Design/Build in the Public Sector                               DOWNLOAD PDF
Adopted: July 1995

Introduction
Design-build is a project delivery system whereby a single entity (known as the design-builder) is contractually responsible for both the design and construction of a project. Design-build is a distinct alternative to design-bid-build, which has been the project delivery system of choice in the U.S. public sector. Under design-bid-build, the project's design and construction are contracted separately. The owner usually selects professional design services on the basis of qualifications and then negotiates the fee with the selected professional and contracts for construction services by competitive bidding.

In the public sector, design-build is used as a specialized project delivery system in certain limited situations. Public agencies have used an array of design-build arrangements for project construction. Government officials, design professionals, and construction contractors involved in these efforts report mixed opinions on the organization and success of this system.

Public agencies are some times restricted from using design-build by statutes and regulations written with the design-bid-build project delivery system in mind. These laws, enacted to protect the public, may not be appropriate when applied to design-build. Selection of the design-build project delivery system without modification to current statutes and regulations can result in consequences that are contrary to the public interest. Consequently, public agencies are seeking statutory and regulatory changes to overcome some of the barriers to implementing design-build.

Despite these statutory and regulatory barriers, design-build may nevertheless be considered a viable system for project delivery. Clearly, it is an acceptable system, as design-build has been used in the U.S., and is in more frequent use in other parts of the world, in both the public and private sectors.

The National Society of Professional Engineers (NSPE) adopted a professional policy on the design-build project delivery system over twenty years ago after intensive internal discussions concerning the ethical and professional considerations of such a policy. That policy reads:

The National Society of Professional Engineers recognizes that design/construct or turnkey is an established and acceptable process and that an owner desiring to use this procedure may properly obtain engineering services by combining the design and construction under a single agreement with a firm qualified in both respects. Regardless of the method selected, the engineering services should be performed under the direction of a registered professional engineer competent in the specific areas of practice required for the successful completion of the project.
It is the responsibility of the professional engineer, legally and ethically, to protect the public health, safety, and welfare on projects in which they are involved. This responsibility cannot be overlooked, lessened, or delegated in the design of a project using design-build or any other project delivery system.

NSPE seeks to educate and inform its members and the public on the use of the design-build project delivery system in the public and private sector. NSPE, representing engineers in all areas of practice, is able to present a comprehensive view on this subject, as each of these practice areas has developed a different perspective based on their roles in and experiences with the design-build project delivery system.

The body of this paper highlights experiences and concerns derived from the work of many of our members in the design-build project delivery system. NSPE recommends this paper as an aid to those considering the use of design-build, those considering offering their services under a design-build arrangement, and those involved in revising and implementing the statutes and regulations governing public procurement procedures.

Background

The Project Delivery System
The process by which projects are designed and constructed is known as the project delivery system. Any project delivery system consists of numerous stages, including identification of need for the project; development of a scope of work; development of a cost estimate; authorization and appropriation of funds; land acquisition (if necessary); in-house design or request for proposal (RFP) for design work by a consulting design professional; in-house construction or procurement of outside construction services; contract negotiation; project supervision; and post-construction management. These stages may be accomplished by different arrangements of entities, leading to an array of project delivery systems such as design-bid-build, design-build, turnkey, construction management, and privatization. Project delivery systems for public works projects involve multiple participants, including the public, the government agency (hereafter referred to as the owner), construction contractors (hereafter referred to as the constructor), and design professionals (hereafter referred to as the designer).

For the purposes of this paper, the terms "designer" and "constructor" apply both to independent entities and to the internal design and construction units within a full-service design-build firm.

The engineering profession plays a key role in the project delivery system. The public is most familiar with the engineer as the designer of the project. But, engineers also fill other key design, administration, and management roles in the system as employees or representatives of the owner, the construction manager, and the constructor. The engineering profession has a broad perspective on all stages of the project delivery system because of this breadth of roles.

History of Design-Build
Design-build is not a new project delivery system, but rather one that has been used for centuries throughout the world. Those who built the projects that are landmarks of ancient civilization used processes essentially similar to modern design-build. Also, in the early years in the United States, much of the public infrastructure was built using the design-build method.

