Design-Build: an Alternative Construction System

February 3, 2005

LAO 60 YEARS OF SERVICE

Design-Build: An Alternative Construction System

ELIZABETH G. HILL • LEGISLATIVE ANALYST

Design-build is a construction delivery method that is relatively new to state and local government. Seventeen statutes have been enacted since 1993 authorizing its limited use by the state and local agencies. In this report, we look at the experience of these agencies and exam- ine the advantages and disadvantages of the design-build method compared to the traditional design-bid-build method. We find that design-build can be a useful option for some public construction projects. We make recommendations for statutory changes to provide that option while preserving the public’s confidence in the procurement process, quality control, and access for small contractors to public contracts. ■ AN LAO REPORT

Acknowledgments LAO Publications This report was prepared by Paul Guyer, and To request publications call (916) 445-4656. reviewed by Dana Curry. The Legislative This report and others, as well as an E-mail Analyst’s Office (LAO) is a nonpartisan office ■ subscription service, are available on the which provides fiscal and policy information LAO’s Internet site at www.lao.ca.gov. The and advice to the Legislature. LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814.

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DESIGN-BUILD: AN ALTERNATIVE CONSTRUCTION SYSTEM

For most of the last century the state—like all Seven of the laws require local entities that sectors of government across the nation— use the process to report on their projects to accomplished construction work using a system the Legislative Analyst’s Office (LAO) at various called “design-bid-build.” The state used this times between December 2004 and January approach almost exclusively to build its roads 2007. Three of the laws (Chapters 594 of 2000, and freeways, public buildings, correctional 637 of 2002, and 976 of 2002) require the LAO institutions, universities, hospitals, and water and to report on these implementations of design- natural resources infrastructure. Similarly, local build. This report contains the LAO’s consoli- governments have used mainly design-bid-build dated findings on design-build to date. Specifi- to construct public projects. cally, the report describes the differences In the 1990s, the state began to experiment between the primary construction delivery and with awarding and managing construction procurement processes, and discusses their contracts using the “design-build” system. advantages and disadvantages. The report then Figure 1 (see next page) summarizes the vari- reviews public sector experience using design- ous legislation authorizing state and local build in California, and makes recommendations entities to use design-build under specified regarding design-build authority for state and circumstances. local agencies.

CONSTRUCTION DELIVERY AND PROCUREMENT

CONSTRUCTION DELIVERY Design-Bid-Build There are two primary construction delivery Under the design-bid-build system, the public systems used in the public and private sectors. agency first awards an architect/engineer These are (1) the traditional design-bid-build and contract to design the project based on subjec- (2) the increasingly common design-build tive criteria of qualifications and experience of approaches. The construction delivery system the architect/engineer. This contract generally defines the contractual and reporting relation- accounts for a relatively small portion of the ship among the principal participants in the project’s total costs—about 5 percent to 10 per- construction project and the methods and cent. After detailed project plans and drawings procedures used to complete construction. are completed, a contractor is selected to Figure 2 (see page 5) shows these relationships perform the construction work, which accounts in simplified form. While there are variations to for 90 percent to 95 percent of the project’s these approaches, most construction delivery costs. In almost all cases, contracts for construc- systems fall into one or the other. tion work are awarded objectively based on competitive bidding.

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Design-Build separately contract with an architect/engineer With design-build, the public agency con- for design. That is the responsibility of the tracts with a general contractor to both design general contractor. The general contractor in and build the project. The agency does not turn subcontracts, through competitive bidding

Figure 1 Recent State Laws Authorizing Design-Build

State Authorization Facilities Comments

Ch 429/93 (AB 896 Brown) Junipero Serra (Los Angeles) and Civic Center (San Francisco) buildings. Ch 430/93 (SB 772, Petris) Elihu Harris (Oakland) building. Ch 761/97 (SB 1270, Johnston) East End Project (Sacramento). Ch 252/98 (SB 776, Johannessen) Permits Department of General Services to use design-build on at • Used for CalTrans District 7 least five projects authorized by Legislature. building (Los Angeles). • Expires 1/1/06. Ch 782/98 (SB 1934, Johnston) Department of Corrections headquarters (Sacramento). • Not used.

