In ancient times, “master builders” seamlessly combined design and construction, evident in iconic structures like the Egyptian pyramids and the Parthenon. However, the Industrial Revolution separated these roles, leading to inefficiencies in traditional design-bid-build contracts. Efforts to revive the master builder concept emerged in the 1970s, coinciding with early design-build contract publications by the Associated General Contractors of America.
The Design-Build Institute of America was established in 1993 to advocate for design-build project delivery. By the mid-late 1990s, changes in federal procurement laws allowed for the adoption of design-build for public projects. Construction management at-risk gained popularity in the 2000s. In 2007, ConsensusDocs published its first standard integrated project delivery contract documents. Despite significant growth in the 2010s, traditional design-build and construction management at-risk still lagged behind traditional design-bid-build in some studies, though progressive design-build expanded, especially in large transportation and water projects.
However, today, as more owners seek opportunities for earlier collaboration in projects to refine the design and meet budget requirements before finalizing their project prices, traditional design-build, progressive design-build, construction management at-risk, public-private partnerships and design-build-operate are becoming increasingly attractive.
Demand for these delivery agreements appears to be growing more rapidly than ever. Tight labor markets and project constraints have led to increased adoption of traditional design-build, according to a 2023 report from FMI and the Design-Build Institute of America. The report projects a 5.2% compound annual growth rate in design-build construction spending from 2022 to 2026, reaching over $405 billion by 2026. Design-build is projected to represent 47% of construction spending by 2026, with highway/street, educational and manufacturing segments leading in spending.
However, extending beyond traditional design-build, one particular sector – water and wastewater – has really stumped for the entire gamut of collaborative delivery methods. And with such a growing market for methods other than design-bid-build, it might be time to stop calling them “alternative,” suggests Mark Alpert, executive director at the Water Collaborative Delivery Association.
“The majority of the largest water and wastewater utilities in the United States use these delivery methods,” Alpert says. “And they each have their own decision process. Rather than default to design-bid-build on every project, now they consider all of these delivery methods, because they have had success. And success has owners talking to owners.”
One example Alpert notes is in Corpus Christi, Texas, where an owner is using design-build-operate procurement for a desalination facility that will be built near the Gulf of Mexico and will be a future source of water for the city. He believes that thanks to what he calls a “comfort zone” based on a growing list of case studies, the way owners solicit bids has changed.
“Ten years ago, my guess is [the city] would have said they would have advertised in the local paper, and maybe in Engineering News-Record and said ‘we’re going to have a bid coming out,’” says Alpert. “Well, now they have bids in RFPs and RFQs coming out for design-build and construction management at-risk. It’s a whole evolution.”
A quick glance at WCDA’s growing list of case studies and ongoing projects suggests that collaborative delivery is particularly popular in California, Texas, Georgia, Florida and Colorado. Alpert notes the Mid-Atlantic and Midwest are also becoming hot spots for collaborative delivery. One example he notes is a nearly $1 billion design-build effort to upgrade two wastewater treatment plants in St. Louis. One of the project members describes the project as “unique in both size and complexity,” which plays into some of the key talking points design-build advocates use when espousing the benefits of the delivery method. In a press release, the Metropolitan St. Louis Sewer District said it selected design-build to “save time on construction while also reducing risks of construction overruns.”
WCDA also says more than $30 billion have been spent on collaborative delivery projects in the past decade. The association, and other advocates for collaborative delivery, say it promotes better project outcomes through early engagement among all stakeholders, early evaluation of constructability and mitigation of supply chain risk.
Outside of the standard arguments for collaborative delivery, Alpert says it has also helped that industry publications from organizations like the Associated General Contractors of America and the American Society of Civil Engineers have communicated that alternative delivery methods like design-build are worth taking seriously and can result in positive outcomes for owners.
However, it’s important for owners to not rush into collaborative delivery without doing their homework. WCDA offers a plethora of resources, including the Water and Wastewater Collaborative Delivery Handbook and procurement guides for CMAR, PDB and fixed-price design build.
On the contractor side, ConsensusDocs’ package of traditional design-build standard contracts documents in its 400 series is compatible with progressive design-build and includes an option to use a two-phased approach, says Brian Perlberg, senior counsel for construction law and contracts at AGC and executive director and senior counsel for ConsensusDocs. The initial phase of the project, governed by ConsensusDocs 400, an Owner/Design-Build Preliminary Agreement, quickly brings a design-builder on board without locking in a price. Moving to the second phase, options include the ConsensusDocs 410 Design-Build Agreement (Cost of Work with a GMP) or ConsensusDocs 415 Design-Build Agreement (Lump Sum) agreements. The 410 document delays setting a guaranteed maximum price, while the 415 requires detailed design for a fixed price. Using only the 410 without the 400 is a single-phased approach, incompatible with progressive design-build.
For CMAR, the 500 series can be helpful. A ConsensusDocs 500 agreement between the owner and the construction manager stipulates the construction manager offers preconstruction services related to scheduling, budget and design. It can also issue subcontracts for fully designed portions of the project before the entire design is done. The series also includes the industry-first ConsensusDocs 541 Design Assist Addendum, which covers some modern considerations in projects, including constructability, value engineering and life cycle analysis. It also pairs nicely with lean construction tools.
In both design-build and CMAR, Perlberg notes that a shared savings clause can provide an incentive for the contractor to complete the project under the guaranteed maximum price. If actual costs come in under the GMP, the savings are shared between the owner and construction manager based on an agreed-upon formula. This clause incentivizes collaboration and cost control efforts since the construction manager shares in any savings achieved. It helps align the owner and construction manager’s interests in keeping costs low. ConsensusDocs guidelines include an optional shared savings clause that parties can incorporate into these agreements.
That said, while ConsensusDocs can accommodate collaborative delivery, AGC itself is “project delivery neutral,” and Perlberg says “progressive design build is not the panacea that is going to fix everything.” There are still some real risks involved, and WCDA acknowledges on its website that “no single delivery method is suitable for every project.” In the grand scheme of construction, progressive design-build is still relatively new, so there is some uncertainty around how often the “off-ramps,” or exit clauses in contracts, are utilized, says Perlberg. He says the threat of an owner taking a project to the off-ramp could potentially be used to terminate a design-builder prematurely in order to low bid out the remaining work and acquire their intellectual property, even though that may not actually save the owner money in the long run. However, experience with off-ramps are used will inform how these risks should be contractually addressed up front as well as addressed through project management.
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