The present design-bid-build system, whereby design and construction are separated, was borne out of the "spoils system" and a lack of widespread technical expertise. Conceptually, design-bid-build was established to produce facilities to meet the needs of a growing population at the "lowest cost" to the public. The system ensured that goods and services were purchased on the basis of a "low bid." This was in contrast to prior systems whereby purchases could be made on the basis of political or personal preferences as opposed to who may offer the best work. Design-bid-build functioned on the basis that project plans and specifications, prepared by trained professionals and executed by a properly supervised "low bidder," would produce the desired product at the lowest cost.

That concept fostered our present system of procurement statutes and regulations, an enormous number of contract disputes, inevitable litigation, and a resulting body of case law. Consequently, owners, designers, and constructors have been pursuing alternative methods to make the interfaces in project delivery systems more workable. Design-build is one such effort.

Since the 1940s the private sector has successfully used design-build in the U.S. for a range of projects, including industrial plants, hospitals, office buildings, retail centers, and hotels. It has been estimated that by 1997, 77 percent of private sector projects will be built on the basis of design-build.2 It is important to recognize that the successful application of design-build in the private sector does not necessarily mean that the public sector will experience equivalent success. There are substantial differences between these two sectors, particularly in their latitude to select the design-builder.

While the U.S. public sector predominantly uses the design-bid-build project delivery system, use of design-build is increasing. The public sector has used design-build for the design and construction of prisons, public and military housing, educational facilities, physical fitness facilities, warehouses, and other projects where the scope of work can be easily developed or replicated. In some cases, the public sector has used design-build in conjunction with privatization, an emerging public works management system whereby the government contracts with a private entity to undertake some or all phases of the system that have been traditionally the responsibility of the government, including project financing, land acquisition, design, construction, operation, and/or ownership.

The federal government's experience with design-build is rather recent, in part because the applicable federal regulations have been a disincentive to its use. For example, the Federal Acquisition Regulation (FAR) System includes a provision under its rules for construction and architect-engineer contracts that states, "no contract for the construction of a project shall be awarded to the firm that designed the project or its subsidiaries or affiliates, except with the approval of the head of the agency or authorized representative."3

The U.S. Department of Defense (DOD), has used design-build only since 1987, when it received authorization under the Military Construction Authorization Act of 1986. In that statute, Congress authorized DOD to enter into no more than three contracts per year for military construction projects using turnkey procedures. Turnkey, similar to design-build, is a project delivery system in which the owner procures a single entity for limited real estate services, such as project financing and site selection/purchase, in addition to design and construction services. In the National Defense Authorization Act for Fiscal Years 1992 and 1993, Congress lifted the three-per-year limitation on turnkey contracts and instead authorized the military agencies (Army, Navy and Air Force) to use turnkey procedures for construction projects on a project-by-project basis, with prior departmental approval.

Civilian federal agencies are also using design-build under their general acquisition authorities. The General Services Administration (GSA), which is responsible for the construction of federal buildings, spent $577 million, 33 percent of their $1.719 billion Fiscal Year 1991 budget, on design-build projects.4 The Departments of Energy, State, and Veterans Affairs are also using the design-build project delivery system on a number of projects.

At the state level, laws and legal decisions have run the gamut from prohibiting design-build to expressly authorizing its use. For example, Florida has adopted changes to its procurement and licensing statutes so that design-build by public agencies is legal. Florida statute also provides specific agencies, such as school boards and the Department of Transportation, the express authority to use design-build. Alaska, California, Idaho, and Virginia are among the states that also expressly permit design-build, at least for certain projects. But in other states, such as New York, design-build has been found to be incompatible with the state's procurement and/or licensing statutes.5

The Design-Build Team
The design-build team can take many forms depending on who is the design-builder. On some projects the owner is the design-builder because it performs all of the design and construction phases in-house. In other cases, the owner designs the project to an incomplete level and then awards a contract to an outside design-builder to complete the design and construction. In still other circumstances, the owner procures the services of an outside design-builder for all phases of design and construction.

