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Public Procurement for Construction Projects: What is the Best Project Delivery Model?



Design-Build vs Design-Bid-Build project delivery models
Image source: https://projectsight.trimble.com/project-delivery-methods/design-build/


Public entity construction projects play a pivotal role in shaping the infrastructure of a region, from schools, purpose built rentals, affordable housing and hospitals to transportation systems. These projects demand meticulous planning, efficient execution, and adherence to budgets and timelines. Public procurement for construction projects has several nuances compared to private projects, however Design-Build has proven to be the best project delivery approach to maximize open and fair competition resulting in the best value for the public. In this article, we'll delve into the realm of public entity construction projects and explore the advantages of embracing Design-Build as a modern and efficient methodology.


How are Public Projects Typically Procured?


How do public entities, such as municipalities, schools, universities, hospitals, and others, typically procure their large construction projects? The most common project delivery model is the Design-Bid-Build (DBB) approach.


In the Design-Bid-Build approach, the Design phase is completely separate from the Build Phase. The project owner will put out a document to procure architectural services. The role of the selected architect will be to design a building according to the needs of the owner. The architect will create drawings that are 70-100% complete. The owner will then take these drawings and put them out to tender for construction companies to bid on. The construction companies have no say in the design of the building, and must give estimated costs to construction the building according to the drawings. The downside of this approach is that construction companies may have ideas how the design of the building could be slightly adjusted to result in much more efficient construction reducing the cost of the project. However, there is not much room for this collaboration between construction experts and architectural experts in the DBB approach.


In contrast, Design-Build combines design and construction responsibilities under a single entity, providing a more streamlined and cohesive project execution process. Every aspect of the project can be optimized relative to each other. Integration and standardization are critical items to reducing project budget and timelines.


Is Design-Build Appropriate for Public Procurement Rules?


Design-Build might seem like a departure from traditional public procurement methods, but it's not at odds with them. In fact, Design-Build aligns with public procurement rules to ensure a more fair and competitive process. Unlike the traditional Design-Bid-Build (DBB) approach, where design and construction are separate entities, Design-Build integrates these phases, fostering collaboration from the project's inception.


Design-Build introduces a level playing field where various design and construction firms can participate in the bidding process. This inclusivity enhances competition, allowing both established firms and innovative newcomers to showcase their capabilities. Consequently, public entities can benefit from a broader pool of talent and ideas.


Design-Build fosters a competitive environment that encourages both traditional and innovative construction methods. Public procurement is no longer limited to the conventional Design-Bid-Build process. In Design-Build, contractors have the freedom to propose creative and efficient solutions, leading to a dynamic marketplace where the best ideas come to fruition.


One critique of traditional procurement methods for constructions is that they unintentionally exclude firms who have been developing innovative solutions to construction issues such as cost, access to labour, and lengthy project schedules. These firms have even been given government funding through grants and low interest loans to develop these innovation methods. Methods such as prefabrication, modular construction, 3D printing and others.


How does the traditional procurement process exclude these companies? Well, in the traditional Design-Bid-Build (DBB) outlined above, the architect chosen to design the project must create drawings that the majority of construction companies can bid on. The architect essentially cannot chose a specific construction method because that would exclude everyone else. Therefore, the architect will create the drawings and details for typical construction.


Now, if a modular construction company wanted to bid on the job, they would have to submit an alternate design that aligns with the parameters of their modular system. The modular company may be able to achieve the desired goals of the project, but will still be non-compliant to any bid process on the construction drawings. Some procurement teams allow for alternatives, however they are rarely chosen since all of the drawings have already been completed.


The Role of Architects in Design-Build


Architectural Expertise in Design-Build: Architects remain essential in Design-Build projects, contributing their design expertise and creative insights to shape the built environment. Rather than being sidelined, architects work closely within the design-build teams to align the project's vision, functionality, and aesthetics. Their role is pivotal in ensuring that the project meets the intended objectives and adheres to regulatory standards.


Simplified Tender Processes Unlock Economic Value


Design-Build projects offer the procurement team the ability to simplify tender documents while still making sure they achieve everything they require from the project. Procurement processes inflate the project requirements, construction specifications, and contract clauses to a point where companies see unnecessary risk. The cost for companies to submit a bid can be quite high, and this will deter companies from bidding, and adds no-value costs into the industry, raising costs for everyone.