Ch 733/99 (AB 290, Steinberg)a Department of Parks and Recreation, Stanford Mansion restoration (Sacramento). Ch 672/01 (SB 809, Ortiz) West End Project (Sacramento). • In planning stages. Local Authorization Facilities Comments

Ch 663/95 (AB 1717, Cortese) Four specified counties. • Projects not exceeding $50 million. • Expired 1/1/01. Ch 1040/96 (AB 2660, Aguiar) Authorized local agencies to enter into agreements for private funding and development of revenue producing facilities. Ch 258/99 (AB 755, Corbett) Alameda County, juvenile justice facility.

Ch 541/00 (AB 958, Scott)a Transit operators. • Projects exceeding $10 million. • Expired 1/1/05.

Ch 594/00 (AB 2296, Dutra)ab Seven specified counties. • Projects exceeding $10 million. • Expires 1/1/06.

Ch 767/00 (SB 1144, Johannessen)a Two specified cities. • Projects not exceeding $50 million.

Ch 421/01 (AB 1402, Simitian)a School districts. • Projects exceeding $10 million. • Expires 1/1/07.

Ch 637/02 (AB 1000, Simitian)ab Three specified community college districts, and five additional as • Expires1/1/08. selected by the community colleges Chancellor.

Ch 976/02 (SB 1759, Johannessen)ab Four specified cities. • Projects exceeding $5 million. • Expires 1/1/06. Ch 196/04 (SB 1130, Scott) Transit districts. • Revised Ch. 541/00. • Expires 1/1/07.

a Required to report information to Legislature. b The LAO is required to report on local implementation.

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or otherwise, for an architect/engineer and but most can be placed in one of two catego- various construction trade work. Design-build ries—stipulated price and construction manage- delivery methods have a number of variations, ment. Stipulated Price. With stipulated price Figure 2 design-build a public Comparison of Two Primary Construction Delivery Systems agency specifies how much it will pay for Design-Bid-Build construction of a particu- lar building. For example, State the agency might provide only a program- matic description of the building it wants by specifying the size of the Architect/Engineer building, types of spaces, and perhaps some General Contractor acceptable construction materials. The agency then asks competing firms to present proposals that illustrate a Subcontractors conceptual design and provide specifications for materials and build- Design-Build ing systems that it is willing to construct for State the price stipulated by the agency. Construction Management. With construction manage- General Contractor ment design-build the public agency awards a contract to a “construction manager” (frequently a construction Architect/Engineer Subcontractors firm, but sometimes an architect/engineer firm)

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on the basis of a fee. The construction manager to the lowest bidder. This is the way construc- designs the project and solicits bids from sub- tion contracts are awarded under design-bid- contractors and suppliers. The total of these bids build. Competitive bidding also is used to plus the construction manager’s fee determine procure most of the construction work when the total price the agency pays for the building. construction management design-build is used. Competitive bidding may or may not be used CONSTRUCTION PROCUREMENT when stipulated price design-build is used. There are two principal construction procurement systems. These are: (1) procurement Experience, Qualifications, Best Value by competitive bidding; and (2) procurement Procurement based on the experience and based on experience, qualifications, and best qualifications of competitors, or a judgment that value. The construction procurement system a competitor will provide best value to the defines the process used to select and award project, is subjective. It is used to award most contracts for construction projects. design-build contracts, as well as architect/ engineer contracts in design-bid-build. Although Competitive Bidding these are subjective criteria and bidding is not Procurement by competitive bidding means used, this procurement system has competitive a public agency awards contracts for construc- elements because contractors compete to show tion or construction-related work objectively, they have the most experience and are best based on bids. Bids are offers to perform the qualified. work for a specific price, with the contract going