The outside design-builder can organize itself in various ways. The designer and the constructor may be units within a single firm. Or, two or more entities may form a joint venture, establish a prime contractor/subcontractor relationship, or jointly sign a contract. Either the designer or the constructor may assume the lead role in any of these relationships.

The structure of the design-builder will vary by project, depending on factors such as the:

• scope of the project;
• technical, managerial, and administrative design and construction capability of the owner; 
• technical, managerial, and administrative design and construction capability of outside designers and constructors; 
• availability of outside designers and constructors; 
• owner's preference as to the structure of the outside design-builder team; 
• requirements of or restrictions in federal, state or local statutes and regulations; 
• case law; 
• contract provisions; 
• availability of financing, insurance, and bonding to the design-build team members; and, 
• customary business practices in the locality or region.

Benefits of Design-Build
The public owner's interest in using design-build is attributable to several potential benefits derived from the system that may be less easily attained or non-attainable through other systems. The following are among the potential benefits.

• Project costs may be lowered because of the close working relationship between the designer and the constructor, who are on the same design-build "team." This may lead to the incorporation of more economical design features and the application of cost-saving construction methods.
• The project may proceed more efficiently because designers and constructors are members of the same team. The interface between designer and constructor, often adversarial within design-bid-build systems, may become more open and foster a cooperative exchange of ideas to produce a profitable project.
• Construction efficiency may be improved because design efficiencies can be woven into the entire construction process and because the designer, as a member of the design-build team, can participate directly in resolving design issues that surface during construction.
• The owner may have more design options to choose from.
• The owner may gain the ability to fix total project costs earlier in the process than with other project delivery systems.
• The project may be completed more rapidly because the procurement of design and construction services is consolidated into a single selection process and because "fast-track" procedures may be implemented more readily. Fast-track procedures allow certain elements of construction to proceed in step with the design process. Design-bid-build, on the other hand, usually requires completed plans and specifications before the construction process (including bidding) can commence.
• The owner's administrative burdens may be reduced because the procurement of design and construction services is consolidated into a single selection process.
• The owner establishes a single point of contact for communicating its goals, objectives and scope of work.
• The burden on the owner to mediate disputes between the designer and the constructor is eliminated because a sole design-builder may be held contractually accountable and responsible for the entire project.
• The owner will no longer need to monitor the designer/constructor interface. The design-bid-build project delivery system, on the other hand, requires the owner to be concerned about loss of communication and misunderstanding between designers and constructors, which may create legal and liability issues, as well as additional costs.

The Problem Identified
The design-build project delivery system is not without potential problems. Owners, designers, and constructors who have worked on design-build projects report mixed opinions on its success. The following are among the potential disadvantages resulting from use of design-build.

Potential legal, political, and business practice barriers also exist that impede the use of design-build.

• The project cost may be greater because of extra costs or claims incurred when delays occur in the construction phase, due to the need to resolve permitting and environmental issues or to solidify owner preferences. The design-bid-build project delivery system, on the other hand, generally allows for resolution of these issues during the less-expensive design phase.
  
• Higher costs may be incurred if the owner chooses to employ a separate entity to oversee the design-build process. In the design-bid-build system the designer who has prepared the project plans and specifications, or another professional, typically provides oversight of construction to assure the owner that the project is properly constructed. When using design-build, some owners have found it necessary to engage an independent design and/or construction professional to review the work of the design-build team to assure that the project has been satisfactorily executed.
  
• The project may require longer completion time, particularly if the scope of work or permitting issues are unresolved. If a design-build project is awarded with an incomplete scope (including project specifications), if the scope is modified in-process, or if permitting and environmental issues are unresolved after construction is commenced, projects can be delayed.
  
• The design-build project delivery system may be more labor intensive and technically demanding for the owner than is design-bid-build. Design-build projects require the owner itself to carefully prepare a scope of work that defines its requirements in detail. In design-bid-build, consulting designers may provide additional definition for project requirements, thus requiring less labor and expertise on the owner's part. The designer's plans and specifications are then reviewed with the owner prior to bidding the project.
  
