building perimeter is linear foot number that is

compared to cladding, parapets, etc.• Define floor heights and again comparing to

cladding, curtain wall, glazing requirements• Site requirement

• Parking area• Landscaping area• Etc.

Pricing Review

Compare to all conceptual estimate

Trend both small and large ticket items. Concentrate on the big items. (Both quantity, quality, and dollars)

Make sure the level, experience, and quality of the subcontractors you are relying on. They also must provide pricing reviews and trending.

Pricing Review of Subcontractor Information

Complete with the subcontractor their detail scope of work.

Complete with the subcontractor outline specifications – these outline specs set quality levels

Complete with the subcontractor their first level of quantities (to be trended as design develops)

Pricing Review of Subcontractor Information (cont.)

Review past project costs in these areas, make comparison to new project

Review pricing guide costs to subcontractor pricing for “reasonableness”

Ask the questions about contingencies in their pricing.

Pricing Review Contingency

Balance Contingency and level of design

How much contingency is being built into other pricing

Have the subcontractor included contingency

Ownership and control of contingency is important

“Contingency is to help correct problem, not to be used by the owner or designer to enhance or grow the project.”

TrendingTools for trending conceptual estimates

during the design process Trend Log Trend Estimate Reports

Trending is needed to maintain control of the budget. It allows the design process to continue uninterrupted because of budget fallout.

Addition and changes in design can have a “domino effect” on costs if not trended.

Trending and New Estimate

Trending should be an introduction to new estimates

New estimates are needed if major systems change or are expanded

New estimates are needed if trends show ever increasing changes to quantities, square footages, quality, and additions

Trending and New Estimate (cont.)

New estimates are a way to get owner’s attention

New estimates are not intended to create shocks and if preliminary estimates have been accurate, and trending responsive, the new estimate will act to continue budget alignment.

Presenting a Conceptual Estimate

“People tend to remember the first numbers you give them”

“The people you are presenting a conceptual estimate must understand at what level of accuracy the conceptual estimate is at.”


The Project Cost will be$ 5,295,933,18 !


“We estimate this project willCost approximately $ 5.3Million. We’re 80% confidentThat the final cost will be Between 5 and 6 million. TheEstimate is based on …….”

“Under no circumstances should the Design-Builder use open bidding.”

“…by involving qualified Specialty Contractors during the design phase, the Specialty Contractor can contribute towards developing a scope that better represents the Owner’s actual requirements, which can lead to much larger saving and overall value.”

Project Management for Design Build (What makes Design Build different?)

Optimize Owner Involvement

Formal design reviews occurred at 30% and 60%. The primary stakeholder had third party

representation at all design meetings. The Design-Build team presented regular design

and construction updates to the stakeholders Stakeholder agreements set the budget

requirements. The GMP was based on 60%(+) documents. The

D/B wanted 30%, but the Owner wanted 50% or even 100%.

Optimizing Owner Involvement

• There was no loss of control because the team members were shoulder to shoulder –all on the same floor.• The design never got ahead of us; there were no surprises.• When we achieved cost savings, we redistributed the savings to add more scope.

Design-Build Can Accelerate Schedules and Generate Cost

Savings

Generating Schedule and Cost Savings • Level of design effort

To bridge or not to bridge Multiple packages

• Scope definition• Purchasing• Phasing and scheduling• Processes

Purchasing process Bid packages Prequalification of subcontractors Design schedule reflected process Design level varied Team review of bid results

Purchasing process

Purchasing process

Don’t make process too complicated –Adds cost

Don’t make process too lengthy–Adds cost and time

Make process flexible and manageable –Allows for innovative thinking

Consider the intangible costs–Bureaucracy complicates

Summary – What Makes Design Build Work

Get the right people on the team

Develop trust between all on the team

Gain and maintain momentum

Develop process to fit Budget, Schedule, and Quality

SHOW UP WHERE THE WORK IS BEING DONE Preplanning Design Construction Commissioning

The End