CONSTRUCTION DELIVERY PROCESSES: PROS AND CONS

Each of the construction delivery processes means there is little uncertainly about what the has advantages and disadvantages. Figure 3 agency wants and what the contractor is re- summarizes the pros and cons of the design-bid- quired to deliver. build process versus the design-build (with Competitive Bidding Results in Lowest stipulated price) process. Costs. With design-bid-build, the contract is awarded to the bidder who offers to construct DESIGN-BID-BUILD the building for the lowest price. This competi- Advantages tion motivates bidders to offer the lowest price Building Is Fully Defined. With design-bid- they can because they know price is the only build, the facility the agency wants is fully basis for award of the contract. Also, since the defined by detailed working drawings and building the agency wants is fully defined by specifications before bids are solicited. This detailed working drawings and specifications, bidders do not need to increase their bids to

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cover contingencies that might arise if a building 5 percent to 10 percent of the building cost) is is not fully defined. awarded based on subjective criteria of experi- Relative Ease of Assuring Quality Control. ence and qualifications because it is for profes- Quality in a construction project is controlled sional services that cannot be defined in detail using detailed working drawings and specifica- before the building is designed. tions, which are the basis of the contract be- Good Access for Small Contractors. By tween the agency and a construction contrac- awarding contractors based on price, the tor. This allows an agency inspector to compare design-bid-build process provides the best the materials and workmanship of the project opportunity for qualified small and new contrac- under construction with what are required. If the tors to obtain government contracts. Small and requirements are not met, provisions of the newly established contractors may be able to contract can compel the contractor to correct perform work at a lower cost than large com- the work. Without detailed working drawings and petitors because of lower overhead and more specifications, there is little an agency can do to efficient operations. control the quality of the contractor’s work. Objective Contract Award. Awarding Disadvantages construction work, which represents about Agency Gets Involved in Conflicts and 90 percent to 95 percent of the building cost, by Disputes. Design and construction of a building competitive bidding, uses an objective criterion is a complex and difficult undertaking. There will of lowest cost. This reduces the opportunity for always be conflicts and disputes that can lead to bias and inappropriate influence to play a part in time-consuming and expensive legal action, no awarding the construction contract. The smaller matter what construction delivery process is architect/engineer contract (representing about used. One major source of conflicts is errors and omissions in the Figure 3 working drawings and Design-Bid-Build Versus Design-Build specifications prepared Advantages and Disadvantages by the architect/engi- Advantages Disadvantages neer. In the design-bid- Design-Bid Build build process the public agency hires the archi- • Building is fully defined. • Agency gets involved in conflicts and disputes. • Competitive bidding results in lowest cost. • Builder not involved in design process. tect/engineer directly, • Relative ease of assuring quality control. • May be slower. and the law holds the • Objective contract award. • Price not certain until construction bid is received. • Good access for small contractors. • Agency may need more technical staff. agency to be the Design-Build (Stipulated Price) guarantor of the completeness and accuracy • Price certainty. • Limited assurance of quality control. • Agency may avoid conflicts and disputes. • Subjective contract award. of the architect/ • Builder involved in design process. • Limited access for small contractors. engineer’s work. This • Faster project delivery. draws the agency into • Agency needs less technical staff. disputes between the