​Simpler Tender Documents =

More Open Competition

Less Baked-in risk

Better Buildings For Less

Better Public Value

Project Specifications

Construction projects tendered through public procurement are known for pages upon pages of specifications, conditions, and legal clauses. Many construction companies see these convoluted tender packages as major red flags and open them up to unnecessary risk, so they don’t bid on them. Not to mention that it is common for specifications to contradict themselves throughout the whole document. We all understand the need for specifications and regulations. We need buildings to be constructed in a safe and sufficient manner. That is why the Building Code and many other regulations exist (Building Code, Electrical Safety Code, Fire Code, Plumbing Code, Accessibility Code, Municipal Bylaws, Energy Efficiency Standards, Environmental Codes, and Standards, etc.). And you know who understands these codes really well? The people who are working with them every day. An electrician can look at a requirement stating that the project must meet the Ontario Electrical Safety Code and say, “Yep, that’s business as usual, no risk or issue here.” Meanwhile, the same electrician may look at 20 pages of custom-written specs (That more or less say the same thing as the electrical safety code) and say, “Pass. I’m not risking it.” Not only is it a risk item, but it’s a cost-risk item. The electrician will know how to estimate the costs for the spec that requires them to meet the Ontario Electrical Safety Code. However, with the 20-page spec, they can easily miss something and price it wrong. If they underprice, they risk their company’s future.


Results Based Project Requirements (RBPR)

A results-based project requirement document doesn’t require spec upon spec. It simply needs to state that the project must meet all the necessary codes (Some codes are voluntary, and therefore the document should list out which codes/standards are desired). This can turn a 100-page document into 5 pages. Let’s take an affordable housing project for example. Some results-based project requirements might be:

  • The site location

  • List site-specific parameters (Zoning limitations, or new parameters if a zoning amendment is to take place).

  • Project must have a minimum of 100 units. Rough breakdown of unit sizes: 20% 3 bedroom, 50% 2 bedroom, 20% 1 bedroom, and 10% bachelor units).

  • Project must either have a total of 120 parking spaces, or 10 parking spaces with a dedicated car-share program of 2 or more cars similar to https://www.kitemobility.io/.

  • Preference will be given to projects that include energy-efficient elements to reduce the long-term operational costs of the building. These might include Solar, Geothermal, super-insulation, air-tightness, etc.

  • The building facade is an important element and must blend into the surrounding area. Preference will be given to projects that achieve this. Examples of buildings we like are: include pictures of real buildings, or renderings that showcase the style and aesthetics that the project owners would like to see.

  • And more.


Standardized Construction Contracts

A similar thing happens with pages upon pages of legal clauses and requirements. There are exhaustive and fair standard documents that exist and are well known in the construction industry. The CCDC has several different types of construction projects that have been vetted, and used for many years. Construction companies are familiar with these contract documents, and know that if they see CCDC14, they are comfortable with the terms … because they are written to be fair for everyone. The common argument is that public entities require more stringent clauses that absolve them of all risk. This is okay, a few pages of supplementary conditions aren’t too bad. But 30 pages of supplemental conditions is suspicious. Similar to the electrician above who says “Pass, I’m not risking it.” Many construction companies see so much risk in the convoluted lawyer language of excessive supplemental conditions. Or custom contracts that the public entity might use. If a CCDC document, which works for the entire industry, doesn’t work for you, I can’t help but ask “Why?” Standardization brings cost efficiency. Just like prefabrication can standardize elements of construction making things more efficient for everyone, Contracts like the CCDC documents bring standardization to the legal side. Construction companies (who are not expert lawyers) can look at a CCDC contract and say “Yep, business as usual” and be confident that there are no hidden “gotchas” in the clauses. This will also shorten and simplify any contract negotiations or discrepancies.


Reducing The Hidden Cost of Lost Bids

For companies and teams to bid on tenders requires quite a bit of time, energy and cost. There is the first cost of having to subscribe to multiple tendering platforms and having to pay, just to review documents to see if the project is a good fit to bid on (This is a whole specific rant that I will have to write a separate article on). But the bigger cost is lost tenders. The tender process can require multiple departments working many hours to put together bids. While this cannot be fully avoided, there are elements of Design-Build tendering process that can help. Why is this important? Shouldn’t this just be a cost being a construction company? Yes, this is an overhead cost. However, think of construction industry as a whole. If the entire industry faces this excess overhead, they have to make up for that somehow right? Therefore, the cost to pay their employees for their hard work must be spread out through projects they do win. Therefore, the winning bidder on any project likely has an inflated price due to excessive overhead items such as lost bids. Therefore, as a whole economy, would we not want to limit this excess overhead cost wherever possible? Because the cost of a lost bid has absolutely no value. An economy that losses money to zero-value-add items is not benefitting anyone.

