Design-build: A civil engineer’s perspective

July 2010 » Features » BUSINESS STRATEGIES
Peter J. Rigby, P.E.

Is design-build the greatest thing since sliced bread or a civil engineer’s worst nightmare? A spin-off of the old “master builder” approach, design-build has been touted, especially by the military and other entities in recent years, as a better approach to the construction process. This system is used to minimize project risk for an owner and reduce the delivery schedule by overlapping the design and construction phases of a project. More often than not, the general contractor retains the design professionals, compared with the design-bid-build process where the owner hires the design professionals directly. A civil engineering firm can be contracted either directly with the general contractor in the design-build process or with the architect, depending on the desires of the contractor.

To stay ahead of the curve, civil engineers should understand the following nine aspects of the design-build process.

1) Marketing for work
As a civil engineer looking for work in the design-build arena, you may need to get a different perspective because it’s a whole new process. When previously seeking public-sector work, you would contact the local, state, and federal agencies to see what’s coming up in the capital improvement plans because these agencies normally hired you directly. Alas, in the design-build era you need to change your focus to general contractors because they are the ones hiring design professionals and putting together a team. Plus, they will typically contract with the owner. So, civil engineering firms need to re-strategize with their marketing colleagues if they expect to get on winning design-build teams. Unfortunately, this is not an easy or inexpensive transition. It takes time and effort to establish relationships with the decision makers within the construction industry.

2) Responding to RFQs and RFPs
Opportunities for direct contracts with owners or operators by civil engineers have exponentially declined in the recent years as a result of the design-build process. It’s harder to find a solicitation these days that reads design-bid-build. It wasn’t uncommon, or always desirable, that civil engineers worked for architects on design-bid-build projects, but now the civil engineer must either continue to work under the architect or under a general contractor.

There is a new decision to be made by the civil engineers in the design-build process. They are now confronted with the viability of being on more than one team. Previously, being on several architect teams meant a little more effort — perhaps a little more practice time for interviews, a couple more coordination meetings, and some additional interviews to attend. Now, near-complete designs must be finished by civil engineers in responding to the RFPs of design-build projects. This is a huge, time-consuming effort, unlikely to be compensated for, and takes tremendous staff resources, not to mention the ethical issues that may arise. Often, civil engineering firms whose contracts were sealed according to qualification-based standards have been removed from that selection process and now have diminished win-ratios as they realize that in the design-build arena it’s often best to join just one team.

3) Contracting the work
From a civil engineer’s perspective on design-build projects, there are generally two contracting entities: the general contractor or the architect. One would think that contracting with the architect on a design-build project works the same as a design-bid-build project. There are similarities, but civil engineers need to recognize how the differences will affect operations.

First, the architect is not directly engaged by the owner, making the flow of payment for civil engineering services one step lower on the food chain. Payment must go from the owner to the contractor to the architect before reaching the civil engineer. This can be a huge cash flow problem for the civil engineering firm as it may take 120 days or longer to get paid. Additionally, if there are questions or issues on invoices, this payment cycle only compounds the problem. It is especially important in contracting for services to get change orders signed ahead of time to keep the pace of the design-build process from becoming frantic and difficult to track.

A savvy contractor will often want to contract professional services directly with the civil engineer. This will help reduce the bid and overall cost of the project because the architect typically tacks on administrative services fees of 10 percent to 15 percent for coordinating with the civil engineer. This contracting arrangement improves the cash flow position for the civil engineer, but also subjects the firm to a whole different contracting document. The firm may also lose out when an architect acts as an advocate for the civil engineer in cases of additional services or construction issues. When not contracted with the civil engineer in a design-build project, the architect may feel that coordination is now the responsibility of the contractor, which can be a foreign process to a contractor that has not been in this role before. Payment histories, contractor experience, and contract language need to be examined closely by the civil engineering firm before choosing the best contracting option.

4) Design issues
Unlike the normal project process, civil engineering and surveying begin before the award of a contract. Civil engineers are under constant self-examination determining how much design is appropriate before the award of the contract. Often times, there will be a certain level of design required by the design-build RFP. Sometimes design must be completed through the schematic stage only. However, typically civil engineers must provide preliminary level drawings. While preparing drawings to this stage may satisfy the strict RFP requirements, the contractor, architect, and other team members often demand more. This makes sense to the team members because the greater the detail of civil engineering drawings and surveying, the better and more focused is the pricing of the project by both the general contractor and the subcontractors. The dilemma becomes how much information to provide. Should you provide just enough information to meet the requirements of the RFP? Or in this case, do you risk losing the project if your engineering firm provided a higher level of design for a potentially nominal increase in sunken costs? Not only is the civil engineer trying to satisfy its team members, it is concerned with what civil engineering competitors might be doing to give another team a leg up.

A bigger design issue than how much to design is where to begin. Engineers should ask, “What data do I have? Has the owner provided me with some sketch plan, existing conditions, or a footprint perhaps if the project involves a building?”

Other costs and time constraints to consider in the design-build process are the levels of detail of the existing conditions at the site. The engineer and its team may need to consider whether additional topography, test pits, utility locations, soils analysis, et cetera are important attributes to obtain prior to beginning the design. The civil engineer is often not compensated for these costs upfront and must be careful to include this upfront cost in the contract if he or she is fortunate enough to win the project. Cash flow concerns and opportunity costs all blend together as these decisions are made by the civil engineer.

Nothing affects the design more than the time-compressed schedule of the design-build process. A designevaluate-price cycle repeats over and over, even sometimes up to minutes before the bid is due. The architect needs information from the civil engineer before it can complete the design.The civil engineer needs information from the plumbing engineer before it can give the design to the architect. The contractor needs drawings from the architect so it can get prices from the subcontractors. The prices are too high and redesign is needed. All kinds of variations of the redesign cycle can influence timing and costs.

Unfortunately, the design does not stop once the bid has been submitted. Refinement, rework, and redesign are a continuing process during design-build projects. As soon as the contractor is notified of the award, it typically wants to start construction of the project. This puts the onus on the civil engineer who typically needs to prepare demolition plans and erosion and siltation control plans as the first step in the construction process. Often, too little is known about the existing conditions — building size, final footprint, and location on-site — so the civil engineer is in the position of making educated guesses about designs to meet the new pressures from the contractor. The lack of sufficient vetting time with other consultants, review agencies, and other stakeholders makes the design process for the civil engineer extremely challenging. Often, the contractor is installing civil-engineered structures before the ink is even dry on the design drawings!

5) Coordination challenges
If completing a project in a design-bid-build world wasn’t hard enough, it is intensely magnified in the design-build arena. The coordination question comes right at the onset of the solicitation of the project — should the civil engineer be coordinating with the architect or the contractor? Who is the contract going to be with if the job is awarded? Coordinating among team members is critical, especially during the hectic RFP response time when the need to submit drawings to the contractor is time sensitive. Personalities of team members play a role in how control is going to be maintained to be sure all documents and designs are coordinated. Often, the civil engineer is working directly for the contractor, yet all design decisions are controlled and coordinated by the architect. The challenge is to be sure your voice is heard and that the best interests of the entire team are followed. Luckily, the use of technology, computer models, and electronic methods of communication have helped advance the speed of communication and improve the ability to interact — especially when consultants are geographically separated. Make no mistake, these are only tools of communication and team members not only need to be on the same systems or compatible systems, but also need the knowledge, the spirit, and an effective and organized way to communicate with all the players, including the civil engineers.

6) Allegiances and alliances
It’s the old adage — you can satisfy some of the people some of the time, but not all of the people all of the time. Before the design-build process, the civil engineer had allegiances to the owner or the architect, depending on the project or type of contract. It isn’t uncommon for a civil engineer to have an open-end contract while also working on a specific project under an architect for the same owner. The open end dictates allegiance to the owner. The specific project dictates allegiance to the architect or contractor. The design-build process wreaks havoc on these previously established allegiances because the civil engineer is no longer working directly for the owner. Unfortunately, the owner often forgets this fact and the civil engineer gets caught up in disputes between the owner and the contractor. In the design-build case, the allegiance has now shifted to the contractor.

The civil engineer forms new alliances in the design-build process. To become established as star team members, civil engineers must communicate their expertise to the contractor. At the same time, the civil engineer wants to make sure the contractor and architect “play nice” because, design-bid-build or not, the civil engineer will likely work with the architect again. Additionally, good alliances with successful contractors can mean future design-build projects for a civil engineer.