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designer and builder and frequently subjects it construction. This may require an agency to to significant liability because of its perceived employ a substantial number of technical staff to “deep pockets.” manage larger design-bid-build projects. Builder Not Involved in Design Process. With design-bid-build, the builder is not known DESIGN-BUILD— until after the design work has been completed, USING STIPULATED PRICE bids have been submitted, and a construction Advantages contract awarded. This means the design cannot Price Certainty. With the “stipulated price” incorporate any input by the construction method of implementing design-build, an contractor on construction materials and meth- agency has the best certainty of the cost of the ods that could improve the building’s design, building at the outset of the project. This is functionality, and cost. because the agency specifies what it is willing to May Be Slower. The design-bid-build pro- pay for a building before it solicits proposals cess is usually slower than the design-build from design-build contractors for the configura- process, mainly because of the sequential tion, features, and materials they are willing to nature of the process. In contrast, under design- provide for the specified price. The risk with this build, design and construction work may be approach is that the agency may not get the undertaken concurrently. (This difference, best quality building for the price it pays. however, may not be significant in the case of Agency May Avoid Conflicts and Dis- larger projects because procurement using putes. Because the designer and builder are subjective criteria of experience, qualifications, part of the same design-build entity, and the and best value often requires substantial time to public agency is not the guarantor of the com- allow competitors to prepare proposals and pleteness and accuracy of the work of the agency officials to evaluate them.) architect/engineer, the agency may avoid Price Not Certain Until Construction Bid conflicts and disputes that can arise between the Is Received. With design-bid-build, the architect/ architect/engineer and construction contractor. engineer firm prepares cost estimates as the Builder Involved in Design Process. The design work progresses, typically when the construction contractor is involved in the design working drawings and specifications are about process from the beginning and can provide 10 percent, 35 percent, and 100 percent com- helpful insights on construction materials and plete. While this gives the agency an early methods that can make the design more effi- indication of the project’s cost, there is no cost cient and less costly to construct. certainty until design is completed and construc- Faster Project Delivery. By overlapping tion bids have been received. design and construction to some extent, and by Agency May Need More Technical Staff. potentially reducing conflicts between designer Design-bid-build requires the completion of and builder, design-build can usually deliver a detailed working drawings and specifications project faster than the design-bid-build approach. before bids are solicited, and then a substantial With large projects, however, this may be less of inspection and quality control effort during

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an advantage because of the extra time needed ➢ Criteria Do Not Relate Directly to for competitors to prepare their statements of Specific Building Being Procured. qualifications and technical proposals. While evaluating contractors based on Agency Needs Less Technical Staff. Under qualifications and experience provides a design-build, the public agency does not have to measure of contractors’ competence, it review the accuracy and completeness of the is not a guarantee on the project out- architect/engineer’s work. Thus, the agency come. This is because under design- may have less need for in-house technical staff build a specifically designed building is to manage projects. not the “deliverable.”

Disadvantages ➢ Comparison of Alternative Proposals for “Added Value” Difficult. It is Limited Assurance of Quality Control. difficult to make a reasoned comparison Because the building the agency wants is not of alternative added value proposals. For defined in detail at the time it enters into a example, it is impossible to directly contract with a design-build contractor, there is compare the benefit from higher quality limited basis for enforcing a contract and the plumbing piping proposed by one agency may have little control over the quality contractor with the benefit from an of the construction work. enhanced electrical distribution system Subjective Contract Award. With design- proposed by another. In addition, many build, the design and construction work gener- of the benefits can only be realized over ally is awarded based on subjective criteria such time—often after the building has been as experience, qualifications, and best value. completed, adding to the difficulty of Agencies have established contractor evaluation comparing alternative proposals. and selection processes and policies to try to mitigate the risks of subjective judgments, but Limited Access for Small Contractors. drawbacks still exist, such as: Because design-build contracts mostly are ➢ Public Managers Have Discretion in awarded based on qualification and experience, Awarding “Points.” Agencies frequently this method may tend to work against small, use a points system. The number of points newly established contractors, who do not have public officials award to competing firms the range of experience of large, long-estab- on various criteria is arrived at subjectively. lished firms. As a result, access to design-build There is no objective way to determine contracts, especially the large contracts, may be the correct number of points to award a limited for these contractors. competitor on a given criterion. For DESIGN-BUILD—USING example, there is no objective way to CONSTRUCTION MANAGEMENT determine that one contractor’s “waste management plan” warrants “43” points The advantages and disadvantages of and another’s only “40.” design-build construction delivery using construction management methods are similar to