• The owner may lose direct control over design. Design-bid-build provides for periods of consultation with the design professional serving as faithful agent or trustee for the owner. The design-build system, on the other hand, places the designer as more accountable to the design-build team, of which he or she is an integral part, than to the owner.
  
• Design decisions may be determined or inappropriately influenced by team members other than the designer. This is more likely to occur when a non-designer is the lead on the design-build team. The leader may pressure designers to reduce self-imposed quality criteria or design standards to minimum levels in order to maximize profit.
  
• The direct relationship and line of communication between the owner and the designer is altered. When the designer and the constructor form a single contractual entity, the owner loses the benefit of the designer's independent construction oversight and monitoring on the owner's behalf. Consequently the owner loses its ability to assure project quality through a system of "checks and balances" between the designer and the constructor, such as exists under the design-bid-build process.
  
• The designer's ability to properly project and design for the project's life-cycle costs and make appropriate adjustments may be hindered because of restraints imposed by budgets and emphasis in the selection process on "low bid."
  
• The designer may be selected on the basis of price rather than qualifications, potentially compromising the public health, safety, and welfare.
  
• The design-build project delivery system may discourage competition. Fewer entities have the inherent capacity to provide design-build services. As a result, larger full service entities will be able to dominate the procurement process to the detriment of small designers or constructors. If the requirements for design-build submittals requires the design-builder to prepare an extensive technical proposal, the development of such a detailed submittal without the promise of compensation may make participation in the submittal process prohibitive for some entities. It is important to note that the public sector in Europe has experienced a shift to a reduced number of bids on design-build projects to principally a few, large, full service design-builders.
  
• The magnitude of liability risk to the designer may discourage participation by highly qualified designers. Given the relatively small percentage of the overall project that his or her services represent, the risk may far outweigh the potential return. As a member of the design-build team, the designer is linked to the construction process to a greater degree than under design-bid-build. Consequently the designer faces liability exposure to construction-related issues such as job-site safety and construction methods, as well as responsibility for losses should the project fail to meet expectations for any reason.
  
• The owner should possess special management and procurement capabilities such as the ability to make judgements on a "best value" rather than "lowest price" basis, to select design-build offerors, to develop project requirements, to assess project progress and quality, and to monitor payments. Under the design-bid-build system, the designer performs many of these tasks.

Key Considerations
Because engineers play a leading role in the design-build project delivery system, the engineering profession has a responsibility to participate in the development of policies and practices that guide or impact its use.

The National Society of Professional Engineers (NSPE) is neither an advocate nor opponent of the design-build project delivery system. NSPE recognizes that more than one project delivery system may meet project requirements such as safety, function, time from conception to completion, capital and life-cycle costs, environmental quality, and appearance. Accordingly, NSPE acknowledges that owners, when undertaking a public project, should have the freedom to choose among an array of project delivery systems, including design-build.

NSPE recommends that design-build may be appropriate when the following conditions exist:

• Guaranty/Warranty provisions that are often a part of design-bid-build construction contracts could void a designer's professional liability insurance if such provisions are carried forward to a design-build contract.
  
• Project financing, insurance, and bonding for design-builders may be unavailable or difficult to obtain.
  
• Bonding and insurance providers are uncomfortable with the long-term guarantees and warranties which may be incorporated into the design-build contract. Consequently, process guarantees (which guarantee a result from process equipment installed for a given purpose), if required, may be difficult, if not impossible, to insure.
  
• The owner should have both design and construction funds in hand at the outset of the project.
  
• Many current laws do not allow for free and effective use of design-build.
  
• Design-build may conflict with state licensing and procurement laws.
  
• Owners, designers and constructors may lack the special communication, organizational, and business skills to effectively manage and administer the design-build system.

Responsibility to the Public
The public expects its construction projects to be safe for habitation or use, healthful, environmentally-sound, free of functional and cosmetic flaws, and long-lasting. The public also expects federal, state, and local governments to construct projects at reasonable costs. The public is not particularly concerned with which project delivery system is utilized or of the procedures and methods by which projects are designed and constructed. However, their paramount consideration is whether the project fulfills the owner's stated requirements. In addition, the project should be completed as scheduled and within the funding allocated.

