States enact design-build legislation

By: Cordell Parvin

Some states have enacted legislation enabling state agencies to award contracts on a design-build basis. As explained below, such statutes range from very detailed with little discretion by the agencies, to very general leaving broad discretion to the agencies.

A detailed state statute might include the following elements:

-- Public policy statement

-- Criteria for use of design-build

-- Qualifications of design-builders

-- Authorization to compensate proposers for a portion of preparation of design proposal costs

-- A two-step process under which qualifications are considered in the first step

-- A minimum number of firms to be solicited in the first step

-- A maximum number of firms that will be considered in the second step

-- Criteria for award based on price and other factors stipulated in the request for proposals after discussions and Best and Final Offers (BAFO) and

-- Authorization to obtain federal funding and/or other modes of financing.

Several states that have enacted more general design-build statutes have taken a variety of approaches. The Virginia statute is one that is short in length but requires a two-step, competitive negotiation process. After offerors submit their qualifications, the Commonwealth decides which are most suitable for the project and allows no more than five offerors to submit their proposals.

The New Hampshire statute is an example of broad authority stated concisely. In simplistic terms, it provides that highway, bridge and turnpike projects may be built under the design-build concept, provided that the selection and award is based on objective standards, that there are measurable criteria for evaluation, and that such projects are expressly designated as design-build and authorized as such in the capital budget.

State agencies considering design-build legislation can find some useful background information. The Systems Committee of the American College of Construction Lawyers (ACCL) has prepared guidelines for a Model Design-Build Procurement Act for State and Local Contracting.

The major sections include the scope of the statute, definition of the design-build builder, and the proposal and selection process. Under the commentary for the scope of the statute, the guidelines reflect that it could cover all types of construction, including roads and highways. Under the definition of design-builder, the commentary suggests that the statute identify those persons or firms who are qualified to enter into design-build contracts. The guidelines further reflect that the qualifications, which design-builders are required to possess, be more complicated in states with highly restrictive licensing laws.

The model statute was drafted with such strict licensing laws in mind in that it requires the prime contractor on the design-build project need have only one of several different licenses, including engineering or general contracting. The model statute also acknowledges and authorizes that the prime design-build contractor may delegate other services to properly licensed firms or persons. With regard to the proposal and selection process, the commentary states they have the most difficult issues because most public procurement statutes require some form of Brooks Act competition for design professionals and fixed-price low bid for construction contracts. The guidelines reflect that the procedures set forth in the statute are meant to be a minimum and it is anticipated that specific agencies or awarding authorities will implement regulations embellishing the procedures.

The ACCL Systems Committee also has provided guidelines for a Short Form Model

In those guidelines, the drafters indicate that in some instances a short statement of policy may be sufficient to authorize design-build project delivery on state or local construction projects and may be preferable to a more detailed design-build statute. Whether a brief statement of policy will suffice, will largely depend on whether the policy is harmonious with other policies or may even override other conflicting policies.

I have been asked whether the design-build approach reduces contract claims and litigation. It likely shifts the timing of litigation from the end of the project (where it addresses claims for defective plans) to the pre-award phase of the project (where it addresses protests from disappointed offerors who spent substantial sums preparing detailed proposals). Given that one purpose of the design-build approach is to speed up the process, protests of awards can be frustrating and costly to the agency. In a later column I will offer some ideas on avoiding such contract award disputes.

Parvin is a shareholder in the law firm of Leonard, Hurt & Parvin, P.C., which has offices in Austin, Texas; Dallas; Houston; Richmond, Va.; and Washington, D.C. You may write to him in care of the editor.