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In order to exempt a project from the use ofcompetitive bidding, the Contracting Agency mustadopt findings that support their resolution toexempt the project.

1) Will not encourage favouritism2) Will result in substantial savings to the Agency3) Effect on the Operational Budget4) Public Safety5) Is there a Public Benefit

6) Will Value Engineering be done7) What effect do Market Conditions have9) Technical Complexity10) What is the Funding Source and what effect

will the exemption have

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Traditional delivery Design and buildsystem Turnkey, Package deal

Client

Designer

Contractor

Client

Designer

Contractor

Inspector

SupervisorQ.S.

InspectorSupervisor

Subcontractors

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Defined as an arrangement where onecontracting organisation takes soleresponsibility, normally on a lump sum fixedprice basis, for the bespoke design andconstruction of a clients project (e.g. D + B).

The fundamental characteristics responsibility for the design and construction lies

with one organisation reimbursement is generally by means of a fixed-

price lump sum project is designed and built specifically to meet

the need of the client

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A single contract between the project owner anda design-build contractor covering both thedesign and construction of a project.

The design-builder performs design,construction engineering, and constructionaccording to design parameters, performancecriteria, and other requirements established bythe agency.

Implemented in the highway construction

industry in a variety of ways on how the state statutes are written

how much responsibility is transferred to the design-builder for the design and other aspects of projectperformance.

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Modified Design-Build, also called Low Bid design-

build or Draft/Detail-Build, where the agencycompletes a significant portion of the designbefore selecting the contractor using a low bidsolicitation or qualified low bid process.

The design-builder then completes the remainderof the design work and constructs the projectunder a single contract.

Primarily used in cases where state law prohibits

the procurement of construction services using amethod other than low bid or before the design issubstantially complete, and the agency administersthe project using traditional practices and retains

greater responsibility for project performance.

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Agency completes the conceptual design to alower level and then procures the design-builder under a two-step best-value proposalprocess.

This two-step best-value approach allows formuch earlier involvement by the design-

builder and shifts greater control andresponsibility for the design and projectperformance to the design-builder.

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D&B contract may also include responsibilities that extendbeyond the design and construction phases of a project,shifting more performance risk to the private sector.

Design-Build-Warranty - A single entity designs, constructs,and warrants specified components over a prescribed timeperiod (e.g., 5, 10, or 20 years). Warranty requirements shift

quality responsibility to the design-builder and reduce theagencys need to inspect during construction and maintainthe facility during its service life.

Design-Build-Maintain - A single entity designs, builds, andmaintains the project works for a specified period of timeunder a single contract. Payment beyond completion ofconstruction is typically tied to meeting certain prescribedperformance-based standards for a period of years.

Design-Build-Operate - A single entity designs, builds, andoperates the project (e.g., a toll road) for a specified periodof time under a single contract.

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Expanded to a PPP concept, where a private

entity or developer takes part in financing andleasing a project in return for monetarycompensation based on contractualauthorization to collect revenues, or pursue

development rights with the contractingagency. Private entity will be responsible for financing,design and construction, and often will operate

and maintain the project for a specifiedduration. May give full or partial contracting authority to

the private entity.

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A recent and fairly comprehensive study on design-build

effectiveness focusing on design-build projects completedunder SEP-14 reported the following (SAIC, AECOM, andUniversity of Colorado 2006):

An average 14 % time savings for design-build projectswhen compared to design-bid-build schedule estimates

3 % reduction in total cost. An average reduction of 1 % between planned and actualtotal project duration No appreciable change in total cost. A comparable level of quality to design-bid-build delivery.

For agency satisfaction as a quality measure, the use ofbest-value procurement, lower level of design, and largerprojects with design-build yielded higher satisfactionratings.

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Owner established budget and buildingcriteria

Design and construction firm is selected asone team based on a predetermined list ofcriteria

The design and construction are bothaccomplished by the selected team

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The owner contracts with a single entity toprovide the design and to construct theproject according to that design.

The contract might be negotiated with asingle design-builder or result fromcompetitive proposals.

The selection can be based on low price or

on a set of value criteria (experience, staff,bonding capacity, etc.).

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Provides the owner with a single point ofcontact for project responsibilities,eliminating the need to assist inresolving designer-contractor disputes.

With the contractor playing a major role

in design, costs are typically defined andmaintained to a greater degree, and thecoordination of fast-track managementto achieve early completion is greatlysimplified.

The design-builder makes manydecisions that owner would make underDBB, due to delegation of greatlyincreased authority.

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For many owners, delegation of responsibilitiesleads to satisfactory projects. However, if theparties are inexperienced and do notcooperate, the transfer of control and risk canbe disappointing.

The owner may need to restructure his/herinternal procedures to accommodate design-build approach.

Compared to DBB, this involves a significantlydifferent set of requirements and expectationsfor process, timelines and communications.

A clear understanding and documentation ofdesign-build processes enhances the quality ofdesign-build projects.

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Specific use buildings Simple design criteria

Repetitive function (open office space; hotel)

Financed by others

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Characteristics

Single pointresponsibility

Can be overlapped

Client can be sure ofmaximum cost before

final commitment

Integrated design andconstruction

Improves buildability

Fits to constructors

expertise, workingcondition,organisation

Preparation Design

Tender ContractConstruction

Cost

costs should belower shorter timeon site

Thus

(Savings are not passed to the client in lower prices)

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Funding Option Variations Turnkey

Developer Financed Projects

Turnkey Variations

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Private capital and developer participationoffer private owners several variations ondesign-build.

Lease-develop-operate arrangement:Theowner gives a private operator a long-term

lease to use, operate, and expand an existingfacility. Public-private partnership or wrap around:

Ownership of or fiduciary responsibility for a

project is assigned to a private party. Thatparty designs, builds, and may even own,operate and maintain the new facility.

