Bonding Design-Build Projects - Design-Build for Water and Wastewater Projects - page 146

STRATEGIES FOR ALLOCATING RISK
FOR DESIGN-BUILD PROJECTS
There are a number of steps that an owner and DB contractor can employ to manage risks
and create a positive environment for surety bonding for a DB project. These are high-
lighted in Table 11-2.
Reasonable risk allocation provisions are important for any construction undertak-
ing, and DB contracting is no exception. Given the enhanced warranties and performance
guarantees often associated with design-build contracts, consideration of appropriate risk
allocation takes on added significance. Risk can be tailored through a number of contrac-
tual approaches, including waivers of consequential damages, waivers of subrogation, and
differing site conditions clauses. These are standard contract provisions found in most, if
not all, industry forms, and sureties evaluate these closely when considering bonding for
a project.
Doing business with people who are competent and have performed well in the past
in a DB setting is vital to the success of the project. Owners are encouraged to carefully
evaluate proposed DB contractors through the use of carefully prepared RFQ and RFP
documents. Owners must carefully articulate their program goals. This is all the more
important in a DB project, because the owner will not have a complete design prepared
by an independent engineering firm to serve as the project scope. Owners can choose
to provide limited design documents (sometimes known as bridging documents) to the
design-builder, and this is decided on a case-by-case basis; but it is critical for owners to
carefully examine their minimum requirements and communicate them clearly to the
design-builder. Again, sureties review these documents and approaches when assessing
the risk on the project.
Setting forth realistic performance and schedule goals is critical to project success.
Unrealistic goals result in disappointed expectations, which in turn can lead to costly
disputes. It is in all the parties' interests to carefully examine what they can reasonably
achieve in the way of performance and schedule commitments.
Table 11-2. Traits of DB projects that are positive influences for surety bonding
Cooperative exchange of information and concerns by all involved parties
Fair and balanced contract terms and risk
Fair and balanced bond terms and risk
Inclusion or exclusion of design liability from the bond
Adequate insurance with particular emphasis on coverages for design-related risks
Thorough prequalification of all major trades, including mechanical and electrical, design
professionals, and structural
Clearly defined project goals
Reasonable risk allocation provisions (e.g., waiver of consequential damages, waivers of
subrogation, limitations of liability, and liquidated damages)
Realistic performance goals
Realistic work schedule