Canadian Design-Build Institute Standard Practices Committee

Occasionally, CDBI receives questions related to different practices in design-build.

Once a question is received it is then reviewed by our Council and then an answer is agreed upon. Since the council comprises of Owners, Consultants, Contractors, Trade Contractors, and Allied Services the answer must be fair to all parties.

Due to the need for consensus it is sometimes a timely process and even more so depending on the complexity or the type of question.

CDBI welcome your questions, but please allow sufficient time for them to be answered properly. You can submit your question directly to CDBI by using the following form:

Note: The personal information that you have provided to us to enable us to respond to your inquiry will only be used for that purpose. You will not be placed on any mailing lists, nor will your information be released to any third party, except as may be authorized by law. The authority for obtaining this information from you complies with section 38(2) of the Freedom of Information and Protection of Privacy Act.


Questions and Answers

Question:

On a large DB project that has many years (6) in duration, the risk on escalation cost is sometime taking by the owner or sometime taking by the design built contractor. In order to provide the best financial value for the project with minimum risk for the owner and for the contractor, what party would you recommend to be the one to take the risk and how would be the best way to manage this risk / escalation through the DB contract? What would you consider to be the standard for DB project?

Answer:

The short answer is there is no “standard” for a DB project.

The risk is either with the owner, the DB contractor or some combination thereof.  The best financial value to the project really depends on the risk profile of the owner.

If the risk is passed onto the DB Contractor, the owner does this knowing that they will be paying a premium to cover off this risk in return for cost certainty on the owner’s behalf.  In this case, the process would be closed book with the risk or reward all lying with the DB contractor.

If the owner is taking the risk on escalation, the present value of the DB contractor price needs to well understand including current market pricing of labour and commodities that make up the DB contractors price.  This would require a complete open book process in order to validate the current market price. The complexity of this is having an agreement on what would trigger the use of the escalation and having the ability to identify escalation vs non escalation items and quantifying it.  For example, if the steel price increased due to the spot price of raw steel in the market, then that would be a draw on escalation contingency, however, if steel price increased due to additional quantities, scope, or design, that would not be a draw against escalation contingency.

There could be variations of this where the risk could be mutually shared with the owner and DB contractor with or without a cost sharing agreement.  Again, this would require a completely open book process in order to validate the current market price.


Question :

When an Architectural firm has been hired to assist in the preparation of Design/Build RFP package, is it common for that firm to be excluded from the bidding process?

Answer :

Yes, it is common to exclude that firm from the bidding process.

When an architectural firm has been hired to assist the Owner to prepare the Statement of Requirements including the RFQ and RFP, it could be deemed that the firm would have an advantage in submitting an actual Design-Build Proposal. The firm could be perceived to have a more intimate knowledge of what the Owner is expecting to achieve, what the Owner’s budget is, and how the Owner will be evaluating the Proposals received. If this perception exists, it could very well limit the interest in the actual RFP, for fear that the Design-Build team that includes the Owner’s architectural firm could have the advantage.

Also, it is common for this firm to become the Owner’s Advisor, to assist the Owner through the evaluation and award phases, and this obviously would be a conflict of interest.

Furthermore, the Owner’s Advisor may also be the Payment Certifier and could be the firm that reviews the work of the Design-Builder to ensure compliance with the Contract Documents.

So you can see it would not be good practice to allow the Owner’s design consultant to participate on a Design-Build team responding to the same RFP.


Question 1:

Why don’t you provide a standard contract for the above mentioned constellation (joint ventures between design professional and Design-Builder)?

Question 2:

Is it proposed to create a standard contract?

If yes, do you have any results discussing how to manage/handle the following aspects?

  • risk allocation and sharing of rewards
  • share of profits and losses
  • main partner selection
  • liability, indemnity, and insurance
  • dispute resolution

Question 3:

In your opinion, what are the main advantages and disadvantages for joint ventures between a design professional and a constructor?

Answer :

The Canadian Design-Build Institute (CDBI) and the Canadian Construction Association (CCA) have developed standard contracts between Design-Builder and Consultant (Document 15), as well as a Stipulated Price Contract between the Design-Builder and Owner (Document 14). These are the most typical and common contracts used in Design-Build, and therefore have been standardized and published. However these are not Joint Venture contracts and there are many variations and other types of contracts used in Design-Build that have not been standardized, because they are largely customized to suit the contractual arrangement being sought. At this time, the CDBI does not contemplate developing any standard Joint Venture contracts.

However, the CCA has just developed a Joint Venture Guide (CCA 52). The Guide is complete but still not available we are not sure when it will be published please visit the CCA web site at www.cca-acc.com for further updates.


Question:

I have recently opened my own company and I’m facing some questions on growth and expanding from simple reno work to full scale design-build. My company doesn’t have much of a history but I have been asked to take on smaller design build projects which is the direction I would like to go in.

