A takeaway from this year’s Construction Superconference was a growing apprehension regarding the risk associated with design-build projects, especially for large mega projects. In four key sessions, concerns surfaced about the project delivery method’s efficacy in fairly allocating risk. Concerns about risk in design-build have previously been reported in ENR. The debate continues over how to share risk and reward among all the parties to the construction process. Amidst these concerns, progressive design-build emerged as a promising variation to the traditional design-build approach. Progressive design-build emphasizes a qualifications-based selection to expedite decision-making and reduce costs. This article explores the pivotal discussions at the Construction Superconference, revealing the industry’s quest for a more balanced and efficient approach to risk allocation in design-build projects.
In one session entitled “Gaining the Upper Hand in Proposal-Related Disputes between Designers and Contractors in Design-Build Contracts,” the tensions between large general contractors and large design professional firms became obvious. The dialogue got “feisty,” especially for a construction law conference. At issue is the reliability of preliminary design plans and information contained in those preliminary plans to estimate projects. When estimating on large mega design-build proposals, even small errors or miscalculations can lead to big losses. How risk and reward should be shared among the different professions was hotly debated.
The builder is typically the lead design-builder and either joint ventures or procures design services contacts from a design professional (other approaches include fully integrated design-build companies or creating a special purpose entity for a project). Builders want design professionals to have more skin in the game. The Presenters from large general contracting companies expressed their relationships with their design professionals are generally very good on design-build projects, they want design professionals to be more proactive in identifying what information is based upon incomplete information and what design development should be further developed. Developing and paying for a fully formed set of design documents in the proposal phase is unrealistic. While some design professionals take the position that fully reliable design plans only come with fully developed and paid-for design plans.
A session entitled, “Spearin Doctrine in Design-Build Projects,” described design-build as a failure in the context of evaluating design-build as a vehicle to allocate risk fairly and efficiently. These comments from Davd Haten of Donavan and Hatam, a nationally recognized legal expert who often represents design professionals.
A session on progressive design-build was much more optimistic in solving some of the rougher edges of what was described as traditional design-build. Progressive design-build emphasizes qualifications in the selection process, making the selection process faster and less costly. Setting a guaranteed maximum price (GMP) until more information on the project is known helps de-risk a project and keeps the owner actively engaged. The presentation explained how off-ramps provide a contractually planned for project exit, but that most projects do not take these off-ramps. The panel concluded that the future of progressive design-build is promising and will likely serve as a valuable option for the right kind of projects with the right kind of owners. However, one of the presenters at another session commented that progressive design-build is not the answer to all the problems we see on design-build projects.
Construction Superconference, an annual conference for the past 36 years focusing on the most compelling construction sessions on construction law, recently occurred in Hollywood, Florida. AGC and ConsensusDocs are proud association partners supporting the conference. This year, the conference attracted a record attendance of over 500 attendees from all segments of the design and construction industry. Many attendees serve as in-house counsel for general contractors, subcontractors, owners, and design professionals. In addition to senior private practice construction law attorneys and the claims consultants who support claims and schedule delay analysis.
The four sessions focusing on design-build were entitled :
- Risk and Insurability When Subcontracting Design Services in Design/Build Delivery
- Progressive Design-Build: The Hot New Contracting Method
- Spearin Doctrine in Design-Build Projects: Allocating and Insuring the Risk of Inaccuracies Between Bid and Design Plans that Lead to Cost Increases
- Gaining the Upper Hand in Proposal-Related Disputes between Designers and Contractors in Design-Build Contracts
Comments or questions about this article can be directed to Brian Perlberg, Executive Director and Senior Counsel, ConsensusDocs Coalition, at bperlberg@ConsensusDocs.org.