contracts and relationships

8/17/2019 Contracts and Relationships

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Design-Build:

RISKSOR REWARDSfor the

Consulting Engineer?


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Presented at the FIDIC Annual Conference

September 7, 2005

Gregs G !homopulos, P", FAC"C


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# Many of the old rules for project delivery that held sway

in the industry no longer have the

same potency as they once did…


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“Design-bid-build still has its many followers among owners who believe that

they can obtain the very best design and

the most cost-effective construction byholding both sides separate…


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“ Advocates of design-build believe that thesole-source method of procurement forces

the team to iron out many of the project

wrinkles on their own because the entireteam will be held accountable…


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“Still others believe that constructionmanagement for fee is the best way of

ensuring that the owner gets the best of all

worlds because there is an agentinspecting measuring observing and

protecting the owner!s interest…


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“"ans of #M At-$isk believe that the words%at risk! say it all and force the #M firm to‑

deliver what it promised on time and on

budget or face the conse&uences' (

"ng$neer$ng %e&s'(ecord, )ul* +, 2000


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Design-Build is not a new concept.

Most of the world’s great structureswere built under a Design-Buildarrangement by master builders.


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Project Delivery Systems Design-Bid-Build

Construction Management (CM)• CM At-Risk

• CM – Owner’s Representatie Design-Build

Ot!er "ariations

• Build-Operate-#rans$er (BO#)• Build-Own-Operate-#rans$er (BOO#)

• %rogram Management


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OWNER

Design-Bid-Build

Contractual Relations!ip

CE CONTRACTORS


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PROJECTSTART

SELECTCE

Design-Bid-Build

%ro&ect #ime 'ine


CONSTRUCTION

DESIGN

PROJECTCOMPLETION

BIDDING/AWARD


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OWNER

Construction Management At-Risk


CM / GCCE


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SELECTCE

PROJECTSTART

SELECTCM/GC

Construction Management At-Risk

%ro&ect #ime 'ine


CONSTRUCTION

DESIGN

PROJECTCOMPLETION

PRE-CONSTRUCTION


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Design-Build

%ro&ect #ime 'ine


OWNER’SCE

PROJECTSTART

OR IN-HOUSE

CONSTRUCTION

SELECTDESIGNBUILDER

PROJECTCOMPLETION

DESIGN

PRE-CONSTRUCTION


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Why Owners Prefer Design-Build

!orter %ro&ect c!edule Better CostBudget Management

*$$icienc+ and ,nnoation(Contractors’ Means Met!ods)

ingle ource Responsi.ilit+(Aoids %ointing o$ /ingers)

Risk !aring(More Risks %assed Down to Design-Builder)

/ewer Claims and 'itigations

/ewer Contract Modi$ications

Opportunit+ to %ackage 'arger Contracts


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How Owners ProcureDesign-Build Services In the U.S.

0egotiated %rocurement• ole ource election (trategic Alliance)

• 1uali$ications Based election (1B)

• Best "alue (%rice and #ec!nical)

Competitie %rocurement• 'ow Bid ('owest %rice #ec!nicall+ Accepta.le)

• Ad&usted 'ow Bid (Mi2 o$ %rice3 c!edule3 etc4)

• /i2ed BudgetBest #ec!nical %roposal• Best and /inal O$$er

• 5eig!ted Matri2


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Organization of theDesign-Build Team In the U.S.

,ntegrated /irm(Design and Construction Capa.ilit+ in ame /irm)

Contractor As %rime

C* As %rime 6oint "enture Between t!e Contractor and C*


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“ )wners are willing to use

alternate project delivery methods

but firms worry that clients don!t always

understand what they need'(

"ng$neer$ng %e&s'(ecord, )une +, 2000

Design-Build Risks and Rewards


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Risks for theConsulting Engineer

%re-%roposal Design Cost Reduced /ee $or !are o$ %ro$it

*rrors and Omissions

'i7uidated Damages orConse7uential Damages

%er$ormance 8uarantee

%articipation in 'oss 6oint and eeral 'ia.ilit+

Client Relations!ips


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Rewards for theConsulting Engineer

uccess /ee

Mark-9p on %rocurement

:ig!er Margins on Design erices

!are in Oerall %ro$it


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Design-Build

“Best Practices”

for the CE inthe Unites States


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/or #!e C*3 u.contracting #ier %re$erred(ome Are ometimes t!e %rime)

0o /ree %re-Bid *ngineering erice

uccess /ee on uccess$ul Bids

Design /ees !ould ,nclude Additional Margins

Design /ees Ma+ Be Reduced$or !are in %ro$its

0o ;!aring in 'oss< Arrangements %rocurement erices $or Additional /ees

%ossi.le 6oint "enture 5it! Contractor

Best Practices For TheConsulting Engineer in Design-Build


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Design-Build:

RISKSOR REWARDSfor the

Consulting Engineer?


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hank .ou


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