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Turnkey adds to the design-buildersresponsibilities the operation and/ormaintenance of the completed project.

Turnkey delivery has the potential for

bringing a new project on line more quickly. Three forms of turnkey project delivery:

Design-build-operate-transfer Design-build-operate-maintain

Design-build-own-operate-transfer

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For highly specialized projects andcircumstances, financing from a private orpublic developer or other third parties canoffer additional variations on design-build

and turnkey project delivery, each with newroles for owners, designers, and contractors.

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Variations on turnkey add financing as a keycomponent. While financing arrangementsare unique for each project, developerfinanced projects generally resemble one ofthe turnkey delivery methods:

FDBT (Finance, design, build, transfer) FDBOT (Finance, design, build, operate, transfer) FDBOOT (Finance, design, build ,own, operate,

transfer)

In each case, the transfer of the project

occurs only after the developers interestsand financial obligations have beensatisfied.

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ECI is a hybrid design-build project delivery method from England

involving qualifications-based design-builder selection and anopen-book target pricing system.

Objective Align team goals through the early establishment of the

contractors role in the project development process and through

the rational and equitable sharing of project risks

Qualifications-based approach to select a contractor early in theproject development process, when the agency has onlyconceptual plans and an approved budget price.

Once the contractor has been selected, additional design andplanning is performed with the input of the entire delivery team to

establish a target price for the project from that point forward. Various mechanisms are incorporated throughout the design and

construction process for the contractor to share in savings, andparticipate in any losses, realized when actual costs are comparedto the target price.

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The agency compensates the contractor for actual costs, based on open-book accounts andrecords, plus a fee.

In addition, an incentive structure, similar to that described below, is established to motivate thecontractor to design and construct the project within budget.

Design Bonus If the contractor designs the project within the project budget, as indicated bycomparing the forecast total project cost to the project budget, the contractor is paid a designbonus. If the forecast costs are greater than the project budget, the contractor does not receive abonus, but likewise does not suffer any reduction in payment. If the agency elects to proceed withthe project, the contractor still has the opportunity to earn incentives during the constructionphase of the project.

Construction Bonus During the construction phase, the contractor is paid actual construction costsplus a percent fee. If, at the end of construction, the total of actual costs plus the contractors feeis less than the estimated cost (i.e., initial target price adjusted for any additional compensationpaid out during design and construction), the contractor is paid a share of the savings, ascalculated using a formula set out in the contract. Similarly, the contractor would pay a share ofany cost overruns.

Final Bonus At the completion of the project, the agency will calculate a final bonus based on acomparison of the contract budget to the total project expenditures incurred by the agency,including any design and construction bonuses already paid to the contractor, as well as an

estimate of future costs not yet incurred. If the total expenditure is less than the contract budget,the contractor is paid a bonus percentage of the savings achieved on the contract budget. If thecontract budget is exceeded, no final bonus is payable to the contractor; however, the contractordoes not share in any additional cost overruns (other than what they may have already incurred inthe construction cost share).

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Pros ConsAllows contractors expertise to be

introduced earlier in the projectdevelopment process

Absence of direct price competition

can lead to overly conservative andeasily achievable performance targets

Bonus structure provides an incentivefor contractor to control costs andwork within the target priceestablished for the project

Open-book accounting structure andthe risk of sharing in cost overrunsmay deter potential bidders

Open book target pricing systemrequires contractor to operate in anopen and collaborative way

Increased procurement costs

Potential for overlapping design andconstruction phases may allow for

faster project delivery

Encourages better communicationbetween contractor and agency

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Compresses the schedule by sequencing the

start of construction on underlying projectelements (e.g. foundation, basic supportingstructures) before final design is complete forinterior or adjacent elements.

Is not a method of delivery, rather, its amanagement strategy within delivery methods. While often successful in achieving schedule

reductions, problems on fast-track contractscan create a domino effect on follow-oncontracts for the project.

More successful on projects that arestraightforward and have a high level ofpredictability.

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Pros ConsDesign E&O not responsibility of owner Owner has little or no input into design

Initial cost is within budget Owner is at greater risk for owner initiated changes

Other than owner, changes to initial design criteria is little to no

risk

Reduced opportunities for smaller, local construction firms

Single point of contact between client and contractor Higher procurement costs

If clients requirement is accurately specified, certainty of finalproject and cost would be then less when compared with otherprocurement methods

Elimination of traditional checks and balances. Designer is nolonger agencys advocate. Quality may be subordinated by cost orschedule considerations.

Design and construction is overlapped which results in improvedcommunications being establish between contractor and client.These two characteristics enable shorter, overall project periodsto be achieved and project management efficiency to be

improved

The absence of a bill of quantity makes the valuation of variationsextremely difficult and restricts the freedom of clients to makechanges to the design

Single point responsibility for design and construction Less agency control over final design

Accelerated project delivery by:- Fast-tracking design and construction- Close coordination between designer and contractor- Early contractor involvement to enhance constructability ofplans

The clients control over the aspect of design and aesthetics ofthe building is less when compared with other methods ofprocurement

Cost containment by minimizing owners exposure to design

errors and omissions

Fewer competitors and increased risk may result in higher initial

costsEarlier schedule and cost certainty Accelerated construction can potentially overextend the

workforce.

Innovation and quality improvements through:- Alternative designs and construction methods suited to thecontractors capabilities- Flexibility in the selection of design, materials, andconstruction methods

Traditional funding may not support fast-tracking construction ormay require accelerated cash flow.

The clients brief is often ambiguous and does not convey exactlywhat he is proposing to the contractor.

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