William Graves,  November 2009

Design/Build has been around for years, milenia actually, but during the past century of building it has played only a minor role. Frequently, during the past couple of decades articles would herald that the Design/Build delivery system was about to become mainstream. It never really happened.

Design/Build has been embraced for infrastructure projects and has gained significant market share in select market segments, but for commercial and institutional work it has remained on the sidelines.

Although each year Design/Build has made gains in acceptance, it just never reached the tipping point. I believe that day may finally be here, but not for the conventional reasons touted by the industry.

The usual rationale for Design/Build include faster turn around time and single source responsibility, these are both accurate and solid arguments that make sense. Every Design/Build project I have built was predicated on the need for speed. We’ve produced remarkable projects within timeframes that were simply not possible through conventional delivery systems. I believe however, that there are two primary factors that will finally allow Design/Build to play a significant role as a conventional delivery system. These factors are related to the current economy and the ever increasing complexity of our industry.

The commercial and institutional building industry is in a tail spin. Projects are selling for 25-35% below where they were 2 years ago. So far the cost reductions have been achieved by cutting the overhead and profit down the supply chain to zero. I also see jobs bid for what I know has to be less than cost, possibly by as much as 10%. That’s a problem for the obvious reasons, but it may also be a harbinger for deflation. Since I have not seen material cost soften, the only way to bridge losses on projects like this is through wage reductions or cheating. Poor options that encourage attrition of experienced professionals and drastically increase risk for owners, GC’s and sub-contractors.

These remain difficult times for contractors; if the lending pipelines don’t open soon this industry will experience radical change, much more than tweaks in delivery systems. Many of the bids that have been awarded at a loss will likely need to be resolved through bankruptcies, claims, and calls on the bond. For projects already in the pipeline,  Design/Build may be one of the best options to cut cost (through efficiency) and to reduce risk. Design Build is still subject to the insanity of price wars, but it requires a more thoughtful process and it’s less emotional.

Is turning to Design/Build really a return to the days of the master builder? It’s a romantic notion but I don’t see it that way, I see it as the burgeoning era of the master contractor. A lot of what’s driving Design/Build into reality is growing complexity and risk for owners.

The increasing complexities of simultaneously managing the design side and supply side, fueled by an anemic economy which raises the risk of default anywhere within this chain, demands a revised approach for owners.

It’s the nature of business to build a better mousetrap. There has been an effort for decades to impose cost control on the construction industry. The industry is seen as an overripe industry that is wasteful and inefficient in the delivery of products and services. The cure for the past two decades has been adding layers of management for cost control, i.e. CM’s and Owners Representatives, both working the top end of the food chain, vying for control. The result has been a trend of commoditization in the industry and overly complicated lines of communication in the design chain. Resultantly, the process is more complex and has grown more out of control then ever. Every tier wants to restrict and commoditize lower levels in search of cost control and to thereby justify their own tier of existence

The effort to drive down prices has given birth to many contract models, many of which just transfer cost from one entity to another. The huge growth of CM put the squeeze on architect’s fees and in effect transferred some responsibilities to the CM, but without the liability. Squeezed by lost fees architects sought ways to outsource through performance specifications, essentially shifting design responsibility to the GC for the scope they could not produce within their budget. Unfortunately this exacerbates the waning clout that Architects were already experiencing, they are further squeezing themselves out of the play with this approach.

All of this ignores the primary problem at hand; reduced architectural fees mean less design and detailing. This in turn fuels the fire for more comprehensive CM proposals, perpetuating the cycle. This is a shortsighted approach since there can be only one design professional of record. Add all the layers you want, but the design professional of record has to agree and document the plan to make it happen. I believe to start fixing the problem, you need to pay architects for comprehensive services, 2% more on design up front saves a lot of changes and conflicts later.

It doesn’t end with adding consultants on top of the owner/architect relationship. Responding to the pressure for reduced design fees, architects are commoditizing their own process, not only through performance specifications but through their own subcontractors. Finding a design firm with in-house structural and MEP capability is getting harder and harder.

In the design chain, architects are being bought on lower and lower fees, they in turn are buying their engineering cost for lower and lower prices. The services rendered are often just enough to get by. Interestingly, just as subcontractors have specialized and sub specialized, so have design firms.

Why worry about endless tires of subcontractors on the design side or the supply side? It complicates the coordination process; the chain of custody is too long and things start to slip through the cracks. It becomes nearly impossible for an owner to stay connected to their project because of the complex web of connections and subordinates.

Overly complex and highly commoditized relationships up and down the supply chain and the design chain cause owners to lose control.

Of course it’s not every job and every firm, but it’s does reflect a disturbing trend that is repeated very commonly these days. Under these circumstances it’s not enough for an owner to just be a competent manager. Without significant experience in the trenches of construction projects, maintaining true control of cost and schedule can be impossible. Many owner/developers just don’t have this type of experience, luck becomes a primary component to the prediction of success.

This is why I believe Design/Build begins to really make sense . Owners who have enough sense to know what they don’t know or can’t control will begin to embrace Design/Build as a way to move forward with a roadmap that is manageable. This approach relieves the roadblocks of reconciling the design chain with the supply chain, a process that has become one of the most challenging aspects of a project. In an over commoditized world of construction, getting the parties to actually talk to one another has become increasingly more challenging since we’ve compartmentalized professional responsibility to a point that communication breaks down. When this happens, projects just stop in their tracks. Time and schedule often lose meaning on these projects, because there is little sense of ownership, it’s always someone else’s time and money.

Design/Build brings control back to owners. It’s one lever for an owner to pull in lieu of trying to affect the Rube Goldberg process that so many projects seem to suffer from. But it’s more than just single source responsibility. Design/Build puts a GC back in charge of cost and spending, it puts one experienced entity in charge of the global project economy. Layers of cost go away. Builders will take the process back to the basics, and they know better than anyone in the process how to spend for construction effectively.

Builders are also the biggest complainers when it comes to architecture, the complaints about incomplete drawings are endless. Even the most conservative “if you’re low I love you” type of builder knows that buying cheap architecture is a ticket to problems. As a builder if I’m responsible for the project as whole, I WILL buy the right services for planning. If there are issues on the job and we need the architects sub consultants on site they WILL be there. The week long discussion about who’s paying for the site visit is no longer the driving force. As a Design/Builder, we’re spending OUR OWN money now, time has meaning again so getting to the finish line on or ahead of schedule translates to real money. The job is also under the umbrella of the builders bond, strong assurance for an owner. Strong motivation for the builder to put the design and constructions pieces in place correctly to begin with.

Commoditization and overly complex sub contract relationships are pushing Design/Build into reality, and the current economy is acting as a catalyst. These are new and unique times for everyone involved with construction.

For an owner, risk has never been higher. They may well have an underbid bid GC bought from inadequate architectural drawings performed by a team of subs all working at a loss; you can guess where that’s headed; claims is the inevitable outcome in this scenario. It’s survival for contractors and its high stakes for owners to defend. It may mean an army of consultants for defensive purposes or a different approach to winning altogether, Design/Build.

Copyright November 2009 William Graves Aeuqtias Management mbfblueprint.com all rights reserved