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Design-Build E ffectiveness Study

As Required by TEA-21 Section 1307(f)
Final Report
Prepared for:
USDOT - Federal Highway Administration
January 2006

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This chapter describes the nature of design-build as an alternative contracting approach to the traditional design-bid-build approach used by state transportation agencies to deliver projects funded through the Federal-aid highway program. It provides a historical context for considering design-build and other related project delivery approaches to the nation's highway construction program. It demonstrates the extensive use of design-build project delivery by other infrastructure development sectors, including buildings (vertical infrastructure) and public utilities (horizontal infrastructure). The section concludes by reviewing the results of prior studies of design-build and other innovative project delivery approaches and their performance relative to more traditional contracting approaches like design-bid-build.


There are a wide variety of ways in which infrastructure projects can be procured and delivered. Some segregate the roles and responsibilities of different phases of project development, as with design-bid-build in which the final design is completed by one party (in-house staff or under a negotiated contract) and subsequent construction is awarded to a separate low-bid contractor. Others integrate these activities under a single overall contract, as with design-build. Still others extend contract roles and responsibilities far beyond project development to include operations, maintenance, preservation, and even finance. Some are prescribed by federal and state statute and regulation (such as design-bid-build), while others are used extensively by private and certain public contracting agencies to expedite project delivery (such as design-build and its various manifestations)1, 2.

This report focuses on the design-build approach and its relative advantages and disadvantages to the more stratified design-bid-build approach. This and other related project delivery methods are defined below.

Exhibit II.1 shows the actual project timelines for a number of comparable design-build and design-bid-build projects documented by the Arizona Department of Transportation in 20044. Although the data for the design-bid-build projects omit the time to develop and procure design contracts for these projects, the design-build projects still have shorter delivery times, especially for urban projects. This chart illustrates the effect of concurrent sequencing of project development phases for design-build projects versus consecutive sequencing of these phases for design-bid-build projects.

Exhibit II.1: Project Timelines for Comparable D-B and D-B-B Projects

This shows a schematic of project timelines for comparable design-build and design-bid-build projects in Arizona. The design-build timelines for 3 design-build projects shows a significant overlap in the design and construction phases of a project resulting in completion times of 1010, 1040 and 1070 days. The comparable design-bid-build projects in Arizona show sequential design and construction phases resulting in total completion times of 1290, 1360, 1575, 1483, 1170 and 1115 days.

Source: Arizona Department of Transportation

As noted in Exhibit II.2, design-build is one of several innovative project delivery, procurement, and contracting techniques that have potential application in the highway construction industry.

Exhibit II.2: Innovative Procurement and Contracting Approaches

Project Delivery ApproachesProcurement ApproachesContract Payment Approaches
  • Indefinite Quantity/Indefinite Delivery
  • Construction Manager at Risk
  • Design-Build Contracts
  • Design-Build Warranty
  • Design-Build-Operate-Maintain (DBOM)
  • Design-Build-Operate-Maintain-Finance (DBOM-F)
  • Performance-Based Total Asset Management Contracts
  • Alternative Bids/Designs
  • Request for Proposals
  • Cost Plus Time (A+B)
  • Multi-Parameter Bidding (A+B+Q)
  • Best Value
  • Disincentive Provisions
  • Incentive Provisions
  • Incentive/Disincentive Contracts
  • Lane Rental Contracts
  • Active Management Payment Mechanism
  • No Excuse Bonus Contracts
  • Lump Sum Contracts

Sources: Gransberg, Douglas D.; Senadheeka, Sanjaya P. (1999). "Design-Build Contract Award Methods for Transportation Projects," Journal of Transportation Engineering, ASCE, 125(6), 565-567
State of Florida (1996). Innovative and Alternative Contracting Practices, Florida Department of Transportation, August 30, 1996
Transportation Research Board (1991). "Innovative Contracting Practices," Transportation Research Circular 386, December 1991

Design-build is an established process for developing major capital projects used by the private sector and the armed services, which may be less constrained by state or local regulations that limit opportunities for achieving its potential benefits. Within the highway construction industry, the design-build procurement and delivery mechanism is a relatively new concept that has not yet achieved widespread acceptance and application. This is because the design-build approach is perceived as:

Other forms of design-build project delivery include the following variations and combinations:

Exhibit II.3 displays different types of project delivery approaches that combine various phases of the project life cycle.