Successful design-build civil engineers often run into the new problem of exclusivity. How does the civil engineer respond to being asked to be exclusive when being asked by several contractors on a design-build project? It wasn’t uncommon for a civil engineer to be on several teams with architects in the old days of design-bid-build. But now, contractors are concerned about design ideas being shared with competitors. The solution is that civil engineers need to instill trust by having very separate teams if they choose to participate with multiple contractors. The question arises, however, whether a firm can afford to be on multiple teams considering resources, costs, and potential alienation of future relationships?

7) Business planning
The decision to be in the market for design-build projects for civil engineering firms is not for the faint-hearted. As discussed, issues of cash flow, depending on the contractual components of the project, have a tremendous impact on the financial operation of the business. The condensed design process implores civil engineers not only to have an adequate and nimble staff to adjust to the mood swings, but also to have adequate design and communication software and hardware to integrate with more typical state-of-the-art tools that large contractors and large architectural firms have at their disposal.

Proposal pricing is quite a challenge as there are uncertainties in the initial documents provided and always unforeseen scope that must be covered in the fixed fee of a design-build project. Post project financial analysis is paramount so the civil engineering firm can effectively evaluate the project’s profitability. Keeping track of all costs prior to project award is essential if the firm is to have a clear understanding of the true costs of the design-build project. The business plan must be integrated with the marketing plan to ensure that the firm obtains its market share of design-build work. Otherwise the efforts are fruitless. Experienced personnel with the design-build process also are a necessity if the civil engineering firm intends to establish its presence in the design-build world.

8) Pros and cons
Working in the design-build world can be the downfall of a civil engineering firm. The transformation of the marketing focus to contractors can be a new and painful endeavor. A firm needs to assess its ability to foster existing relationships with contractors as well as its commitment to build new ones. Working on projects with no guaranteed fee can be a significant blow to a firm, especially a small firm with limited manpower and expertise to design quickly and at a high level of quality.

Despite winning a design-build project, a firm must recognize its potential delay in compensation, but also the high level of effort involved by the civil engineer during the entire duration of the project. An evaluation of the proportion of the business devoted to design-build projects is essential if the business is to remain broad-based and stable. Too much design-build may lead to increased project losses without compensation, bad alliances, and burned out employees. Too little design-build may mean missing out on the trend of the future and the ability to obtain a significant portion of the civil engineering business.

Done well, the design-build market for the civil engineering firm can be both educational and profitable. It’s not often that the civil engineer has such a close interaction with a contractor. Learning preferred construction methods, gaining an understanding of sequencing, and getting feedback on pricing for design options are much more prevalent in the design-build process. By watching what you spend and establishing internal controls as to what is included in the design, profitable design-build projects are still attainable. And high-profile contractors and owners are willing to pay reasonable prices for top-notch civil designers. For those civil engineers that love the fast-paced, high-intensity lifestyle of design-build, nothing could be more rewarding. The process can be much more collaborative with a qualified contractor assisting the design team on the best approaches to design challenges of a design-build project.

9) Future of design-build
Certainly the design-build process will expand to new markets in the future. The increasing demand for water over the next decades will inspire civil engineers and contractors to work collaboratively to speed up the project process. Civil engineers will shine their brightest when design-build further expands in the area of transportation. While the economy has stalled and stimulus money from the government is temporarily available, those civil engineers positioned as design-build experts can stand to benefit as shovel-ready projects still get pushed forward. However, as the global economy has changed and everyone has been asked to do more with less, repair/renovation markets for civil engineers present excellent opportunities for design-build. As technology continues to move forward and building information modeling and other advances play an important role in developing sustainable development, the collaborative efforts forced by design-build will help integrate 3D modeling and GPS into more user-friendly, powerful tools to speed design. Increased use of robotic machinery both in the office and in the field will affect both surveying and engineering disciplines as contractors reap the benefits of the design-build process and become computer savvy in the application of construction methods.

Look out for a temporary pause by owners, however, on pushing the design-build process too far. Complex projects that have been let out by design-build contracts have owners assessing whether or not they really lost control and ended up not getting the finished project that they really wanted. Lastly, financing will play a big role in the direction of design-build. Will contractors become the financing arm of owners in this difficult banking environment? How will state and federal governments react both from a regulatory perspective and the use of capital funds? Stay tuned. It’s going to be an exciting ride.

Peter J. Rigby, P.E., is partner and vice president of Paciulli, Simmons & Associates, and principal-in-charge of the firm’s Fairfax, Va., office. He can be contacted at prigby@psaltd.com.


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