Integrated Design-Build Reduces Owner Risk

Posted on March 9, 2011

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When you hear people talk about the benefits of design-build, they usually mention how risk for the owner is reduced. This works best when the design-builder is integrated, or when everyone works for the same company. Let’s take a look at this concept.

Traditional project delivery requires at least two contracts, owner-architect and owner-contractor, and can involve many more with other specialists (project managers) and consultants (medical equipment). The more contracts with the owner, the more scopes the owner has to manage. Integrated design-build (IDB) is one contract, owner-design-builder, and all scope falls under that:  one party, the design-builder, responsible for managing the entire project and its outcomes.

Therefore, risk reduction starts at the beginning:  the contract with the owner.

Even the specific language of the contract benefits owners in design-build. It is not uncommon for typical design-bid-build contracts between owner and contractor to contain phrases like this:  “Owner warrants to the contractor that the drawings and specifications are complete and free from error…”  Let me ask the question:  how can the owner warrant a product (drawings and spec’s) he is not an expert in?  Design-bid-build (DBB) is based on unreasonable expectations for the owner, expectations which are inherently risky.

Such language allows an ‘out’ for the contractor to point the finger at the architect, who argues the contractor should have ‘reasonably expected’ such and such.  Finger pointing, time wasted, disputes to be resolved…and more owner risk.  Integrated design-build shoulders all the blame; architects and contractor work together because they cannot point the finger at themself.

In design-build, you will see this in a contract:  “Design-Builder warrants to the owner that it will produce documents that are complete and free from error…”  The design-builder backs its performance in the right place—with things it can control.  The design-builder essentially guarantees high quality in the finished product by assuming complete responsibility from design through construction into operation.

Next, risk reduction for the owner continues at the design stage. With an integrated design-builder, architects, engineers and construction specialists (including estimators and scheduling experts) provide cost-effective input on materials, methods of assembly, costs and schedule. This may not seem like a big deal; ‘I get that from my builder’, you think. However, the value of this information is early in the project, during design. Traditional project execution gets the contractor involved when the design is nearly complete.

Too often impracticalities of design (redundancy, inefficient detailing, proprietary solutions) are discovered during construction which lead to increased cost, schedule overruns and finger-pointing between parties under the traditional design-bid-build method. In addition, these design issues are opportunities for savings if caught before bidding; when found out after bidding, any savings are pennies on the dollar in the “value engineering” process. Since the design-builder is responsible for design and construction, the risk of any design cost overruns or construction coordination errors are the problem of the design-builder, and not the owner—thus less risk for the owner than traditional design-bid-build.

More specifically, schedule coordination is more seamless and less risky with a design-builder. Why? Two reasons. First, no redesign time because the estimate is updated real-time with the design; they move in parallel. Second, due to single-party responsibility, bidding and construction can begin on parts of the design that are complete (like the super structure, civil design, underground utilities) while remaining details of the design (ceiling layouts, interior finishes) are completed.

With a shorter combined design and construction time, owners are in their buildings earning revenue sooner than with traditional design-bid-build. Making money sooner is less risky for owners.

Finally, the owner is at-risk for things in design-bid-build that are otherwise covered by the design-builder. Some concerns the design-builder manages that the owner does not worry about: project cost, constructability, errors and omissions during construction, redesign if overbudget, labor disputes, inflation.

In conclusion, the traditional design-bid-build team shuns risk and communicates only through specific channels (many times using the owner to filter and translate) and creates paper trails to protect its individual interests and liabilities. An integrated design-builder takes on more risk because they have control over the whole project, and a superior process based on direct communication and a single interest—they all work for the same company. All of this means a more fluid project, less risk and less money for the owner.

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Posted in: Design-Build