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those for design-build using a stipulated price, changes to be made in subsequent trade pack- with two main exceptions: ages to control costs and keep the project Price. The public agency has far less price within budget. certainty under this method than if the stipulated Benefit of Competitive Bidding Flows to price approach is used. Even so, construction Agency. With the construction management management still provides more certainty than approach to design-build delivery, the savings design-bid-build, where the total price is not resulting from competitive bidding for subcon- known with reasonable certainty until design is tracts and supplies benefits the public agency finished and bids have been received. With rather than the design-build contractor. This is an construction management, a series of trade important advantage construction management contracts is bid over time. This provides partial has over stipulated price. cost information earlier, and allows design EXPERIENCE WITH DESIGN-BUILD

Cities and Counties between the architect/engineer and the con- The authority for local governments to use struction contractor. They also indicated that by design-build was first granted by the state in awarding a fixed price contract, design-build 1995 and has been extended to various Califor- provided more price certainty. nia cities and counties. Figure 4 summarizes Lessons Learned. These local agencies also how these local governments have used this made various observations about the general authority under those statutes that required usage of design-build: them to report their design build activities to the ➢ Project Cost Thresholds Not Needed. Legislature. As the figure shows, of the 13 Statutory requirements regarding speci- counties and cities that have been given the fied maximum and/or minimum project design-build option, six—Alameda, Sacramento, costs prevented agencies from using and Solano counties, and the cities of Davis, design-build on certain projects. Local West Sacramento, and Woodland—have used agencies do not see any compelling the option to construct one or more capital reason for imposing such cost thresh- outlay projects. olds. Views on Design-Build Generally Favor- ➢ Adding Objectivity in Procurement able. The counties and cities that have used Process Would Be a Plus for Public design-build generally expressed favorable Projects. Many of the officials we talked opinions of the process. Almost all reported that with acknowledged the benefit of compared to the traditional design-bid-build applying some objective criteria in process, it took less staff time to construct a awarding design-build contracts, and not project and resulted in fewer claims and less relying solely on subjective assessment litigation. To a substantial degree, this is because of competitors’ experience, qualifica- the local agency is removed from disputes

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tions, and proposals of best value. They but generally they first used subjective indicated that this is one means to criteria such as experience and qualifica- maintain the public’s confidence in the tions to identify a limited group of procurement process. In an effort to finalists to compete for the design-build provide objectivity, Sacramento, Solano contract. The finalists then submitted (on the health and social services build- design and cost proposals based on ing project), and Alameda Counties, and county criteria, and the contract was the cities of West Sacramento and Davis awarded based on the objective criteria used a two-step process to select a of lowest cost. Similarly, for the Solano design-build contractor. Details varied, County administration center and the

Figure 4 Summary of Design-Build Activities by Authorized Cities and Counties

Used Did Not Use Agency Design-Build Design-Build Types of Projects Counties Chapter 663, Statutes of 1995 Solano X • $2.3 million juvenile hall expansion. • $0.4 million county recorder’s office renovation.

Chapter 594, Statutes of 2000 Alameda X • $15 million county recorder’s office building. • $135 million juvenile justice center (under construction). Contra Costa X Sacramento X • $2.5 million branch library. Santa Clara X Solano X • $18.4 million health and social services building (under construction). • $80 million county administration center (under construction). Sonoma X Tulare X

Cities Chapter 1040, Statutes of 1996 Woodland X • $14.4 million police station. Chapter 767, Statutes of 2000 Davis X • $7.3 million police station. West Sacramento X • $2.6 million pump station. Chapter 976, Statutes of 2002 Brentwood X Hesperia X Vacaville X Woodland X