So how can Design-Build help ease the hidden costs of lost bids? Well, a Design-Build tender pairs perfectly with a pre-qualification round or “prequal.” The prequal is the initial tender that goes out to the public. This will call for Design-Build teams who are interested in bidding on a particular project. The goal of the prequal round is to develop a short-list of 2-3 teams who have the right qualifications for the job. The team can be made up of several individual companies, and therefore architects and construction companies can join forces and everyone can bid. This also allows for more integrated companies with modular and prefabricated solutions to compete. The prequal stage is relatively simple to apply to. Nothing about the project design, cost, or logistics is included. The teams must present a submission that displays their competence. This usually includes past project experience, resumes of key team members, anything else that would portray their expertise and competence. From this prequal round the public entity would select the teams they would like to move forward. It is only these teams that can bid on the Design-Build tender. Limiting the bidders based on experience is prudent, and now only a select few teams will be required to invest in the bidding effort. If three teams are short-listed, then yes, two of them will still have lost-bid costs. However, it is only two teams compared to a longer list adding to the no-value wasted costs of the industry.


If the resulting Design-Build tender is also simplified in manner described above. And if the tender doesn’t require detail drawings, but more concept and massing to show the design intent, we will be left with a simple tender document that maximizes the benefit to public and the construction industry as a whole.


Okay, but what about price? Well, that is where the CCDC14 Stipulated Price Contract works very well. “Stipulated Price” puts the onus on the Design-Builder to lock-in their pricing. While some people might say this is an unnecessary risk to the Design-Build team, it is completely acceptable. Who knows the pricing of their end ‘product’ better than the design-build team. Most companies that have been a part of a design-build project will be favorable to the idea of a stipulated price.


Benefits of Design-Build Project Delivery


Open up more competition

As discussed in the section above, Design-Build allows for more competition by allowing new construction methods that require special design consideration and parameters. These new construction methods are typically designed to benefit the project owner and therefore provide better value to the public.


Single Point of Responsibility in Design-Build

A key advantage of Design-Build is the single point of responsibility. This approach promotes accountability, clarity in communication, and efficient issue resolution. With a designated team overseeing both design and construction, public entities can expect smoother project management and reduced conflict.


Risk Reduction in Design-Build

In Design-Build, risk management shifts from public entities to experienced design-build teams. This shift not only promotes efficient project delivery but also minimizes costly disputes and delays. Public projects become more predictable and less prone to costly litigation.


Cost Certainty in Design-Build

Design-Build simplifies administrative processes for public entities. It streamlines procurement, reducing red tape and bureaucracy. This efficiency can lead to substantial time and cost savings, allowing public entities to allocate resources where they matter most – the successful execution of construction projects.


Streamlining Administrative Burdens

Design-Build simplifies administrative processes for public entities. It streamlines procurement, reducing red tape and bureaucracy. This efficiency can lead to substantial time and cost savings, allowing public entities to allocate resources where they matter most – the successful execution of construction projects.


Efficient Scheduling and Adaptation in Design-Build

Design-Build improves project scheduling and adapts to changes efficiently through early contractor involvement. Contractors provide valuable insights during the design phase, helping public entities make informed decisions. This proactive approach minimizes delays and keeps projects on track.


Simplified Prequalification

Design-Build simplifies prequalification, making the selection process more efficient. Design builders are chosen based on their experience with similar projects, team expertise, and other relevant criteria. This approach reduces the workload for potential bidders and ensures that only qualified teams invest substantial effort in the bidding process.


Foster Sustainability and Innovation

Design-Build isn't just about constructing buildings; it's about creating sustainable and innovative solutions. DB projects often lead the way in adopting net-zero and environmentally friendly building practices. By encouraging innovation and sustainability, Design-Build contributes to a greener and more future-focused construction landscape.


Communication

Communication between everyone involved is critically important. The notion that architects are not consulting with the construction team is outdated and is a primary source for extra, cost overruns, and inefficiency. Architects are experts in designing spaces to be functional and aesthetically pleasing. They are also experts in regulations that must be met with the design aspect of the building. While architects know a lot about construction methods, they can’t be expected to be experts in this area as well. That is why architects must work in tandem with the construction companies to understand which best practices, design details, material choices, and parameters result in the best overall building; both in building performance and project cost.


In a Design-Bid-Build process, if an architect chooses one specific building method that is used by one specific company, does this open up competition or close competition? A Design-Build process allows for more fair competition while also presenting the public with more options to achieve a certain project goal.


Design-Build Project Delivery. It’s the Future


Design-Build presents a compelling case for enhancing public entity construction projects. Its alignment with public procurement rules, emphasis on architectural input, promotion of fair competition, and efficiency gains make it a formidable contender in modern construction. As public entities seek cost-effective, sustainable, and innovative solutions, Design-Build emerges as a future-forward approach, poised to reshape the landscape of construction procurement. Embracing Design-Build means embracing progress and efficiency in the world of public construction.











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