Design-Build or not? Good Question

Sep 9, 2003 12:00 PM, Roger B. Hutchins, CPP

Whether one is an experienced security services buyer or a novice, it is a good idea to consider all the options. And fundamental to the choices is what kind of contracting method would be best suited for a particular project.

Standard procurement models in both the private and government sectors are based on one of the following:

• developer build-to-suit

• design-bid-build

• design-build.

This article will examine how contracting methods work and why one might be better in a particular instance than another.

Developer Build-to-Suit

When purchasing security-related products or services, the developer build-to-suit usually doesn’t apply, although it might be relevant to a purchase involving general construction, such as a new visitor center building or vehicle inspection station.

Overall, engaging a developer to furnish a complete building project has become more popular with government buyers in recent years. Benefits include less risk for the buyer, reduced project management requirements and deferred financial obligation. The delivery process is entirely under the developer’s control. There can be variations in the developer’s responsibilities — they may include all the elements of a traditional design-bid-build arrangement or the developer may act in a lesser capacity to provide what is essentially a project management resource on behalf of the customer. One difficulty with government procurement under a developer-based model is the requirement for competitive procurement. This issue is often addressed contractually between the owner and the developer and is more important to the government buyer than the private sector buyer due to Federal Acquisition Regulations (FARs).

Design-Bid-Build

This traditional delivery method is still the most widely used and best understood contracting model. Compared to the developer-based or design-build approach, it offers the buyer more control — but does so at the expense of buyer resources that must be devoted to manage the process. Here again there are ways to fine-tune the process depending on the sophistication of the buyer’s resources. The buyer might elect to perform the design work in-house or to hire a construction manager to take control of the project after it has been awarded. The size and type of a project may make this traditional model more or less attractive.

Design-Build

The design-build model has become more popular in the government sector due in part to the “less government” initiatives of recent administrations and the popular “better, faster, cheaper” mantra initiated by NASA and emulated by many others in government. For commodity-type delivery orders, such as basic office buildings or off-the-shelf systems, it has proven to be effective. There are advantages for the buyer in the transfer of risk to the design-builder and reduced project management resource requirements. But there are also some downside issues if, for example, the project is complicated or has unique characteristics that are hard to translate to the design-builder’s scope of services.

So, how does the government buyer determine which method is best? And how does the buyer protect and support his or her organization most effectively? The answers lie in understanding and analyzing the criteria.

Look Inside First

Although the government has long-established rules and regulations that guide the buyer in the procurement cycle, it is not always as simple as checking the right box on a GSA standard form. Anyone who has worked with many different agencies knows that no two are organized the same way. Nor do they possess the same depth and range of internal resources. So first, the buyer should consider his internal capabilities, including the following:

• Does the buyer’s organization have internal design, construction management, and project management resources that are up to the challenge of the work being considered?

• Has the project been well-defined in advance? Can the project’s needs be defined sufficiently to convey those needs to a systems contractor or builder?

• Has the buyer completed a similar project? Was it a success or was the process not up to the challenge?

• Does the particular organization have set-aside requirements that must be met? For example, are there Disadvantaged Business Enterprise (DBE) participation requirements? What kind of contract vehicles does the organization have in place that might satisfy the project’s requirements?

For security-related procurements, a given project can be complex and involve work that interfaces or integrates with existing systems. For example, consider the government agency that recently needed to enhance its visitor access control program and improve its facilities’ resistance to vehicle penetration. The project involved a new building to house the visitor screening and registration operation and new vehicle barriers. Part of the design involved relocation of a legacy visitor management system, expansion of the existing access control and CCTV systems and the installation of new vehicle barriers that would be integrated into the design. In this particular case, the access control and CCTV systems were being serviced under existing maintenance agreements from two different vendors. Modification of the existing systems or additions to those systems as part of the work being considered would likely put the existing maintenance agreements in jeopardy.

In this example, the client decided to break up the project to avoid any conflicts with the existing agreements. The visitor center building and related infrastructure work were awarded on a design-build basis to a general contractor. Separate contracts for the system’s installation work were awarded to the two existing vendors under existing contracts. The systems design was performed in-house by resident technicians and converted to bid documents by an outside security consulting and engineering firm.

Contract specialists within the government are always looking for ways to satisfy minority or disadvantaged business participation requirements. Security-related procurements are not exempt. Thus, the type of contracting vehicle and the performance method are often reviewed by the Contracting Officer and the Contract Officer’s Technical Representative to determine if DBE participation goals can be met within the planned procurement. It has been demonstrated that DBE participation goals can be achieved under a design-bid-build or design-build approach.

The key is understanding the design requirements to determine if a design-builder’s proposed team has the design expertise needed. It is possible to direct a DBE design-builder to augment its team with an appropriate design and engineering resource under a master design-build contract. In a traditional design-bid-build approach, the buyer has the freedom of selecting the design resources needed for a particular project so this is not as important an issue to consider.

Design Requirements

The second most critical question relates to the complexity of design. The buyer may know in general terms what is required but not necessarily at a detailed level. Contractually, the difference between a design-bid-build and design-build may not seem significant. However, design capabilities within a team vary greatly and may not be adequately addressed under a design-builder’s typical team. For this reason, the buyer should understand what level of design expertise is required for a particular engagement and, if necessary, seek outside assistance to define the requirements before soliciting proposals.

Here is an example of design requirements gone bad. It involves a government client who tried to procure a new access control system for a large facility. On first examination, the buyer thought there was sufficient information from the end-user to write a design-build RFP for the procurement. However, the proposals submitted by the competing design-builders were extremely far apart on price and technical capability. Further, the end-user expected the design-builder to sort out all the technical issues after the contract is awarded. Unfortunately, the contract was awarded on the basis of the lowest bid, and that offer assumed minimal design effort on the part of the contractor. Only weeks after the award, the contractor claimed that the design effort exceeded their scope of work and sought additional compensation for those services. Consultants were brought into the process when this impasse was reached, and they discovered that neither party was “lily white” in the dispute. An examination revealed that the RFP documents did not contain enough technical detail and, far worse, provided almost no detailed performance requirements relative to the design portion of the services.

Likewise, the contractor provided mountains of technical information but didn’t explain how they would deliver a complete design. In the end, the buyer chose to negotiate an increase in design scope to fill the missing requirements.

Also from the viewpoint of complexity, the design component of a project may be better served by an independent designer who has no vested interest in selling products or equipment. Here’s why: As the design becomes increasingly complicated, it becomes easier for the design-builder to justify more goods and services than may be necessary. One should not immediately conclude that the design-builder’s actions are malicious. In some cases it is simply a matter of familiarity with a particular product line that leads a contractor to over-specify or over-supply a certain product. In other cases, it is technical expertise that is lacking. In any event, knowing the degree of technical complexity will allow the government buyer to make an informed decision regarding how much technical design expertise is needed and how to structure the contract.

Schedule

It seems that every project these days is on a fast-track schedule. And with the spotlight focused on security, it is common for security projects to be accelerated. Depending on how a project is managed, there is no real time advantage for design-bid-build or design-build. It’s really a question of project management.

In a design-build environment the schedule is less dependent on the buyer’s project management team than it is on a design-bid-build. It’s the approvals process that usually impacts the schedule under either approach. Provided the design issues have been identified in advance, either kind of project can be accelerated.

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© 2008 Penton Media Inc.

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