Design-Build is a project delivery contracting method within the construction industry. An owner enters into a contract with a Contractor or Design-Builder for the complete design and construction of a particular project. It is prudent for the design-builder to assess the responsibilities and risks they will assume under the design-build agreement and determine how best to manage those risks. A design-builder will assume certain risks, insure others, and transfer risk to design professionals and trade sub-contractors.
Design-Build agreements are increasingly becoming a preferred delivery method within the high profile construction sector. Today, more than 40 percent of non-residential construction projects are completed under the design-build model, according to the Design-Build Institute of America (DBIA). The method is an attractive option for all parties for one driving reason: one contract. Owners, design- builders and the design professional sub-contractors have a relationship with one entity. The contract may be an industry standard agreement, such as the one sponsored by the DBIA, the American Institute of Architects (AIA), or the Concensus Documents to name the most common. One point of contact is particularly beneficial to the owner. The Owner gives its design and requirements to one entity resulting in less direct contractual management of the project. Often, this means the project may be completed faster at a competitive overall cost. The design-builder then exerts control over both the design and the scope of the project, with selected design professionals and trade sub-contractors of their choosing.
The Design-build delivery method is used for both Horizontal and Vertical construction. Design-build is desirable for horizontal construction due to the complexity, cost and duration of the project undertaking. Structural engineers opt for the design-build delivery method for public entity infrastructure projects, which have become a driving factor in the growth of the high end construction sector in recent years. Horizontal construction refers to bridge, tunnels and roadway projects, while vertical construction applies to the design of buildings. Typically, horizontal project engineers are sub-contracted as the project manager to oversee the entire project; thereby the design-builder avoids dealing with architects or interacting directly with all the sub-consultant professionals. Vertical construction requires many trade experts and materials classes working in a congested work place site. Owners gravitate to Design-build delivery as a way to streamline the contracting process and expedite project delivery at a competitive price.
The drawback for design-build rests with the level of risk and responsibility the contractor will assume for the project. Budget considerations are set forth in the design-build agreement at the outset of the project. In a design-build agreement, even though design responsibility is subcontracted to design professionals, the design-builder remains legally liable for those professional services. Too often, the contract does not adequately budget for unexpected contingencies leading to additional, unexpected costs incurred for rectification even before construction is underway. As an example, the design-build contractor may find themselves responsible for the redesign and remediation of a design defect to avoid litigation or large insurance claims.
The typical risks surrounding a design-build project are both professional and non-professional. The non-professional risk exposures include direct damage to property, supplies and materials, as well as bodily injury resulting from the contractors’ operations on the project premises that can emerge during or after completion of the project. Environmental liability exposures can be the result of accidental release or dispersal of hazardous material from the project site. The design-builder is also held accountable for the safety of all employees and third parties on the project site, which present the potential risk of workers’ compensation claims and OSHA fines and penalties.
Design-build delivery agreements vary from fair and equitable to onerous. The outcome of a successful design-build project squarely rests on the terms of the contract agreement that sets forth the scope of responsibility the design-build professional assumes in managing the sub-contractors and tradesmen and competitive but comprehensive project budgeting.
Please visit Ironshore.com for all disclaimers.