Design-Build:

RISKS OR REWARDS
for the
Consulting Engineer?

Presented at the

FIDIC Annual Conference

September 7, 2005
Gregs G. Thomopulos, P.E., FACEC

Many of the old rules for

project delivery that held sway
in the industry no longer have the
same potency as they once did

Design-bid-build still has its many

followers among owners who believe that
they can obtain the very best design and
the most cost-effective construction by
holding both sides separate

Advocates of design-build believe that the

sole-source method of procurement forces

the team to iron out many of the project
wrinkles on their own because the entire
team will be held accountable

Still others believe that construction

management for fee is the best way of
ensuring that the owner gets the best of all
worlds because there is an agent
inspecting, measuring, observing and
protecting the owners interest

Fans of CM At-Risk believe that the words

atrisk say it all and force the CM firm to
deliver what it promised on time and on
budget or face the consequences.

Engineering News-Record, July 19, 2000

Design-Build is not a new concept.

Most of the worlds great structures
were built under a Design-Build
arrangement by master builders.

Project
Delivery Systems
Design-Bid-Build
Construction Management (CM)
CM At-Risk
CM Owners Representative

Design-Build
Other Variations

Build-Operate-Transfer (BOT)
Build-Own-Operate-Transfer (BOOT)
Program Management

Design-Bid-Build
Contractual Relationship
OWNER

CE

CONTRACTORS

Design-Bid-Build
Contractual Relationship
Project Time Line
SELECT
CE
DESIGN
BIDDING/
AWARD
CONSTRUCTION

PROJECT
START

PROJECT
COMPLETION

Construction Management At-Risk

Contractual Relationship
OWNER

CE

CM / GC

Construction Management At-Risk

Contractual Relationship
Project Time Line
SELECT
CE
DESIGN
SELECT
CM/GC

PRECONSTRUCTION
CONSTRUCTION

PROJECT
START

PROJECT
COMPLETION

Design-Build
Contractual Relationship
OWNER
OWNERS CE

OR IN-HOUSE CE

DESIGN-BUILDER

Design-Build
Contractual Relationship
Project Time Line
OWNERS
CE
OR INHOUSE

SELECT
DESIGN
BUILDER
DESIGN

PRE-CONSTRUCTION

PROJECT
START

CONSTRUCTION

PROJECT
COMPLETION

Why Owners Prefer Design-Build

Shorter Project Schedule
Better Cost/Budget Management
Efficiency and Innovation
(Contractors Means & Methods)

Single Source Responsibility

(Avoids Pointing of Fingers)

Risk Sharing

(More Risks Passed Down to Design-Builder)

Fewer Claims and Litigations

Fewer Contract Modifications
Opportunity to Package Larger Contracts

How Owners Procure

Design-Build Services In the U.S.
Negotiated Procurement

Sole Source Selection (Strategic Alliance)

Qualifications Based Selection (QBS)
Best Value (Price and Technical)

Competitive Procurement

Low Bid (Lowest Price Technically Acceptable)

Adjusted Low Bid (Mix of Price, Schedule, etc.)
Fixed Budget/Best Technical Proposal
Best and Final Offer
Weighted Matrix

Organization of the
Design-Build Team In the U.S.
Integrated Firm

(Design and Construction Capability in Same Firm)

Contractor As Prime
CE As Prime
Joint Venture Between the Contractor and CE

Design-Build Risks and Rewards

Owners are willing to use

alternate project delivery methods
but firms worry that clients dont always
understand what they need.
Engineering News-Record, June 19, 2000

Risks for the

Consulting Engineer
Pre-Proposal Design Cost
Reduced Fee for Share of Profit
Errors and Omissions
Liquidated Damages or
Consequential Damages
Performance Guarantee
Participation in Loss
Joint and Several Liability
Client Relationships

Rewards for the

Consulting Engineer
Success Fee
Mark-Up on Procurement
Higher Margins on Design Services
Share in Overall Profit

Design-Build
Best Practices
for the CE in
the Unites States

Best Practices For The

Consulting Engineer in Design-Build
For The CE, Subcontracting Tier Preferred
(Some Are Sometimes the Prime)
No Free Pre-Bid Engineering Service
Success Fee on Successful Bids
Design Fees Should Include Additional Margins
Design Fees May Be Reduced
for Share in Profits
No Sharing in Loss Arrangements
Procurement Services for Additional Fees
Possible Joint Venture With Contractor

Future Market Trends

Transportation - More DOTs Are
Following Utah DOTs Lead
Sports/Recreation Projects
Power Generation and Transmission
Communications
Hotels/Resorts
Medical/Health Care
Commercial Buildings

Design-Build:

RISKS OR REWARDS
for the
Consulting Engineer?

Risky Business
Has Its Rewards

Thank You