Design-build is a project delivery method that combines two, usually separate services into a single contract. With design-build procurements, owners execute a single, fixed-fee contract for both architectural/engineering services and construction. The design-build entity - also known as a constructor - may be a single firm, a consortium, joint venture or other organization assembled for a particular project.
With design-build delivery, the design-builder assumes responsibility for the majority of the design work and all construction activities, together with the risks associated with providing these services for a fixed fee. When using design-build delivery, owners usually retain responsibility for financing, operating and maintaining the project. In some cases, however, separate maintenance, or operations and maintenance, agreements have been combined with design-build contracts (discussed below).
With design-build procurement, the owner must complete a certain amount of preliminary engineering and project definition in order to be able to gain environmental approvals and prepare bid documents. While the level of definition is not fixed, experience in the highway sector suggests that preliminary design efforts of 10 to 15 percent completion are usually adequate. A project that is too advanced (for example, fully designed) may be unattractive to prospective constructors since there will be minimal opportunity for the private sector to apply innovative methods to reduce cost and shorten the construction schedule. Projects that are still in the early stages of planning with unanswered questions regarding scale, alignment and other basic project features and those that have not yet gained environmental approvals are not ready to be procured on a design-build basis.
Customary practice with design-build procurements is to rely upon best value. This approach, which is encouraged by Federal guidelines, takes into account both the technical capabilities and qualifications of the design-build team, and cost. There is no universally accepted approach for determining best value, with the request for proposal usually specifying the relationship between technical rankings and price.
Greater opportunity for applying the design-build contracting method to projects has been facilitated through legislative changes in SAFETEA-LU and MAP-21.
Section 1503 of SAFETEA-LU eliminated the $50 million floor on the size of contracts that can use design-build contracting without special approval. Section 1503 also directed the Secretary to revise the regulations applicable to design-build contracts to permit transportation agencies to proceed with certain actions relating to design-build contracts, prior to receipt of final NEPA approval. Specifically, the regulations may not require compliance with section 102 of the National Environmental Policy Act of 1969 prior to any agency: (a) issuing requests for proposals; (b) proceeding with awards of design-build contracts; or (c) issuing notices to proceed with preliminary design work under design-build contracts. These modifications have allowed private sector partners to be involved in the project definition process prior to NEPA approval.
Pursuant to Section 1503, FHWA issued a final rule on design-build contracting regulations in the August 17, 2007 issue of the Federal Register.
MAP-21 permits a greater Federal funding share (normally 90 percent for Interstate Highway projects and 80 percent for other projects) for projects that use some method of accelerated project delivery, which includes design-build contracts. Section 1304 of MAP-21 allows the Federal funding share to increase by up to 5 percent of the total project cost, subject to the limit of 10 percent of the combined apportionments of the state under the National Highway Performance Program, Surface Transportation Program, and Metropolitan Planning.
Design-build procurements can be combined with long-term maintenance (or operations and maintenance) activities to generate additional project benefits from a lifecycle asset management perspective. Design build coupled with a maintenance contract, sometimes referred to as design-build-maintain, brings together the inherent cost and schedule efficiencies of design build with the specified performance guarantee of a long-term maintenance agreement. In addition to design and construction services, the developer is responsible for the maintenance, preservation, or rehabilitation of the facility and its compensation may be required contractually to maintaining the condition of the facility to a specified standard. Because the same developer remains vested in the physical condition and performance of the facility after construction is completed, the initial level of design and construction quality may incorporate longer-term performance and condition considerations. Long-term agreements may also include operational responsibilities such as incident management.
Examples of projects that have combined design-build procurements with long-term maintenance include: