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Procurements & Supplements

• The design phase
• The bidding phase
• The construction phase

During the design phase, the Owner engages an Architect to work with the Owner to identify the Owner's needs and then to produce a conceptual or schematic design. This early design is then developed, and the Architect will usually bring in other professionals including mechanical, electrical, plumbing, fire protection, structural, civil engineers and a landscape architect to complete drawings and specifications which are called the Contract Documents (CD's). As an additional service, the Owner may have the Architect develop a written program documenting those needs.

Once completed, the CD's are presented to General Contractors (GC), who prepare bids for portions of the work and put them out to multiple subcontractors for bids on sub-components of the project. Sub-components include items such as the concrete work, structural steel frame, mechanical systems, electrical systems, and landscaping. Questions may arise during the tender period, and the architect will typically issue clarifications or addenda. From these elements, the contractor compiles a complete "tender price" for submission by the closing date and time. In public work, the contractor submitting the lowest responsible bid is selected to perform the construction. For private work, the Owner selects one of the GCs based on the evaluation of the bid, the proposed Subcontractors, proposed schedule, the GCs current workload, and other factors. The successful bidder may or may not be the one submitting the lowest bid. In the event that all of the bids are in excess of the goals of the Owner, the Owner may elect to reject all bids. The following options become available:

• Abandon the project;
• The Architect may revise the design, making the project smaller or more efficient, or reduce features or elements of the project to bring the cost down. The revised documents can then be re-bid;
• The Owner may elect to select the lowest qualified bid's General Contractor to join the architectural team to assist with cost reduction. This process is often referred to as Value Engineering.

The selected GC is then responsible for constructing the facility in accordance with the CDs, including all related work to deliver a complete project. The GC is responsible to provide items included in the CDs but not included in the Subcontractor bids at no additional cost to the owner.

During the Construction Phase, the Design Professionals typically maintain limited oversight of the work, respond to questions, and interpret the intent of the CDs on behalf of the Owner. The Design Professionals may also assist the Owner in administering the construction contract, including determination of project progress for interim payments made to the contractor.

Benefits of this system
This contracting system offers the advantage of being widely applicable, well understood, and well-established /clearly defined roles for the parties involved. Furthermore, it offers the Owner a significant amount of control over the end product, particularly since the facility's features are fully determined and specified prior to selection of the contractor.

Among the chief advantages of the Design-Bid-Build system are:

• The design team is impartial and looks out for the interests of the Owner.
• The design team prepares documents on which all General Contractors place bids. Incomplete, incorrect or missed items are usually discovered and addressed during the bid process when brought to the attention of the Design Professional by the bidders.
• Ensures fairness to potential bidders and improves decision making by the Owner by providing a range of potential options. It also identifies new potential contractors.
• Assists the Owner in establishing reasonable prices for the project.
• Uses competition to improve the efficiency and quality for Owners.

Disadvantages of this system
In Pennsylvania, public owners are not permitted to utilize this approach in a single prime delivery method because of the Seperations Act, which requires a Multiple Prime Contractor delivery system (refer to section I-8).

Even though this delivery system has historically been the most dominant, many Owners have experienced a variety of frustrations using this system, leading to the development of other methods.

Among the chief disadvantages of the design-bid-build system are:

• The process is time-consuming since all design work must be completed prior to solicitation of the construction contract.
• The designer may have limited ability to assess scheduling constraints.
• Failure of the design team to be current with construction costs and any potential cost increases during the design phase could cause project delays if the construction documents must be redone to reduce costs or result in a more costly final product.
• The Owner generally faces exposure to Contractor claims over design and constructability issues since the Owner accepts liability for design in its Contract with the contractor.
• The approach tends to promote more adversarial relationships rather than cooperation or coordination among the Contractor, the designer and the Owner.
• The Contractor may pursue a least-cost approach to completing the project, requiring increased oversight and quality review by the Owner.
• The absence of a Contractor's input into the project design may limit the effectiveness and constructability of the design. Important design decisions affecting both the types of materials specified and the means of construction may be made without full consideration of a construction perspective.
• There is the potential for the development of a "cheaper is better" mentality amongst the General Contractors bidding the project resulting in the tendency to seek out the lowest cost Subcontractors in a given market. In strong markets, General Contractors will be able to be selective about which projects to bid, but in lean times, the desire for work usually forces the low bidder of each trade to be selected. This usually results in increased risk (for the General Contractor) but can also compromise the quality of construction. In the extreme, it can lead to serious disputes involving quality of the final product, or bankruptcy of a sub-contractor who was on the brink of insolvency desperate for work.
• As the General Contractor is brought to the team post design, there is little opportunity for input on effective alternates being presented.
• Pressures may be exerted on the design and construction teams, which may lead to disputes between the Architect and the General Contractor.

Hybrid Design-Bid-Build Systems
While the most common approach to bidding a project in building construction is for General Contractors to submit a sealed lump sum bid, many variations in Contractor procurement exist in the traditional system.

Other methods include unit-price contracting, which is generally limited to projects that can be easily divided into small work units and quantified prior to construction. This is commonly found in heavy construction projects. At the other end of the spectrum is cost-plus contracting, generally used in circumstances where there is such high risk or variability in the work that preparing a responsible bid is impossible.

Many Owners make some effort to pre-qualify Contractors, either through invitation, or through an objective set of criteria considering construction experience and financial capability. Doing so helps assure the Owner that the Contractor is capable of providing a high-quality product. Once the field of bidders is established, an Owner bidding a lump sum project may choose to require sealed bids, wherein the lowest responsible bidder will earn the right to perform the work.

However, many private Owners prefer to negotiate bids with pre-selected GC's (see section I-9: Negotiated Bid). This can be an especially powerful technique if the Owner considers qualifications, history of claims and experience in related work along with price in its evaluation. What the Owner should really be seeking is the best value for its money, not necessarily the lowest initial cost. Through a careful negotiation or contractor evaluation, the Owner can maintain the maximum amount of control over the resulting construction portion of the project.

TAGS: Addenda, Constructability, Design-Bid-Build, Lump Sum, Multiple Prime Contractor, Schematic Design, Section, I-9, and Value Engineering.

Glossary Terms for the Best Practices Guide

History of Recommendation:
Revised September, 2011
Approved July, 2010

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