When I first began working for highway and bridge contractors, state DOT engineers designed substantially all of the highway and bridge construction projects. In that era there was consistency in the designs, and lessons learned over time were incorporated into later projects. More recently, state DOTs have used consultants to design their highway and bridge projects. I believe that through this change the industry has lost the consistency in the designs and is starting the learning process over again.
A change in plans
I recently read a report by the Office of Program Policy and Analysis in Government Accountability discussing the Florida Department of Transportation’s (FDOT) performance in controlling cost overruns and delays. The report was done in 1996 and addressed the following three questions:
• How prevalent are construction cost overruns and delays in FDOT construction projects?
• What factors contribute to cost overruns and delays in transportation construction projects? and
• What additional actions could FDOT take to minimize construction costs overruns and delays?
The analysis revealed that almost two-thirds (62%) of the cost overruns and delays were attributed to errors and omissions. That is a very significant finding. The remaining cost overruns and delays (25%) was attributed to breakdowns in project coordination between FDOT and other entities; and the balance was attributable to problems in defining the scope of work, changes after design plans were complete and damages to construction sites due to extreme weather conditions. The office suggested that FDOT improve the quality of its review of project design plans, focusing particularly on the areas of earthwork and drainage, and recommended that FDOT continue developing specifications for innovative contracting methods.
The office noted that FDOT was already taking steps to identify and resolve errors and omissions prior to bid letting. Those steps included performing "constructability reviews" and drafting specifications and procedures for innovative contracting, including design-build, lane rentals and warranties.
In an appendix, the office analyzed alternate contracting methods including design-build. They found several potential advantages of using design-build: clarified accountability, time savings and lower costs. They noted that two potential drawbacks would include the potential of increased contract costs based on the higher risk that the contractors face for design errors and reduced competition.
Risky move
This report is one of many that will support advocates of more construction of highway and bridge projects by the design-build method. Simply put, advocates argue that under the design-build method, the state DOT transfers the risk for design errors to the design-build entity. Advocates also argue that under the design-bid-build system, a project is developed sequentially in a slow process. Finally, advocates continue to suggest that the design-bid-build system does not give contractors the opportunity to be innovative in constructability and potential cost savings.
I believe contractors must prepare for larger highway and bridge construction contracts built using the design-build method. Contractors also must be aware that when contracts for highway and bridge construction are awarded based on the "best value" to the state, there will undoubtedly be a "first to market" advantage to contractors with design-build experience.
For contractors, I ask: What is the current law in your state? Is design-build permitted for highway and bridge construction? Have bills been introduced in the legislature to permit highways and bridges to be constructed by the design-build method? Does your state DOT favor using the design-build method?
I believe if the answer to any of those questions is yes, contractors must consider design-build as part of their long-range strategic plans. In doing so, contractors must focus on their niche. Will they be prime contractors or subcontractors?
Contractors also must focus on the differences between obtaining an award based on the low bid and obtaining an award based on "best value" after working extensively with a designer to meet the quality desired by the state DOT within a budget that is not likely to change very much after award.
Finally, contractors must be aware of the risks likely to be shifted to them under a design-build contract. For example, has the state DOT removed the Differing Site Condition Clause? Who is responsible for obtaining environmental permits? Who is responsible for existing hazardous waste? Is potential liability uncapped? Is the contractor indemnifying the state DOT for the state DOT’s own negligence? Contractors should carefully review the changes made by the state DOT to its standard specifications.
I have argued for years that claims and disputes can be best avoided in the design phase of construction. I fear that state DOTs will choose design-build over focusing on improving the design by their consultants.