Exhibit II.3: Alternative Contractual Arrangements for Delivering Highway Infrastructure

This exhibit shows alternative contractual arrangements for delivering highway infrastructure. It depicts how services typically delivered under the traditional project delivery process can be combined in letting integrated multiple-service type contracts. The services include: pre-planning & acquisition, finance, design, construction, operations & maintenance, and upkeep and improvement. Design-build contracts combine design and construction. Design-build-operate-maintain contracts combine design, construction, operations and maintenance. Design-build-finance-operate- contracts combine design, construction, operations and finance. There are many combinations of integrated service contracts that can be used.

Source: Pekka Pakkala. Innovative Project Delivery Methods for Infrastructure - An International Perspective. Finnish Road Enterprise, Helsinki, 2002, p. 32.

Many of the project delivery approaches described above extend far beyond the scope of design-build contracting by placing increasing functional responsibilities for highway infrastructure under a single contract vehicle. The choice of which approach to use for a particular project depends on a number of factors, such as:

The effect of each contracting approach on project performance, as defined by several key performance measures, is discussed later in this section based on the results of several prior studies.


According to Beard, et al.5, the earliest form of infrastructure delivery involved a master builder serving as both project designer and builder. Throughout most of recorded history, this form of design-build project delivery has been used to develop infrastructure projects such as pyramids, temples, aqueducts, cathedrals, and major public buildings. The widespread use of design-build project delivery reflected the need to have the project designer intimately involved in the construction of the project to ensure the proper execution of the design plans and consideration of construction challenges posed by the design before it is completed. In the absence of scientifically-based engineering principles, standards, and specifications, only the master builder had the experience and understanding of fundamental engineering and construction principles and techniques to know what could be built and how to build it. These master builders typically passed on their specialized skills and knowledge from one generation to the next, gradually enhancing the profession through the development and application of new techniques, often based on trial-and-error. By integrating these two sequential and highly interdependent phases of project development, the early design-builders could adjust the design to fit prevailing site conditions and to take advantage of new techniques or alternative sources of materials.

It was only in the period starting in Europe with the Renaissance that the knowledge and skills involved in project design and construction became increasingly complex, better documented, and more specialized. This enabled the design function to become more distinct from the construction function. Along with increased complexity and specialization came concerns over the accountability and responsibility of the various functions that comprise the project development process.

To respond to concerns over the objectivity and integrity of the project development process for large infrastructure projects in this country, particularly after such projects as the Transcontinental Railroad showed how favoritism and process manipulation could lead to fraud, waste, and abuse in the development of infrastructure, government agencies in the United States instituted contracting reforms late in the nineteenth century that culminated in the development of the two-step project delivery process known as design-bid-build.

Key legislative events in the United States that led to the formal separation of design and construction phases of infrastructure projects included the following:

Once it became institutionalized through laws and regulations, design-bid-build became the traditional form of procuring and delivering government infrastructure projects in the United States over the ensuing 50 years. This included Interstate highway facilities, whose genesis (starting with the National Defense Highway Act of 1956, which initiated the Interstate program of superhighway construction) postdated passage of most of the laws mandating design-bid-build for government projects.

Under the design-bid-build form of project delivery, the contracting agency first retains the services of an engineering design firm to prepare plans, specifications, and estimates (PS & E) for a project (unless the contracting agency uses in-house architects and engineers to do this). Once the PS & E is completed, the contracting agency then selects a contractor to construct the project. This two-step project delivery process separates the design and construction phases of project development, with the contracting agency assuming responsibility for the completeness and accuracy of the drawings and specifications produced by the design firm. As discussed further below, until 1996, federal law (the Brooks Act) precluded the award of engineering service contracts based on price, and required that they be awarded based on the qualifications of the winning team with the price determined through negotiation. Similar restrictions continue to be imposed on the award of engineering service contracts. Construction contracts are typically awarded on the basis of price, with the lowest responsible bid being awarded the contract (i.e., a realistic and responsive bid given the scope and complexity of the project).