Participants in a public project delivery system, whether they be owners, designers, or constructors, have an obligation to ensure that these public expectations are met. Each participant has a different obligation in the system. The owner will need to select a project delivery system which is appropriate to satisfy the owner's requirements, including public health, safety, and welfare. The sole basis for selection of a particular project delivery system should be the expected outcomes from such a system. The owner should not select a system solely because it reduces its responsibilities or lessens its administrative workload, benefits that may be advantageous to the owner, but not necessarily the public. Designers and constructors have the responsibility to provide quality design and construction that fulfill the requirements of the project scope.

Scope of Work
Any successful project requires a sufficiently detailed scope of work. A poorly crafted or inadequate scope sets the stage for complications later in the process, including the owner's loss of control over the project design and disputes between owners, designers, and constructors over their interpretations of the scope. Furthermore, a poorly crafted scope may discourage designers and constructors from submitting proposals for the project, for fear of obligating themselves to an ambiguously-defined project. This results in lessened competition and higher costs to the owner. In the design-build project delivery system, it is particularly important that the scope of work be thoroughly defined because it is the single statement of the owner's minimum project expectations, upon which the design-builder submits its proposal, is selected, and proceeds. In the design-bid-build system, even when the scope of work is somewhat vague, the designer is able through application of his or her professional education and experience, to guide the owner through the decision process to reach a final design. The cost of providing these services is usually on a reimbursable basis provided by a negotiated fee structure. It is then the owner's responsibility to select a constructor to implement the agreed-upon design. In the design-build system, however, the price to complete the project has usually been agreed to in advance. Accordingly, consultations between the design-builder and the owner may be restricted to hours agreed to in the contract or controlled by the economic structure of the design-builder's bid costs. Since completion time is often the essence, the design-builder is under pressure to rapidly plan and execute the project, also limiting the time available for consultation. Thus, if an owner expects to obtain a quality project through design-build, its scope of work must be considerably more detailed than a scope of work for the design of a design-bid-build project. A precise scope assists the design-builder and the owner in ensuring that they supply and receive a completed project that fulfills the owner's expectations.

Conversely, the scope of work should not be so precisely defined as to restrict designers and constructors from selecting innovative and alternative designs and construction methods. When professionals are permitted to explore new solutions, the public benefits through increased efficiency, improved quality, and reduced costs. Many of the benefits that occur through innovation occur during the earliest stages of project development, often as a result of cooperation between the designer and the constructor. Owners should not sacrifice the benefits accrued through innovation. Accordingly, the scope of work should clearly define the owner's needs and expectations as to the final project without rigidly controlling the means of accomplishing them.

This dilemma over the extent to which the scope of work should be specific or flexible does not justify restricting the use of design-build solely to projects of limited complexity. The fact that scopes of work for complex projects necessitate a greater level of instruction does not preclude the use of design-build; simple projects merely require less instruction in the scope.
Complex projects do, however, require a greater level of effort and expense on the part of the design-builder at the proposal stage. In particular, the designer on the design-build team (if the designer and constructor are separate entities) is likely to incur much greater non-reimbursable costs to prepare the designs required to submit the proposals for the design-build team under the design-build system than to be considered under the design-bid-build system. This occurs because the extent of design required for a design-build proposal is greater. When extensive engineering design effort is required to prepare a design-build proposal, the owner should provide remuneration for that design effort.

Designer Responsibility
Professional engineers, architects, and other licensed design professionals have legal and ethical responsibilities to protect the public health, safety, and welfare. No project delivery system should overlook, diminish, or delegate this responsibility. Design-build places the designer's independence and ability to retain control over his or her design work in potential jeopardy, because of the nature of the relationship that is formed between the designer and constructor. This could result in non-design professionals superseding the designer in decisions that impact project design. To avoid this, the agreement between the owner and design-builder should require that, in all matters that affect the health, safety and welfare of the public, the designer must be the decision maker. The contract should also specify that engineering services are required to be performed by or under the supervision of a licensed professional engineer.