Answer:

It is really not as daunting as it seems – especially if you are starting out with smaller projects. Ideally, it would be great if you were able to get some experience by working in a firm that practices design build, however since you have already opened your own design company, it is not likely that you would work for someone else at this time!

I sense that what you are looking for is how to construct what you have designed, and offer one complete package to your clients. You are performing what is referred to as “designer-led design build”. You meet with your client, figure out their design needs, prepare the design, and then you are responsible to get the project built. In your case, if you are a small, one-person company, it may be difficult for you to perform the construction side of the business yourself. I suggest that you link up with a few general contractors of the type and size suited to the projects you want to perform. You can then enter into construction contracts with them, and offer a complete design-build package to your clients.


Question:

We have a new school project that may lend itself to a design-build project. There would be 3 or 4 distinct phases to be built over a period of approximately 5 years. I am looking for information to convince the provincial government that this might be a better way to go than separating the project into 3 or 4 separate projects. I am also looking for reference material that would clearly indicate what the responsibilities of the owner would be in this kind of project. Any information you can provide would be useful.

Answer:

Reference Materials

Firstly, in order to get an understanding of Design-Build and the Owner’s role in Design-Build, I suggest you obtain a copy of the Canadian Design-Build Practice Manual, available from your local Construction Association. The set includes:

  • Series 100 Introduction and General
  • Series 200 Procurement and Award
  • Document 210 RFP (Request for Proposal) Guide
  • Series 300 Responding to RFQ’s and RFP’s
  • Document 310 Conceptual Estimating

If you are not familiar with Design-Build, these documents will give you some insight into the process. They are also sold individually if you don’t want the whole set.

Project Design Development

If treated as a Design-Build project, a 3 to 4 phase, 5-year project can easily be a single project, rather than broken out into several projects. The benefits are outlined below.

First, you need to come up with a Statement of Requirements that allows the interested Design-Build teams to understand what you are wanting to achieve, like a master plan, so that your end point after 5 years is clearly defined. With this document, the Design-Builder can determine how they can design and deliver that end product to you. You may already have this Statement of Requirement information readily available. In any event, you should consider retaining the services of a Consultant experienced in Design-Build to assist you in preparing that document and in preparing the Request for Qualifications and Request for Proposal. The key is to state your requirements as clearly and succinctly as possible at this stage so there is no confusion later on.

Since this is a publicly-funded project, once you have received Proposals for your project, you will need to evaluate them in an objective manner (as much as possible). The evaluation criteria should be developed well in advance, so the evaluation process can proceed quickly, efficiently, and transparently. This will be required by the School Board and the provincial government to ratify your recommendation of the successful Design-Build Proponent.

Project Costs

In order to determine your project costs up front, you can request the Design Builders to provide a cost for the entire project or for each phase over the projected time frame, and when each phase will start and complete. The Design-Builder can take the risk of cost escalation over the life of the project, or the pricing for each phase can be given in current dollars with an agreed upon method of determining escalation of costs over the time span of the project. You can then analyze the impact on the school board’s funding & project expenditures over the 5 year duration.

Conversely, you can spell out your budget allowances for each fiscal year to the Design-Build Proponents as part of your Statement of Requirements. This will allow the Design-Builder to fit the work to your budget and pace the work over the 5 years.

Design-Build Benefits

As far as the provincial government funding this project, the benefits of Design-Build are:

  • A 5-year development plan and design is determined early along with phasing
  • Project costs and a 5-year cashflow are determined early
  • The design can be done early and assessed throughout the 5 years to allow for design efficiencies and improvements over the life of the project.

Question:

Is Design-Build appropriate for construction within the healthcare industry.

Answer:

In our considered opinion Design-Build is a viable form of project delivery for Health Care projects provided design standards and design criteria are clearly established for the project, prior to the Request for Proposal being issued to proponents. Unfortunately at this time no Provincial or Federal standards as such exist. It therefore requires that the Hospital or Government body putting out the proposal call establish and document those standards in such a way and to such a level of detail that both the Hospital and the responding proponents are safeguarded. This however does take a considerable amount of time and financial expenditure and requires a dedicated, controlled and focused approach, all of which could be avoided if either Provincial or Federal standards were in place.

Where in the past such standards have not been clearly established then projects have either failed as Design-Build projects and have reverted to the traditional Design-Bid-Build process or the resultant proposals are not comparable.


Question:

Are there any regulations about releasing budget figures when issuing a design-build project?

Answer:

There is no regulatory requirement for the owner to provide the budget amount. Based on the RFP, bidders will provide a tender price and if accepted by the Owner it will become the contract amount independent of the budget. During bid preparation, bidders need to concentrate on a multitude of design issues, all within the context of the budget and schedule. Providing the budget will help the bidders focus on a design solution within the realities of the project. In addition, providing a realistic and achievable budget will be an asset in attracting experienced and competent Design Build teams. The provision of the budget should be considered as essential if it is in any way a factor in the evaluation process.

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