Is a Design-Build Contract Right for You?
By: JOSEPH G. SPRINGER
Spring 2000
Throughout most of the 1900s, most commercial construction projects were design-bid-build. Over the past ten years, the increase in the number of design-build projects has been astounding, from 15% in 1990, to 35% in 1999, according to the Design-Build Institute of America. What is the difference between the two types of construction contracts?
The Contracts
In the traditional design-bid-build construction project, the owner enters contracts with a design professional (typically an architect) to design the project. The architect may employ other "sub-design consultants" such as engineers. When the design is complete and approved by the owner, several bids are solicited from contractors. The owner then enters into a separate contract with a contractor to construct the building.
In a design-build system, the owner enters into a single contract with a design-builder who bothdesigns and constructs the building. The design-builder may employ architects or engineers (either on the design-builder's staff or from outside firms), but such design professionals are directly responsible to the design-builder, not the owner.
Why the change to design-build contracts?
Design-build contracts provide single-point responsibility. If the owner has a problem, he or she need only call the design-builder. Design-bid-build projects often lead to "finger pointing" between the architect and contractor; when a problem arises, the architect accuses the contractor of faulty construction, and the contractor blames the architect for faulty design.
The design-build system also increases the likelihood that the building will be constructed within the owner's budget. Contractors often can provide better prices and information regarding construction methods than architects. The contractor is able to conduct value engineering and constructability analysis from the start.
Finally, design-build projects are often completed sooner and are more flexible than traditional projects. A design-builder can start construction before the final design is completed. The design-builder can provide early project scheduling, and can order long-lead time items before the design is completed. In design-bid-build contracts, the design generally must be completed before bids are let.
Precautions if you enter into a design-build contract
Design-build contracts have certain pitfalls. In a design-build contract, the owner cannot rely on the architect to act as his or her representative during the construction process. Under the traditional design-bid-build system, the architect will conduct site inspections, review pay requests and change orders, and assist in resolving disputes between the owner and contractor. As a result, some owners in design-build contracts will employ their own architect or other adviser knowledgeable in construction. However, this may result in increased costs and animosity that the design-build system is intended to avoid.
In the "old days," the conventional wisdom was that design-build contracts led to mediocre design because the design-builder was more concerned with cost and constructability. This concern seems to be fading as contractors become more experienced and more design professionals enter the design-build field.
Because design-bid-build contracts have been around for many years, courts have had an opportunity to interpret them, and the legal and insurance issues are well understood. Courts and insurance companies are only now catching up with the design-build trend. For instance, whether a court will hold the design-builder to the same legal standard as a design-professional or a contractor is unclear. Before entering into a design-build contract, pay careful attention to the insurance and bond clauses because a contractor's general-liability policy generally excludes coverage for architectural and engineering errors. A design professional's errors and omissions insurance policy, on the other hand, generally excludes coverage for construction services. The contractor's surety bond may not cover design errors, all of which provides the owner with limited protection. Consequently, owners, contractors, and design professionals should seek competent legal and insurance advice before entering into a design-build contract.