Owner-Designer-Constructor Communications
In order for any project delivery system to succeed, all of the participants -- owner, designer, and constructor -- need to establish a direct relationship and line of communication with each other. Most importantly, each participant should be permitted to communicate openly with each of the other participants. This open line of communication among the participants establishes a system of "checks and balances," the absence of which may place the project in jeopardy of being controlled by a single participant. The preservation of direct communications between the designer and the owner, the constructor and the owner, and the designer and the constructor benefits both the public and the owner.

Owners should not assume that an independent "checks and balances" system is an inherent element of the design-build project delivery system. In many design-build projects, the designer and the constructor are either employed by a full-service design-build firm or are members of a single contractual entity, and, therefore, are not independent of each other.

Since the greatest cost in design-build projects is usually construction-related rather than design-related, the constructor may dominate the interface with the owner, and, possibly, override engineering decisions. This domination can lead to unacceptable consequences. Accordingly, the designer, whether an employee of a full service design-build firm or an independent member of a design-build team, should have direct access to the owner in all matters concerning design.

Qualifications-Based Selection
The design-builder should be selected on the basis of many factors other than price. The design-build procurement process should require that design and construction professionals be selected only after their qualifications to perform the work have first been established. Furthermore, it is imperative that the design professional and construction contractor upon whose qualifications the design-builder was selected be retained for the duration of the project.

NSPE has long supported the procurement of engineering services by governmental entities on the basis of qualifications. Federal agencies are required by P.L. 92-582 (commonly known as the Brooks Architect and Engineer (A/E) Act) to base their selection of design professionals on qualifications. Most states and localities have adopted similar qualifications-based selection (QBS) procedures.

NSPE's support for the qualifications-based selection procurement procedure is based on the following assertions.

• the project must be completed more quickly or efficiently than can be accomplished through other project delivery systems; 
  
• the project scope of work is not complex; or, for complex projects, a reasonable number of competing technologies are available;
  
• the project will not require extensive environmental permitting or right-of-way acquisition during the design phase;
  
• the project scope of work is sufficiently detailed;
  
• when the preparation of proposals requires engineering design, provisions should be made to reimburse qualified proposers for such engineering costs;
  
• the owner is willing to accept innovative or alternative designs and construction methods and, accordingly, does not restrict the designer or constructor through an excessively restrictive scope of work;
  
• the designer retains authority to make design decisions;
  
• the designer retains a direct line of communication with the owner;
  
• design and construction services are procured on the basis of qualifications;
  
• the owner establishes favorable conditions that encourage multiple entities to compete for the project award;
  
• in circumstances where the designer is an independent design professional not employed by a full service design-build firm, the designer's professional liability is limited solely to that portion of the overall design-build project over which he or she has control;
  
• the owner does not require an independent design professional not employed by a full service design-build firm to provide a process guaranty;
  
• adequate project financing, insurance, and bonding are available to the design-builder;
  
• the owner has the capability to effectively oversee and administer the design-build system; and,
  
•  adequate funds are available at project commencement for both design and construction.
  
• QBS ensures that projects are designed in a manner that is safe, innovative, environmentally sound, and cost effective over the project's life-cycle.
  
• QBS allows life-cycle costs such as construction, operations, and maintenance to be factored into project design. Competitive bidding, on the other hand, focuses only on initial capital costs. Over the life of a project, the engineering, design, and related services account for less than one-half of one percent of total costs.6 Yet these services play major roles in determining the other 99.5 percent of the project's life cycle costs; and,
  
• The owner is more likely to obtain a qualified service provider through QBS than through competitive bidding because the QBS procedure requires proposers to submit information that outlines the applicability of their qualifications to the particular project at hand. This information usually includes specialized experience for the work required; past quality and performance of work; evidence of timely completion on other assignments; current workload and size of staff; financial stability; reputation among fellow professionals; awards, honors or other recognition of outstanding work; special resources or capabilities; and, anticipated rapport and compatibility with the client. The owner obtains greater information on which to base a decision than it receives under competitive bidding.