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Woodland police facility, the design-build statute was too short to coordinate with contracts were based on a mixture of the timing of the projects the county (1) the subjective criteria of experience, needed to build. qualifications, and proposals of best value, ➢ Sonoma County did not use design- and (2) the objective criterion of cost. build because of the high threshold of ➢ Good Project Definition Is Needed project cost set by Chapter 594. County Before Awarding Design-Build Con- staff also indicated that due to a general tract. Agency officials indicated that it is lack of public sector experience in using important to thoroughly specify the design-build, it is not inclined to use a building it wants using conceptual new delivery system for large projects. drawings, specifications, program state- Had the cost threshold been lower, the ments, and similar documentation so county would have considered using (1) design-build proposers understand design-build for relatively smaller-scale what is required and (2) there is docu- projects, such as an office building. mentation to form a basis for the con- ➢ The City of Hesperia indicated it did not tract between the agency and the use the design-build authority granted design-build contractor. under Chapter 976 because the legisla- ➢ Best Suited for Straightforward tion contained a requirement that the Projects. Most agencies seemed to feel city establish a labor force compliance design-build was best suited to projects program and contract with a third party of conventional design and construction, for its operation, unless all contractors such as office buildings and parking on the project entered into collective garages. When buildings are more bargaining agreements. The city felt this specialized, such as jails and hospitals, provision would negate any economic there was less certainty that design-build benefit it might gain from the design- was the best construction delivery pro- build process. cess. This is because the user agency ➢ The Cities of Brentwood and Vacaville often has more unique design preferences did not use their design-build authority it wants accommodated in the building. because they did not have projects they Reasons for Not Using Design-Build. Local considered suitable for design-build agencies that did not use design-build provided delivery due to size, complexity, or different reasons for not doing so. For example: scheduling considerations. ➢ Contra Costa County indicated it did not All of the cities and counties that did not use use design-build authority granted it the design-build authority, however, indicated because of the high cost threshold for that they would like to have design-build author- qualifying projects, and the time avail- ity available to them as an alternative construc- able to utilize design-build under the tion delivery method.

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The State Nevertheless, the experience has been relatively The Department of General Services (DGS) recent and limited. As such, questions and issues has completed several major projects using remain in how design-build can best be imple- design-build. Generally, the DGS-managed mented in the public sector. The key issues design-build contracts have been completed on include: schedule and within budget, although there ➢ How to Ensure Integrity of the Pro- have been exceptions. For example, the East curement Process. Local and state End project required an $18 million augmenta- officials we talked with were almost tion and was completed about a year and a half uniformly in favor of the authority to use after its original scheduled completion date. The subjective criteria such as experience, Caltrans District 7 building is currently under qualifications, and best value as a basis construction and has required no augmenta- for awarding design-build contracts. tions to date. It is currently estimated to be However, they also recognize that completed about 15 months after its originally allowing subjectivity in the award of scheduled completion date. Nonetheless, DGS public contracts may permit inappropri- has indicated general satisfaction with the ate influence to be brought to bear on design-build approach used on all of these the procurement process. There have projects, pointing primarily to the advantages of been incidents in other states where the using the process discussed above. integrity of the process was compro- mised. Federal ➢ How to Ensure Cost and Quality Federal agencies have been authorized to Control. With design-build, the project use a design-build construction delivery process an agency wants constructed is inher- since 1996, and federal officials have expressed ently only minimally defined at the time general satisfaction with it as an option. The the contract is awarded to a contractor. federal procurement process has two phases. In Depending on how the process is the first phase, federal officials reduce the implemented and how well defined the number of competitors to no more than five project is at the outset, the agency may based on subjective criteria of experience and not get the building it thought it was qualifications. In phase two, competitors submit paying for. technical and price proposals which are evalu- ated and a design-build contract is awarded ➢ How to Ensure Access for Small and based on a combination of subjective (“best Newly Established Contractors. Using value”) and objective (price) criteria. criteria such as experience and qualifications to award contracts reduces the Issues to Address likelihood that contracts are awarded to To date, experience in design-build by state small and newly organized contractors. and local agencies in California as well as the Over time, this may limit competition for federal government has generally been positive. public agency construction contracts.

