From The Editor | September 7, 2016

Is Progressive Design-Build Right For Water And Wastewater Capital Projects?

Peter Chawaga - editor

By Peter Chawaga

There’s no shortage of controversy around how municipalities choose to go about their water and wastewater capital projects. Anything involving public funds, major infrastructure, and potentially lucrative construction bids will endure its fair share of scrutiny.

Traditionally, there have been three avenues that municipalities and construction companies use to carry out their capital projects. There’s design-build, in which both the design and construction of the project are given to a single group; design-bid-build, in which one company designs the project and then others bid for the construction work; and construction manager at risk (CMAR), in which a construction group agrees to complete the project within a preset maximum price (liable for any additional costs at its own risk).

But a fourth route worth considering has emerged: “progressive design-build” (PDB).

The Progressive Route

In PDB arrangements, the selected construction company advances the design of the project to a predetermined level while performing cost-modeling and other preconstruction services. Once the design reaches that level, the construction company then provides a commercial proposal for final design, construction, and commissioning. Once an agreement is reached for all the final terms, including price and schedule, the construction company proceeds with finalizing the project. Like CMAR, PDB often uses a guaranteed maximum price approach for the second phase of services in which the project is constructed.

PDB is usually selected when a municipality wants to be heavily involved in the design process and wants real-time and open pricing information.

“There are a number of important issues being considered in the water and wastewater industry, but when the discussion relates to procurement and project delivery, PDB is receiving the greatest attention,” said Peter Kinsley, manager of the Government & Public Services Group at Haskell, a design-build firm. “This is of no surprise as owners are recognizing the added benefits of PDB that gives them greater control of design and creates a more collaborative environment, while maintaining a single point of responsibility and other benefits inherent in design-build.”

By its nature, PDB encourages municipalities to weigh the qualifications of prospective construction companies over their ability to deliver at the lowest cost. The fact that there’s a second proposal stage encourages selection based on a construction company’s ability to advance a design. Furthermore, municipalities electing for PDB will only be able to consider the price of the preconstruction services and the construction company’s overall fee, a small fraction of the total project price.

Benefits Of The Fourth Path

According to Michael Loulakis, founder of the capital project consulting firm Capital Project Strategies, LLC, PDB holds some distinct advantages over the three traditional capital project methods.

In design-bid-build projects, he said, there is no contractual relationship between the contractor and the designer, only between those parties and the municipality. While this method allows the municipality to be involved in design decisions before the design is bid out for construction, it will also be liable for design errors that manifest themselves during construction. PDB eliminates this liability while also allowing for input during the design phase.

Like PDB, CMAR offers the benefits of early contractor involvement, transparent pricing, and extensive collaboration, Loulakis said. But, because it is not a design-build approach, the contractor does not have responsibility for the design and cannot make performance guarantees.

“Owners who choose PDB over CMAR will frequently do so because they want the natural benefits of design-build and don’t want to manage the designer,” said Loulakis.

Loulakis said that under PDB, the design-build team is brought to the project relatively early compared to other forms of design-build, limiting the team’s chance to offer its own ingenuity. Also, other forms of design-build have the price established when the contract is formed, which can create challenges for the owner’s ability to influence the design.

“Why might an owner not want to use PDB?” Loulakis asked. “If they don’t have the ‘stomach’ to enter into a contract with a design-builder before getting a fully committed price is one of the main reasons … Another reason is if the owner wants to have a separate contract between the designer and contractor and forego the benefits of design-build, while still having collaboration and early contractor involvement. This might lead one to use CMAR.”

A Fit For The Water And Wastewater Industries

In his work with the water and wastewater markets, Kinsley has found PDB to be a particularly attractive option for many utilities.

“PDB, with its collaborative process, allows multiple design scenarios to be identified, developed, and analyzed from a specific set of decision-making criteria in order to develop a custom solution meeting specific owner objectives,” he said. “This ability to identify and analyze multiple technical scenarios is why PDB is particularly beneficial in the water and wastewater industry, as there is great variability in available technologies.”

In the absence of analytical studies to define the frequency of PDB use for water and wastewater capital projects, Kinsley said that he personally has seen significant increase in the use of design-build and PDB in the space.