Briefing Report: California Counties and Design-Build Contracting

Wednesday, February 17, 2010

The Pyramid of Khufu at Giza is the largest of the Egyptian pyramids. It is the only one of the Seven Wonders of the Ancient World still in existence. Centuries later, we still marvel at its creation.

In the days of the master-builders of Egypt, when the pyramids were built, those who were responsible for the design of a building or structure were also responsible for the construction. There was one person, or perhaps a unified group of people, slated to oversee the development of the structure from start to finish.

As the design and construction field evolved over time, the two functions – design and construction – have become separate. Yet today, there is a definitive shift back towards one team performing both tasks. Touted as a method to save both time and dollars, the design-build option is becoming increasingly more popular.

Reviewing Design Build

Design-Build is a method for obtaining construction services where a single organization is retained to provide architecture/engineering and construction services under one contract. This contrasts with the more traditional design-bid-build approach where an architect or engineer is commissioned to prepare drawings and specifications, and the owner separately engages a contractor through a competitive bidding or negotiated process.

According to a study conducted by USC, under certain circumstances, design-build contracting has resulted in reduced project delivery times and construction costs when compared with design-bid-build procurement. At the present time, over half the states in the country have some form of legislated design-build authority, and while some states use the practice extensively some do not use the authority at all.

California currently makes rather limited use of design-build contracting. However, in recent years the Legislature has seen several bills slowly but surely extending the use of design-build authority. In part, the steady flow of legislative extensions has been in an effort to provide local governments another arrow in the quiver when seeking to provide constituencies cost and time efficient civic projects.

California Public Contract Code Section 20133 authorizes all counties to use the design-build method to construct buildings and related improvements. This provision of statute also authorizes design-build for county sanitation wastewater treatment facilities that cost more than $2.5 million. These statutory authorities will automatically terminate on January 1, 2011.

In order to help the Legislature evaluate the effectiveness of the design-build process, the law also required counties that completed design-build projects by November 1, 2009 to submit a report to the Legislative Analysts' Office (LAO). In turn, the LAO was required to submit a summary of these reports to the Legislature by January 2010.

LAO's Response Then and Now

In 2005, the LAO published a review of state and local design-build practices, Design-Build: An Alternative Construction System. The Legislative Analyst compared the advantages and disadvantages of the design-build and design-bid-build methods.

The 2005 report noted, "[a]lmost all (cities and counties allowed to use design-build) reported that compared to the traditional design-bid-build process, it took less staff time to construct a project and resulted in fewer claims and less litigation." County and city agencies recommended limiting the use of the design-build method just to buildings."1

The report also recommended:

  • The Legislature should adopt an inclusive, uniform design-build statute that applies to all public entities.
  • Design-build should be optional and not replace design-bid-build.
  • Contracts for most project costs should be based on competitive bidding.
  • State law should ensure access for the greatest number of contractors.
  • There should be no cost limitations.
  • Design-build contracting should be limited to buildings and related infrastructure.

In the 2010 report, the LAO responds to the reporting requirement for county design-build projects completed by November 1, 2009. The new report looks at 15 design-build projects from nine counties. Of the 15 projects, only five were completed at the time the reports were submitted. Some counties chose to submit information on projects currently in progress in order to provide information on their design-build efforts and demonstrate their support for extending design-build authority to counties beyond January 1, 2011.

The 2010 LAO report recommended that the Legislature:

  • Adopt "a single statute … that applies to all public agencies providing the same authority and limitations."
  • Limit its reporting requirements to new types of infrastructure projects, "such as … a limited number of highway projects."
  • Eliminate maximum or minimum cost thresholds for design-build projects.
  • Make project cost "a larger factor in awarding the [design-build] contract."

Projects Submitted to LAO for Review

Per information provided to the LAO, five counties have used the design-build contracting method to complete five projects:

chart 1

In addition, four counties told the LAO that they have 10 design-build projects underway, but not yet complete:

chart 2

The LAO's 2010 report noted that from the information submitted it was difficult to find conclusive evidence as to the benefits of the design-build method. However, each county expressed their support for the process and was pleased with the project outcomes. Moreover, the study found that the county experiences tended to support LAO's prior findings that design-build can be a useful alternative delivery method.

Additional Research for Consideration

A new study sponsored by the Water Design-Build Council has garnered national attention and shown that the design-build delivery method saved almost half the time as traditional delivery methods in completing water and wastewater projects. The comprehensive study is worth noting as it is one of the first to compare the design-build delivery method to design-bid-build in the water sector.

A team of researchers from the University of New Mexico, University of Colorado at Boulder and Iowa State University collected data on 100 public water and wastewater projects completed since January 2003, each with total project costs of at least $3 million. Thirty-one of the projects were design-build, and 69 were design-bid-build.

The researchers found that design-build projects in the water-wastewater sector have a shorter duration for design and construction than design-bid-build projects. The median duration for design and construction for design-build projects was 23 months, compared to 40 months for traditional design-bid-build projects.

Conclusion

As noted by the 2009 Senate Local Government Committee background paper on design-build2, the process is not without its disadvantages. Because the owner does not fully define the project upon entering into a contract, the owner gives up control over design and construction quality. Furthermore, because the designer and builder are on the same team, they share a financial incentive to reduce quality to increase their profits. Critics also say design-build results in more expensive change orders and opens the door to favoritism in the selection process.

In the final analysis, design-build contracting represents a collaborative effort that integrates the various resources involved in the development of projects and provides incentives for a high level of technical performance and consistency with contractual budget and schedule terms.

It has the potential to produce a more cost-effective project in less time than a process that contractually insulates the project participants while leaving the contracting agency with most of the project risk.

Extending the design-build legislation beyond the January 1, 2011 sunset date will enable local agencies to deliver projects faster and spend available dollars more wisely to benefit California's taxpayers and the economy.

 

1Legislative Analyst's Office (2005). Design-build: an alternative construction system. Sacramento: Legislative Analyst's Office.
2Senate Local Government Committee (2009). Local Agencies and Design-Build Contracting: A Briefing Paper for Legislators and Their Staffs. Senate Local Government Committee.

For more information on this report or other Local Government issues, contact Ryan Eisberg, Senate Republican Office of Policy at 916/651-1796.