Advantages and disadvantages of design-build contracts

Highly specialized high-technology, heavy industrial and manufacturing-process projects may effectively dictate the use of the design-build approach, due to the absence of any available class of consultant to provide the essential design. In such cases, owners will have little alternative but to buy the contractor's design and product in a turnkey or design-build form. Even in relatively conventional construction projects, owners often find themselves under commercial and sales pressure, such as promises of lower cost or greater speed of construction, to use the design-build approach, leaving the design to the contractor. What follows are the principle advantages of design-build. Since the design will be prepared by the person who will also be responsible for construction, the design can be expected to take full account of access and construction problems, and the particular way in which the contractor plans to carry out the work. In principle, therefore, such a design should offer both savings in cost and speedier construction. Savings may be offered on the professional side, since the preparation of a detailed design will no longer be carried out by the owner's consultants or other advisers. Also, owners without adequate technical resources or manpower, whether in the form of consultants or their own in-house technical departments, may find such contracts attractive. Design-build contracts virtually dictate a cost-plus or lump-sum approach to pricing, since it would be commercially unwise for an owner to accept a unit price contract in a case where the original estimated contract quantities have been provided by the contractor himself. In such a case, there would be virtually no certainty or safeguard as to their accuracy, unlike a conventional contract situation. As a consequence, most design-build arrangements will tend to be lump sum in nature, with the lump-sum feature meaning that they will usually offer greater certainty as to the final cost. Payment by fixed installments at certain stages, rather than by evaluation, may be justifiably insisted upon in lump-sum contract arrangements. In the event of a post-completion failure of the project, the owner will not be concerned about whether the failure is due to the design on the one hand or defective work or materials on the other. In conventional contracts, inadequacy of the design will afford a defence to the contractor, and even against the professional designer it would be necessary to prove negligence or fault, not the mere fact of failure of the design. It should be pointed out. however, that very few design-build contractors in fact offer a satisfactory unqualified design guarantee. The favorite express qualification is to reduce it to a 'professional negligence' level. In the event of a post-construction failure of the project, the financial resources of a design-build contractor available to meet the owner's claim will, in many cases, be greater than those of a professional individual or firm. Major disadvantages of design-build include the following: there can be little or no check on the reasonableness of the price; if a detailed check of the design and specification is attempted, the basic savings in cost by way of reduced fees will not be realized. As well, where it has proved possible to make a comparison of conventional and design-build prices, there is little evidence that design-build contracts designed in light of the contractor's proposed construction methods have in fact produced savings in cost to the owner, though there is considerable evidence that the speed of construction may be superior in these types of contracts. Design/build contracts must be very carefully drafted if ultimate certainty of the lump-sum price is to be achieved. And if the owner wishes to use design-build contracts under competitive tendering procedures, the cost of tendering is enormously increased since all contractors will have to engage design or consulting personnel to prepare and submit competing designs, and the design costs of the unsuccessful tenderer will, in the long-term, need to be recoverable in the prices of their successful tenders. Another disadvantage is that satisfactory standard forms of contract for design-build contracts are not readily available. Also, substantial loss of control by the owner inevitably takes place during construction. Even in a case where a consultant is engaged to supervise the project independently of the design-build contractor, it will be extremely hard for him to assess claims for variations or interim payment, or for disruption and extensions of time, or to identify and reject defective work or materials or to administer any owner's termination clause based upon defective work or delay. Finally, satisfactory long-term contractual protection with regard to the design, suitability and performance of the work is rarely if ever offered by design-build contractors, and satisfactory bonding or insurance of such an obligation is likely to be either commercially unobtainable or prohibitively expensive.