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
owner’s interest…
“Fans of CM At-Risk believe that the words
‘at-risk’ 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 world’s 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 – Owner’s 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
OWNER’S CE
OR IN-HOUSE CE
DESIGN-BUILDER
Design-Build
 Contractual Relationship
 Project Time Line
OWNER’S
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 don’t 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 DOT’s 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