No matter the project delivery system, owners should be required to select professional design services on the basis of qualifications rather than price. In the case of design-build, the design-builder must be procured on the basis of its qualifications since design and construction services are both included in the combined contract. This will require owners, particularly those with a penchant for competitive bidding rather than QBS, to reinvent both their procurement mindset and the procurement procedures themselves, using a "best value" concept (obtaining the highest quality possible at the best price possible) rather than a lowest price concept.

Competition
The public is best served when the project delivery system encourages multiple entities to submit project proposals. Competition ensures that the owner will have a choice in selecting among service providers, thus maximizing the likelihood that it will obtain the most qualified service. Accordingly, the owner should ensure that all entities, whether they be small entities that team with others to create a design-build team or large design-build firms, have an equal opportunity to submit proposals.

A major barrier to participation in design-build competitions is the inordinate amount of time and money that proposers may be required to invest in order to properly prepare their proposals. Some design-build procurements require the proposers to submit extensive design plans and specifications. In fact, the designer must complete a substantial portion of the design work in advance of winning the project award. As such, the designer may incur more non-reimbursable expenses when offering proposals for design-build projects than when being selected under design-bid-build. This unfairness has led eligible designers to bypass participation in the design-build system.

To address this disincentive to participation, as well as the inequity involved, the owner should provide appropriate reimbursement to design-builders for their preparation of proposals, whether they are selected or not, when the scope is such that extensive design effort is required to submit the proposal. Additionally, owners should institute a process of "short-listing, whereby first, an unlimited number of firms may submit a statement of qualifications; then the owner will select a limited number of qualified firms that would then be eligible to submit detailed proposals. This short-listing process significantly reduces the number of entities needlessly developing detailed project proposals. It also reduces the owner's reimbursement costs solely to those few short-listed firms that do notreceive the award, rather than to the entire pool of firms that would have submitted detailed proposals had there not been a short-listing process.

Liability
Designers also are hesitant to participate in design-build because of the increased liability exposure that can be incurred through such participation. This exposure occurs in many forms, including the presence of guaranty/warranty clauses in design-build contracts, the uncertainty of obtaining appropriate liability insurance from the insurance market, and increased exposure to bodily injury claims from workers on the job site. The insurance and bonding industry is gradually responding to the needs of the design-build market, but the prudent independent designer must still proceed cautiously in the design-build arena. For example, the structure of the design-build team is of great importance to insurers. When a designer performs substantially as a subcontractor to the design-builder, his or her liability remains largely unchanged. But, partnership or leadership in such a venture creates a whole new set of circumstances that must be addressed. As a further concern, the liability risk incurred by designers in the course of their activities on projects that involve hazardous materials, pollutants, or asbestos keeps many capable proposers out of the design-build area.
 
One of the principle liability issues of concern to the designer depends on whether or not the contract agreed to between the design-builder and the ownercontains a guaranty/warranty clause and, if so, whether or not this clause extends to the designer. Guarantee/warranty clauses are typically contained in stand-alone construction contracts and seldom contained in stand-alone design contracts. Unfortunately, owners and constructors have carried these clauses forward in design-build contracts, even though a design-builder is distinctly different from a construction contractor. In carrying forward these clauses, the designer within the design-build team may be required to provide a guaranty/warranty as well.
 
It is inappropriate for designers to guarantee or warrant their design work or to be required to do so by an owner. Guaranties/warranties are typically applied to products rather than services, such as those provided by design professionals. Engineering (much like law or medicine) is based on professional judgement; therefore, its practitioners cannot appropriately guarantee/warrant a particular outcome.
 
NSPE also believes that guaranty/warranty clauses are unnecessary, given that the owner receives adequate protection through professional negligence laws and the designer's professional liability insurance. A designer who is found to have been negligent in the performance of assigned duties can be held responsible for the payment of any damages incurred, without having signed a guaranty/warranty clause.
 