As noted above, the development of the design-bid-build contracting process resulted from the increasing complexity and specialization of design and construction services, the perceived need to provide a check and balance between the development and execution of project plans, and a desire to produce projects at minimum cost. The primary benefits of design-bid-build were to reduce favoritism in the procurement process and spur competition among construction firms. However, as with most institutionalized processes, the benefits of design-bid-build began to be eroded by its inhibiting effects on the development and application of more efficient procedures and technology.

Despite the prevalence of the design-bid-build approach to project delivery among public works agencies, design-build project delivery has numerous advocates among private corporations not subject to federal procurement statutes and regulations, and certain public agencies responding to urgent requirements for project completion. Starting in the late 1960s, based in part on the successes achieved by the private sector in applying design-build to their capital projects and the need to expedite needed infrastructure projects and stretch scarce financial resources, a number of government agencies at the federal, state, and local levels began to experiment with and apply the design-build project delivery approach to reduce the time and cost to complete their projects. This included various branches of the Defense Department, public school districts, and public utilities, which became adept in its use for constructing buildings and other kinds of facilities (military base housing, schools, and water-wastewater treatment facilities). However it was not until the 1996 Federal Acquisitions Reform Act (Clinger-Cohen Act) that federal agencies received the legal authority to engage in design-build projects and use a new two-phase design-build process. Among the federal agencies using design-build project delivery are the Veterans Administration, General Services Administration, Postal Service, Federal Bureau of Prisons, Environmental Protection Agency, Department of Energy, and U.S. Army Corps of Engineers.

While design-build has become a significant project delivery approach for buildings, it is relatively new to the highway construction industry, whose roots are largely in the post World War II era in which design-bid-build was already the established way to procure and deliver all kinds of infrastructure projects. Interest in the design-build approach by sponsors of highway projects has been spurred by the reported successes achieved in applying this approach to project delivery by other infrastructure development sectors in this country (for buildings) and overseas (for buildings and highways). As the nation's highway programs became increasingly challenged in the 1980s and 1990s, interest grew in alternative project development and delivery approaches that offered ways to improve the efficiency (time, cost, and quality) and cost-effectiveness of traditional contracting practices.

Responding to this renewed interest in alternative ways to deliver transportation infrastructure projects, the Transportation Research Board of the National Academy of Sciences established a broad-based task force of highway project delivery experts in January of 1988 to evaluate the potential for applying innovative contracting practices to Federal-aid projects, including design-build. This TRB task force (designated Task Force A2T51 - Innovative Contacting Practices) compiled information from a variety of domestic and foreign sources on contracting practices and their impacts on project cost, progress, and quality. The task force also considered impediments to the application of promising contracting approaches and made recommendations to improve contracting practices.

One of the outcomes of TRB Task Force on Innovative Contracting Practices was the establishment by the FHWA of an experimental project that would allow state transportation agencies to test and evaluate innovative contracting practices6. The development of Special Experimental Project Number 14 (SEP-14) - Innovative Contracting, provided the impetus for state transportation agencies, in cooperation with the FHWA, to try out these innovative approaches to project delivery; discover how they affect project costs, duration, and quality; and determine whether and under what conditions any of these contracting approaches might be used to improve the cost-effectiveness of Federal-aid highway projects. The SEP-14 Program and the lessons learned during the first ten years of testing innovative contracting approaches are discussed in the next chapter.


The rebirth of design-build as a project delivery method for government-sponsored infrastructure projects can be attributed to a number of complementary factors. First, design-build has its roots in the genesis of infrastructure development going back millennia when design and construction functions were integrated by the design-builder position. Second, in times of war or natural disaster the urgency to expedite projects has caused government agencies to suspend traditional procurement and contracting methods and permit alternative approaches such as design-build. Third, budget and personnel shortages or other constraints in the public sector and competitive pressures in the private sector have caused project sponsors to seek more cost-effective ways to deliver projects. Indeed, fiscal and national crises have often been the driving forces behind efforts to permit government to innovate and become more cost-effective. Design-build is viewed by many as one of the most promising "innovative" approaches to build highway infrastructure faster and cheaper without sacrificing product quality.

