Design-Build Contract Risk Allocation - Design-Build for Water and Wastewater Projects - page 109

projects is balancing the owner's need for a final design that will satisfy the requirements
for the budget with the design-builder's need to ensure that the project will not experi-
ence significant scope growth and jeopardize its ability to construct the project for the
contract price without seeking relief from the owner.
To this end, it is important to recognize that there are variations of the DB delivery
model that offer an owner of a water or wastewater treatment plant different levels of
control and different points in the procurement process to establish cost certainty. For
example, when an owner is clear on the design preference and wants cost certainty sooner
rather than later, the owner can employ a prescriptive-based DB model. Under this model,
an owner issues a request for proposal that includes a 20 to 30 percent complete baseline
design as reflected in preliminary design drawings. The DB teams then provide lump-
sum cost proposals to deliver the plant based on the preliminary design information.
While prescriptive-based DB contracting allows the owner to obtain competitive
prices and shortens the project's duration, a major disadvantage for the owner is the loss
of control of specific design elements. From the design-builder's perspective, the design-
builder has to walk a fine line between satisfying the owner's project criteria, while keep-
ing its price as low as possible to beat its competition.
Progressive DB contracting is another variation of the DB delivery model that incor-
porates certain safeguards into the DB process to eliminate (or at least mitigate) some
of the aforementioned concerns associated with prescriptive-based DB contracting. A
Request for Proposals is released with a reduced initial design definition. The DB team
is selected based primarily on qualifications. Once selected, the DB team further refines
the design to a higher level of definition after selection and submits a guaranteed maxi-
mum price (GMP) or stipulated sum during the design phase to the owner for approval.
Progressive DB allows the owner to maintain a higher level of control over the project and
conduct a relatively simple and inexpensive qualifications-based procurement process.
The benefit to the design-builder (which is also a benefit to the owner) is that a more accu-
rate price can be developed as the design progresses with a much more accurate validation
based on the greater definition of the project.
Progressive DB contracting typically requires a two-step contracting process. The
first step is for the owner to enter into a preliminary contract with the selected design-
builder. Central to this contract is the process whereby the design-builder advances the
preliminary design and provides cost estimates along the way. Both the owner and design-
builder communicate closely and frequently throughout the design evolution and pricing
exercise. The first step culminates in the submission of a proposal from the design-builder.
The proposal includes, among other things, the basis of design, which includes drawings
and specifications incorporating the owner's program criteria; assumptions and qualifica-
tions the design-builder has made with respect to design components, quantities, and per-
formance conditions; the GMP (or a stipulated price) by which the DB team will complete
the design and construct the plant; and a project schedule providing a detailed schedule
for completing various activities and achieving final acceptance.
The owner and design-builder then meet to discuss and refine, if necessary, the pro-
posal. If the owner and design-builder reach agreement on the proposal, the parties exe-
cute a final agreement for the completion of the design and construction of the plant. If
the parties cannot reach agreement on the proposal, the owner takes ownership of the
design that was developed during the preliminary phase of the project and is free to seek