In addition, professional liability insurance policies provide for termination of coverage when a designer agrees to guarantee or warrant work. Almost all design professional liability insurance policies exclude coverage for claims related to express warranties or guarantees where the engineer guarantees certain aspects of the project.7 This nullification occurs because, from the insurance industry's perspective, the designer has agreed to accept a greater degree of liability than is ordinarily found in the profession. As such, a designer who guarantees/warrants his or her work, either by knowing intent or by "accident" through their participation in a contract that contains such a clause, is in jeopardy of being completely exposed to liability without the benefit of insurance.
 
For these reasons, NSPE opposes legislation or regulations that require professional engineers to guarantee or warrant their design work. Furthermore, NSPE urges owners, whether through contract terms or through enactment of statutes or regulations, to make expressly clear that designers serving as subcontractors on design-build teams shall not be held to any guaranty/warranty clauses that may be required of the constructor in the design-build contract.
 
Absent such statutes or regulations, designers, when considering entering into a design-build contract, should recognize the potential additional liability responsibilities they may be accruing and make appropriate liability arrangements.

Owner Capability
Owners have human resource needs that must be addressed in order for design-build to be an effective project delivery system. Owners must have in-house staff or consultants that are familiar with the design and construction process and capable of supervising the technical, financial, and administrative aspects of project delivery systems. Owners should offer salary and compensation packages that attract competent staff. Owners should also provide continuing education and training opportunities so that their employees can improve their skills. This is particularly important to the successful implementation of design-build because it is a relatively new system that challenges traditional ways of thinking and contracting procedures. Because implementation of design-build requires owners to adopt new procurement, financial, and legal frameworks, NSPE encourages owners to adopt human resource practices that prepare their employees to meet these new challenges.

Project Funding
Owners also face a potential hurdle in obtaining sufficient funds for implementing design-build contracts. Unlike design-bid-build, where capital costs can usually be spread across multiple fiscal years (as the design work and construction work are treated as separate contracts, they usually involve separate funding actions), design-build necessitates that total project funding be available at the outset. As such, owners will have to convince their governing bodies of the need for total funding up front. Owners should implement design-build procedures only if adequate funds have been made available in such a manner. NSPE will support owners in advocating for public works budgets that adequately cover their funding needs.

Statutory and Regulatory Issues
Federal, state, and local statutes and regulations have been written with project delivery systems without consideration for design-build. For example, many states have passed statutes and regulations which may prohibit non professional entities from providing design or construction services. Furthermore, some states may prohibit firms which are authorized to provide one professional service from also providing other professional services which may be required under design-build. Accordingly, changes may have to be made to these statutes and regulations in order to accommodate design-build.

Although design-build may not be expressly forbidden by statute, neither may it be expressly authorized. Absent this authorization, some public officials may be reluctant to select project delivery systems that step outside of traditional bounds. Accordingly, statutory language that expressly authorizes design-build may be appropriate if the government wishes to encourage its use.

Each unit of government should carefully review applicable law prior to initiating a design-build procurement to satisfy themselves, and to assure the potential design-builder, that such a procurement is appropriate.

Summary
Public owners are seeking alternative project delivery systems that meet public needs with minimal legal and functional problems. Consequently, interest in public sector use of design-build has increased in recent years.

The design-bid-build system is the predominant public project delivery system of the U.S. construction industry. Many elements of the industry fear that much of the legal/liability precedents that have been established in the industry over many years will be applied to the design-build project delivery system. They fear that such precedents may be inappropriately applied to the design-build system. The success of design-build depends on whether the needs and concerns of all participants -- the public, the owner, the designer, the constructor, and the financing, insurance, bonding and financial institutions -- are addressed.

Because design-build is a fact of life, professional engineers who wish to provide design services to the public must become knowledgeable as to its benefits and pitfalls. Professional engineers should participate in all viable project delivery systems.

NSPE, representing engineers in practice as owners, designers and constructors, is convinced that design-build can be a viable project delivery system. NSPE has determined that its role in the policy making process should be to outline recommendations as to the conditions under which design-build may be used to advantage and to highlight the business practice, legal, ethical, statutory, and regulatory barriers that impede its suitability. This discussion paper is also intended to be a reference document for those considering use of or participation in design-build arrangements.