Building Teams

Public Agencies Form a Design-Build Pocket in Region

by Diane Greer

Around the nation, design-build is fast losing its status as an "alternative" delivery method. But in the New York region, it remains a rare choice.

The Design-Build Institute of America based in Washington, D.C., estimates that between 30 to 40 percent of nonresidential projects currently use some version of the delivery technique across the country. Meanwhile, a majority of design and construction firms responding to a survey conducted by ZweigWhite - a Chicago-based construction industry management consulting firm - report that they expect an increase in design-build use in the public sector over the next five years.

Even the legislative environment is becoming more favorable. In 1998, only 11 states had design-build procurement laws for state projects, but by 2005 only seven states had not specifically authorized the method for use by public agencies.

In New York, New Jersey, and Connecticut, however, there is limited use of design-build methodology, in which an owner contracts with a single entity - usually a partnership - to both design and build a project. Design-build steps away from the traditional design-bid-build model where an owner executes separate contracts for an architect or engineer to design and a contractor to build.

In the region, the method is largely used by federal offices and regional transportation agencies such as New York's Metropolitan Transportation Authority, the Port Authority of New York and New Jersey, and New Jersey Transit, said Robert Scancella, president of the DBIA's Tri-State Chapter serving New York, New Jersey, and Connecticut. The few private-sector design-build projects in the region typically involve wastewater and power facilities, manufacturing plants, schools, or retail complexes.

The region is still getting familiarized with the process and is advancing at its own pace, said Paul Wagner, vice president for design-build services at Edwards and Kelcey, a civil engineering and design firm based in Morristown, N.J.

"There is a learning curve for engineers, contractors, and owners," he added. "That is the biggest risk. Everybody is still learning what works and what does not work. It is not a cure-all for every situation."

Factors shaping the lethargic growth of design-build's use in the region include reluctance by owners to embrace a new process and legal restrictions affecting some public agencies, Scancella said. Neither New York or New Jersey's state departments of transportation - a typical user of design-build services elsewhere - currently have authority to use design-build, despite legislation allowing pilot projects in some instances.

The tide could change as high-profile projects using design-build accumulate in the marketplace, such as the Long Island Rail Road's $78 million Arch Street Shop and Yard completed last year. The project was part of the ramp-up for the MTA's East Side Access program that will bring LIRR trains to Grand Central Terminal in Manhattan for the first time, and was a showcase of sorts for design-build work, said Mike Kennedy, design manager at Edwards and Kelcey.

"We came up with better ideas and functionality because you merge the expertise and perspectives of the contracting side with the design side," he added.

Others are more cautious about design-build, suggesting that owners abdicate too much control of the design and project to the contractor, said John Osborn, partner at his namesake law firm, John E. Osborn PC of New York.

"You end up with a combination of the owner backing off a bit and not having as much input and vigilance, and you do not have an independent design professional who is going to raise questions," he added.

One source of contention surrounding the delivery technique in the region is the debate over whether a design consultant could lose its independence under a design-build format. The American Institute of Architects is supporting legislation in the New York State Assembly that would prohibit a licensed architect or engineer from being dependent on the contractor in a design-build partnership - instead requiring that the design firm take the lead, said Terrence O'Neal, president of the state AIA chapter and principal of Terrence O'Neal Architect of New York.

"If you are getting a salary from the design-builder and a conflict comes up that might affect the health, safety, and welfare of the public, just the fact that you are not independent of the design-build entity may influence the architect," O'Neal said.

Scancella said such criticism is invalid and that the DBIA is fighting the bill.

"I have a responsibility to my license and a responsibility to the owner," he said. "Whether I am paid by the owner or the design-builder, I am supposed to do the right thing."

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More Design-Build in the Market

The design-build slate has a few big project names from recent years, and most tilted toward the method because of expected time savings.

In another East Side Access project, Metro-North Railroad needed to free up space by removing a rail storage area at Grand Central Terminal. The agency selected the design-build method to construct its new $75 million Highbridge Yard in the Bronx in just 21 months with the design-build team of Slattery Skanska, a contractor based in Whitestone, N.Y., and Edwards and Kelcey.

The City of Bridgeport, Conn., is also choosing design-build for the first phase of a $28 million public works complex featuring garages, sheds, tanks, and offices, but has not yet awarded the contract. The city, seeking a federal grant contingent upon completing the project by mid-2007, sees design-build as a faster option, said Petina Killiany, senior project manager at Pinnacle One, a construction manager based in Tempe, Ariz., that is program manager on the project out of its Middletown, Conn., office. While accelerated schedules can lead to lower costs by allowing project teams to stay ahead of materials price increases and avoid the added administrative overhead costs in longer contracts, a design-builder may pad its proposed bid to cover unexpected risks. That buffer can somewhat reduce the potential cost savings, said Keith Itzler, assistant branch manager in New York for Dewberry, an engineering and design firm based in Fairfax, Va.

Design-build advocates say time savings is not the method's only benefit to owners. Streamlining project team communications with a single point of contact and accountability allows the owner to transfer risk to the design-build team, Killiany said.

"This is a big reason why owners want to do it," she added. "There is no finger pointing or transfer of claims back to the owner."

The method can also inspire innovation, said Tom DeMaria, executive director of capital program management for LIRR.

"Part of the advantage of design-build is you have another entity, the contractor, who can comment on the preliminary design and add to it with innovative ideas," he added.

It tends to work best when owners know what they need but don't know how to get it, said Doug Lisak, president of the design-build division at HDR, an engineering firm based in Omaha, Neb.

"Owners need to find the right applications," he added. "It works well for complex problems where owners are looking for creativity in the design."

But design-build skeptics say there are possible pitfalls. Osborn said that the harmony of a design-build team should not be presumed, with the possibility of disputes always present.

"You do not think about the team members splintering and fighting with each other," Osborn said.

Such complications can be avoided with well-documented teaming agreements that identify specific roles, responsibilities, and risk sharing, Lisak said.

Do's and Don'ts for Design Build

Owners can remove a lot of potential questions about design-build construction by developing sound practices for executing the method and staying active in the development process, DeMaria said. For instance, LIRR uses qualification-based bidding to hire contractors.

"We specify the level of quality in our preliminary design specification document," he added. "We also take an active role in construction management and the approval process with shop drawings."

Qualification-based bidding is becoming more common, Scancella said. Using this method, the owner doesn't just select on price. It also weighs criteria measuring the qualifications of the team and the technical merits of the proposal.

Some owners are employing architects and engineers to develop design and RFP documents as a step prior to seeking a design-build team. Those owners sometimes keep the firms on as consultants to review proposals and monitor the project, Killiany said. The Bridgeport project is using this approach.

"Owners need to make sure that there are checks and balances within their own system to ensure that they are getting what they are paying for," Killiany said.

Variations of the design-build model are also starting to appear. Itzler said that in an approach "the federal government has down to a science," drawings are well defined before turning over a project to a design-build team.

"This approach better defines what the owner wants, helps in the pricing, and makes the cost of proposing a lot less," he added.

Itzler said developing design-build proposals can be a costly endeavor, with owners running the risk of securing fewer bids.

In recognition of that cost, Killiany said that Hartford's city government offered small stipends to losing design-build bidders on a short list in the qualifications process to build the new $25 million Breakthrough Magnet School. Pinnacle One was construction manager on the project completed this year.

That project may also be also a bellwether for the possible spread of design-build in the region. It grew from a Connecticut Department of Education design-build pilot program authorized by the State Legislature in 2003, and Killiany said the school's successful completion inspired the agency to extend the pilot through 2008.