Proclaimed Advantages of Design-Build Project Delivery

Proponents of design-build contracting proclaim a number of advantages over typical contracting arrangements such as design-bid-build7, 8, 9 including:

In a design-build project development process, the procurement of the design-build contractor through a request for proposal (RFP) process might actually require substantially more time than the invitation for bid (IFB) process used to retain the construction contractor. However, overall time savings result from not having to go through two separate procurement processes, one for the design team and one for the construction team.

Proclaimed Disadvantages of Design-Build Project Delivery

Design-build contracting is also one of the most controversial of the innovative highway project delivery approaches, since it changes the fundamental way key stakeholders in the highway construction industry compete and cooperate with each other10, 11, 12. Critics claim that design-build:

In considering alternative project delivery approaches, proponents of more traditional approaches question whether adequate checks and balances are provided to ensure product quality, integrity in the procurement function, and fairness to established businesses that compete for these contracts. Others ask whether any one method of project delivery is preferred for all types of projects and situations, or if a portfolio of alternative approaches should be available to suit different situations and project types.


Past research has considered a number of performance criteria when analyzing the implications of design-build contracting13, 14, 15 as shown in Exhibit II.4. This study characterizes the implications of design-build project delivery versus the traditional design-bid-build project delivery in terms of selected project characteristics and relevant/measurable performance criteria that directly relate to the issues posed by Congress in framing the requirements for this study.

Exhibit II.4: General Criteria for Evaluating Design-Build Project Delivery

This shows the general criteria that have been used for evaluating design-build project delivery. The general criteria include: conformance to expectations, conformance to specifications, user satisfaction, unit cost, potential cost growth, construction speed, delivery speed and potential schedule growth.

Source: AECOM Consult

Pertinent literature on design-build project delivery reveals that proponents and critics use similar criteria for judging the applicability and effectiveness of design-build and related approaches to project delivery. These criteria relate to performance objectives that proponents seek to achieve and performance standards that critics fear will be jeopardized by using design-build.

Expanding on the general criteria shown in Exhibit II.4, this study used the following criteria to assess the advantages and disadvantages of using design-build versus design-bid-build:

Among these factors, proponents generally agree that project duration or speed of delivery is the most significant factor motivating project sponsors to try design-build, particularly when an emergency or other urgent condition exists. Cost control is the next most frequently cited reason for using design-build, particularly for contracting agencies who wish to minimize the extent and impact of change orders on project costs. Quality is the one feature of a project that both proponents and critics agree must be preserved regardless of the applied delivery approach. Where warranties are included as a part of the contract, the emphasis on project quality takes on even more significance due to the added cost exposure of the project delivery team.

Equity and competition are both important issues in the design-build versus design-bid-build debate, prompted largely by a concern that innovative project delivery is merely a way to get around current regulations that protect the interests of and promote continued competition among competent project design and construction firms in the United States. A prevailing complaint is that innovative contracting approaches will change the competitive landscape for companies involved in a particular state's highway development program by placing local firms at a distinct disadvantage to larger national firms that have significantly more experience in successfully responding to these kinds of procurements in states with laws, regulations, and institutional context more favorable to alternative approaches. Another concern is that increased use of design-build will lead to fewer business opportunities for small businesses, including disadvantaged business enterprises, minority-owned firms, and female-owned firms.

Other performance indicators for judging the success of design-build contracting include:

Each of these features can be measured by the five primary performance criteria listed above. Indeed, these five criteria reflect the specific areas of focus established by Congress in TEA-21 for this study, based on the results of the literature search, SEP-14 program and project surveys, and project databases available to the research team.


This is not the first study of performance issues resulting from the application of design-build contracting to infrastructure projects. However, this is the first study to focus specifically on these issues with respect to highway projects funded under the Federal-aid highway program, using completed SEP-14 projects as the primary source of information. In the past ten years, a number of domestic and international studies have sought to determine how innovations in project delivery affect projects built by the private sector, defense agencies, and public infrastructure agencies. Several of these studies focus on infrastructure projects built in countries where the institutional context is quite different from this country. With federal funding legislation granting state transportation agencies significant latitude to experiment with and apply alternative project delivery approaches on Federal-aid projects, an increasing body of literature has grown that reveals the consequences of these efforts on highway projects built in the United States.

The information and insights provided by these earlier studies is broader in scope and application than the results of the SEP-14 program and project surveys conducted in this study. These prior studies varied in a number of ways that limit their applicability to comparison with the results of this study. These include differences in the following dimensions:

Exhibit II.5 summarizes key information from these prior studies. The following summarizes the key findings and conclusions from these prior studies:

Exhibit II.5: Performance Results from Studies of Alternative Project Delivery Approaches

Vertical Infrastructure - BuildingsNumber of Projects or Agencies in Sample% Reduction in Contract Cost Relative to D-B-B% Reduction in Contract Duration Relative to D-B-B
J. Bennett, E. Pothecary & G. Robinson, Designing and Building a World-Class Industry, University of Reading Design and Build Forum Report, Centre for Strategic Studies in Construction, Reading, United Kingdom, 1996.33013%30%
Victor Sanvido & Mark Konchar, Selecting Project Delivery Systems: Comparing Design-Bid-Build, Design-Build, and Construction Management at Risk, The Project Delivery Institute, State College, PA., 1999.3516%33%
Design-Build 101: Basics of Integrated Service Delivery, Design-Build Institute of America/American Institute of Architects Professional Design-Build Conference, Chicago, Illinois, October 14, 1998.DOD14%18%
Design-Build 101: Basics of Integrated Service Delivery, DBIAGSA3%N/A
Design-Build 101: Basics of Integrated Service Delivery, DBIANAVFAC 112%15%
Design-Build 101: Basics of Integrated Service Delivery, DBIAVet Admin0%28%
Linda N. Allen, Comparison of Design-Build to Design-Bid-Build as a Project Delivery Method, Master's thesis, Naval Postgraduate School, Monterey, CA., December 2001.NAVFAC 218%60%
Horizontal Infrastructure - HighwaysNumber of Projects or Agencies in Sample% Reduction in Contract Cost Relative to D-B-B% Reduction in Contract Duration Relative to D-B-B
Illinois DOT Study by SAIC, 200211 states3 of 11 states reported lower cost10 of 11 states reported shorter duration
New York State DOT Design-Build Practice Report, 20029 agencies5 of 9 agencies reported lower cost9 of 9 agencies reported shorter duration
Arizona DOT Study: Design-Build vs. Design-Bid-Build - Comparing Cost and Schedule. Jim Ernzen, Ron Williams, and Debra Brisk, TRB Paper 2004.134%22%
Ralph Ellis, Zahar Herbsman, & Ashish Kumar, Evaluation of the Florida Department of Transportation's Pilot Design/Build Program, University of Florida, College of Engineering, Gainesville, FL., August 1991.1111%36%
Washington State DOT Study. Design-Build Pilot Project Evaluation: A Measurement of Performance for the Process, Cost, Time, and Quality - SR500 Thurston Way Interchange. Dr. Keith Molenaar, University of Colorado, Boulder, CO, January 2003.1-23%16%
Jim Ernzen and Tom Feeney, Contractor Led Quality Control and Quality Assurance Plus Design - Build: Who is Watching the Quality? Transportation Research Board Paper, 2000 Annual Meeting, Washington, D.C., January 2000.1N/A30%
Bulk of Ambitious $1.6 Billion Design-Build Job Complete, Engineering News Record, May 14, 2001, Page 13. (Utah I-15 Design-Build Project)10%9%
ODOT Experience on Six Design-Build Projects, Ohio Department of Transportation, Columbus, OH., 1999.6Lower administrative costs; little/no change orders or claimsSignificant time savings

The use of design-build contracting goes beyond affecting project cost, delivery speed, and quality. Some states have used design-build to promote economic development. For example, in 2001 the Florida legislature passed a law that uses design-build project delivery as a key component of an economic stimulus package.