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WHERE DOES THE STATE GO FROM HERE?

Figure 5 shows that many of the statutes ➢ Design-Build Should Be Optional to— authorizing design-build in California included And Not Replace—Design-Bid-Build. expiration dates, after which authority to use the Design-build should be an available design-build process ends. As these statutes option for state and local agencies, but expire, the Legislature likely will be asked to not a replacement of design-bid-build. extend the authority, either for limited terms or This is because for many projects agen- permanently. The Legislature will also likely be cies may want the greater control over the requested to provide the authority to a larger design that they would have with design- number of public entities. Based on our review, bid-build. we recommend the Legislature provide the ➢ Contracts for Most of Project Cost design-build authority on an ongoing basis to Should Be Objectively Awarded Based local agencies and the state—within a framework On Competitive Bidding. In order to that protects the integrity of the procurement preserve the integrity of public sector process, controls the quality of the construction procurement and provide prudent work, and provides access to public contracts stewardship of public funds, we recom- for small and newly established contractors. mend that most of the cost of a project Specifically, we recommend: be procured by competitive bidding. As ➢ Inclusive, Uniform Statute. Instead of discussed above, one way to do this is separate legislation providing the design- by using construction management with build authority for different time spans competitive bidding of subcontracts. Any for different groups of state and local savings resulting from competitive entities, as currently exist, we recom- bidding would flow to the public agency. mend that a single statute be adopted Another way is sometimes called the that applies to all public entities provid- “two-envelope system.” With this system ing the same authority and limitations, if the agency defines its building require- any. This would provide contractors and ments with conceptual drawings and public officials with a consistent business environment within which to Figure 5 operate Design-Build Legislation Expiration Dates

throughout the Chapter/Year Agencies Expiration Date state. 541/2000 Transit operators 1/1/05 252/1998 Department of General Services 1/1/06 594/2000 Seven specified counties 1/1/06 976/2002 Four specified cities 1/1/06 421/2001 School districts 1/1/07 196/2004 Transit operators 1/1/07 637/2002 Eight community college districts 1/1/08

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specifications, as well as functional and longest-established firms. To encour- requirements. Statements of qualifica- age competition and access, we recom- tions are submitted by design-build mend statutory language which provides contractors, and the agency selects a that design-build contracts be accessible short list based on qualifications and to design-build contractors with experi- experience—typically three to five firms. ence and qualifications that are consis- The agency then usually pays each of tent with needs of the project, rather the finalists a modest amount to develop than limited to the biggest and longest- a technical proposal, which is submitted established firms. in one envelope, with their price in a ➢ No Cost Limitations. We recommend second envelope. The agency reviews there be no maximum or minimum project the technical proposals to see if they cost threshold imposed on the authority. satisfy its requirements. For those finalists whose technical proposals are ➢ Buildings Only. At this time, we recom- satisfactory, the agency opens the second mend that the Legislature grant design- envelopes and the contract is awarded to build authority only to buildings and the proposal having the lowest cost. directly related infrastructure. There are more complex issues associated with ➢ Ensure Access for Greatest Number of other public works projects such as Contractors. As discussed above, transportation, public transit, and water legislation permitting design-build con- resources facilities. Evaluation of design- tracts to be awarded based on qualifica- build as a construction delivery option tions and experience may have the for these other infrastructure facilities is practical result over time of restricting beyond the scope of this report. contract awards primarily to the biggest

CONCLUSION

Design-build can provide state and local changes that make the design-build process agencies with a useful alternative to the more more widely available to state and local agen- commonly used design-bid-build process to cies also preserve the public’s confidence in the deliver construction projects. However, to the procurement process. Using construction extent design-build contracts are awarded based management with competitive bidding of solely on subjective criteria, there is an opportu- subcontracts or a two-envelope system can nity for compromising the public procurement achieve that. process. Thus, it is important that statutory

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