That design/build projects account for a growing percentage of major construction projects is a fact recognized by owners and managers of contracting companies. The Design-Build Institute of America estimates 40 percent of today’s construction projects take advantage of the design/build format.
“The advantages of design/build-—to both owners and practitioners—are by now well known and well documented,” said Walker Lee Evey, president of the Design-Build Institute of America (DBIA). “Studies by educational institutions, U.S. government agencies and international researchers have consistently shown that design/build projects are typically lower in cost and faster in both construction time and total program time.”
Owners of electrical projects have long taken advantage of the benefits design/build offers.
The most recent ELECTRICAL CONTRACTOR industry profile study found 43 percent of the revenues of contractors participating came from design/build or design/assist with most from the design/build category. And the magazine’s 2006 study of the evolving role of design/build found 79 percent of survey respondents work on a design/build-design/assist basis and that 37 percent of larger contractors work primarily on a design/build-design/assist basis.
Electrical and datacom work for large commercial and industrial projects routinely use the design/build format, but less often is there news of design/build projects for outside infrastructure, such as power line and underground distribution.
Indeed, electric utilities have been slower to turn to design/build than other segments of the industry, but contractors who specialize in infrastructure work say that is changing, and opportunities appear to be growing for firms with design/build capabilities.
The design/build approach to construction is gaining popularity with shareholder-owned electric companies, said Greg Obenchain, manager of distribution operations and standards for the Edison Electric Institute (EEI).
“We have no statistics to document the number of firms that are using design/build, and that’s not the type of information we track,” Obenchain said. “However, from involvement in the industry and anecdotal information, it is evident that this is a trend. The first time I heard of a design/build project was about 10 years ago, and the number of design/build projects that I learn about seems to have increased every year since. In addition, it seems that more and more contracting companies are offering design/build services.”
Electric utility design/build projects now include transmission and distribution construction, building power-generation facilities and, recently, the construction of wind farms.
Design/build—often referred to in the utility market as engineer-procure-construct (EPC)—offers the same benefits to utilities as to commercial and industrial project owners by executing a single contract with one entity for all design, engineering and construction services. Because this single contract results in a single source of responsibility, much of the design and performance risk transfers from the owner to the design/builder.
North Houston Pole Line and PAR Electrical Contractors Inc., both Quanta Services companies that are active in outside utility construction, have incorporated design/build into their capabilities.
Duke Austin, president of utility contractor North Houston Pole Line Corp., said his company has been involved in design/build projects for about 10 years, and that the number of such projects his company performs for power utilities is increasing.
While design/build has not been as prevalent for outside electrical infrastructure work as it is for inside commercial and industrial projects, Austin said that is changing.
“The electrical utility industry is moving toward design/build as utilities downsize, including reductions in engineering staffs,” said Austin. “For contractors who are prepared to step in and help through the design/build process, there definitely are opportunities.”
For North Houston Pole Line, greater involvement in design/build has been an evolutionary process as the company adapted to fill changing needs of its clients.
“The larger players in the industry recognize the benefits of design/build,” Austin said. “The design/build process allows the constructability of the job to be analyzed before the prints are finalized and reduces the change orders in the field. This will also reduce the overall cost to the client.”
For contractors, the first step in the evolutionary process may come when a client asks the contractor to provide engineering services.
“Utilities tend to come to the contracting companies who have served them well in the past,” Austin said. “So when a company asked us to provide engineering as well as construction, we recognized the opportunity and took steps to be able to provide that service, also.”
Austin believes the EPC arrangement will become the normal course of business for large transmission and distribution projects.
“Owners,” he said, “have less full-time staff to manage the multiple disciplines of a project and want one point of contact to do that for them.”
Austin said the key to success in implementing the design/build process is for the owner and contractor to be on the same page.
“Conflicts can be the result when this doesn’t happen,” Austin said. “Usually, this primarily is caused by lack of communication among parties involved. From the project owner’s perspective, contractors should be selected early in the process and be made a part of the whole process.”
Design/build projects are nothing new for PAR Electrical Contractors Inc., said Tom Shiflett, president. The company has been doing design/build for 40 years. However, the number of design/build projects has increased significantly in recent years.
“In the past, electrical utilities self-performed many of the construction tasks, including project management,” Shiflett said. “The business model for most power companies was, and still is, a vertically integrated organization—a company that does most of the work itself and has employees and resources necessary to do so. However, many of the utilities today have been forced to lower operating costs while minimizing rate increases to the power consumer. That has prompted utilities to look at their internal cost structure and look at ways to reduce costs.”
These market pressures have forced utilities to reduce staff and look outside for national contractors that provide a cost-effective alternative for the required construction activities. The design/build methodology allows the utility to leverage the expertise of the contractor and pass on certain risks and costs.
“Design/build is a different approach to transmission and distribution construction, and its success depends on how each party executes the project,” Shiflett said. “Keep in mind, there are various degrees of project scope within the broad design/build category. Project scope can range from engineering and construction with material procurement to procure to construct, which has a greater degree of risk to the contractor. Getting the best combination for a project is a factor, and to do that requires good working relationships among parties involved. As a contractor, working in a collaborative manner with customers to achieve the best combination for a project is a win-win for both parties.”
It also is important to understand that some transmission and distribution projects are better suited to design/build than others. Jobs without the need to acquire large amounts of right-of-way can better use design/build than those that include right-of-way requirements, Shiflett said. A utility can exercise the power of eminent domain to obtain right-of-way, but the variability in this process can lead to increased costs.
Advantages and disadvantages of design/build
“The advantage of design/build for contractors is that it allows more control of schedule and leveraging of personnel and equipment resources in a more efficient manner. The downside is that the contractor takes on a significantly larger portion of the risk. Subsequently, those risks must be accounted for in the overall cost of the project through careful pricing that allows for contingencies,” Shiflett said.
From a contractor’s perspective, a sharing of the risk would benefit both parties by not allowing all the risk to be assumed by one party. Several cost factors can be influenced by the utility, therefore, working in concert with the contractor could avert costs that neither party should incur.
However, a contractor that learns to control risks and effectively manage the design/build process can turn the experience gained into opportunity.
“It enables us,” Shiflett said, “to develop the expertise from start to finish on a design/build basis. We can, in turn, leverage that expertise over multiple projects, increasing our revenue base. Doing what we do well allows us to maximize efficiencies in our overall operations, and that leads to greater growth.” EC
GRIFFIN, a construction and tools writer from Oklahoma City, can be reached at 405.748.5256 or firstname.lastname@example.org.