In response to a requirement contained in Section 1307(c) of TEA-21, FHWA developed and issued a Final Rule laying out the regulations under which design-build contracting can be applied within the Federal-aid highway program. The Design-Build Contracting: Final Rule was published in the Federal Register on December 10, 2002 and became effective on January 9, 2003.16

The Design-Build Contracting Final Rule is based on the results of design-build projects developed and evaluated under SEP-14 since 1990 and significant comments provided by members of AASHTO and representatives of the various industries that make up the highway development community to a Notice of Proposed Rule Making (NPRM) published October 19, 2001.

The following lists the most salient parts of FHWA's Design-Build Contracting Final Rule for consideration by both representatives of transportation agencies and firms interested in proposing on prospective projects using the design-build contracting approach:


Subsequent to the data collection efforts for this report, the President signed into law the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) on August 10, 2005. Section 1503 of this law includes several important provisions regarding design-build contracting. The following is a summary of the Section 1503 requirements:

* * * * * * * * * *

Chapter III discusses how the FHWA has used the special experimental project (SEP) mechanism to enable transportation agencies to try alternative contracting approaches, including design-build, and to discover for themselves whether and under what conditions these innovative project delivery approaches produce sufficiently positive impacts on project cost-effectiveness to warrant more widespread use. The pilot projects approved under these testing and evaluation programs formed an important source of documentation for guiding development of the FHWA's Design-Build Contracting Final Rule, and for developing the results of this study contained in Chapter IV.


  1. Beard, Jeffrey L.; Loulakis, Michael C. Sr.; Wundram, Edward C. (2001). Design Build: Planning Through Development, McGraw-Hill, New York.
  2. Transportation Research Board (1991). Innovative Contracting Practices, Transportation Research Circular 386, December.
  3. An Introduction to Design-Build. Design-Build Institute of America, Washington, D.C., 1994.
  4. Ernzen, Jim, Williams, Ron, and Brisk, Debra: Arizona Department of Transportation. Design-Build vs. Design-Bid-Build: Comparing Cost and Schedule. Excerpted from a presentation made at the 2004 Annual Meeting of the Transportation Research Board, Washington, D.C., January 2004.
  5. Beard, J. L.; Loulakis, M.C.; Wundram, E. C. Design-Build: A Brief History. Design Build Planning Through Development. McGraw-Hill, 2001.
  6. Transportation Research Board (1991). "Innovative Contracting Practices," Transportation Research Circular 386, December.
  7. Loulakis, M.C. (1999). Construction Project Delivery Systems: Evaluating the Owners Alternatives, AEC Training Technologies.
  8. Pakkala, Pekka (2002). Innovative Project Delivery Methods for Infrastructure: An International Perspective, Finnish Road Enterprise.
  9. Tenah, K.A. (2001). "Project Delivery Systems for Construction: An Overview," Cost Engineering, AACE International, Morgantown, WV, 43(1), 30-36.
  10. Loulakis, M.C. (1999). Construction Project Delivery Systems: Evaluating the Owners Alternatives, AEC Training Technologies.
  11. Pakkala, Pekka (2002). Innovative Project Delivery Methods for Infrastructure: An International Perspective, Finnish Road Enterprise.
  12. Tenah, K.A. (2001). "Project Delivery Systems for Construction: An Overview," Cost Engineering, AACE International, Morgantown, WV, 43(1), 30-36.
  13. Bennett, J.; Pothecary E.; Robinson, G. (1996). The Industry Today: Designing and Building a World Class Industry, Centre for Strategic Studies in Construction, United Kingdom.
  14. Gransberg, Douglas D.; Villarreal-Buitrago, Monica E. (2002). "Construction Project Performance Metrics," AACE International Transactions, AACE International, Morgantown, WV, CSC.02.
  15. Sanvido, V.; Konchar, M. (1999). Selecting Project Delivery Systems, Comparing Design-Build, Design-Bid-Build, and Construction Management at Risk, The Project Delivery Institute, PA.
  16. Federal Register, December 10, 2002, Volume 67, No. 237, pages 75902 - 75935

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