The State of Design/Build

By Aug 15, 2003




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Some say design/build practices date back 5,000 years, when they were used in Mesopotamia and to construct the Great Pyramids. Though design/build’s roots do go back a ways, linking today’s contractors and the pharaohs’ master builders is entertaining but not much help. Today, we’d consider King Nebuchadnezzar’s Hanging Gardens of Babylon a public-sector project. Would he have been forced to accept the lowest bid for one of the Seven Wonders of World?

The term “master builder” has been updated to “design/builder,” which the Design/Build Institute of America (DBIA) calls a firm with in-house design and construction resources, or a joint venture between designer and contractor, a contractor-led team with designer as subcontractor, or a designer-led team with builder as sub.

More relevant to the master-builder comparison is design/build’s bedrock principle of single-source responsibility, where the client deals with one person on a project, not a general contractor, architect, engineer and subcontractors. Even more important, contractors who balk at design/build may soon find themselves in the minority and at a competitive disadvantage. The American Institute of Architects (AIA) thinks design/build will constitute more than 50 percent of construction by 2010, and an Engineering News-Record report found use grew 172 percent from 1986 to 1992. The DBIA said U.S. design/build projects increased from 5 percent in 1985 to 33 percent by 1999, and, like the AIA, believes they will soon overtake low-bid construction.

Competition will come from designers, too, as they seek market share. Architect Martin Sell wrote that the race is on for design/build leadership and laments contractors have taken control. An AIA newsletter claims 40 percent of all new United States construction uses design/build with architects heading only a quarter of those projects, and Sell quoted Ralph Johnson of the Associated General Contractors of America, who said his group’s “position on design/build has been that the designer is part of the builder’s team, with the contractor leading the way.”

The big drawback

The Engineering News-Record’s figures include public works where design/bid/build contracts are the norm. Though nearly all states allow some type of design/build, it is patchwork legislation and the DBIA sees procurement laws as the biggest hindrance to growth. Since states often grant design contracts based on quality but require low-bid construction, design/build firms are weakened.

Public works remains a thorny, contentious issue. For example, Ohio, one of five states that mandates multiple-prime contracts, was a leader in public-works design/build for certain projects, especially roadwork, and introduced legislation in 2001 that gave communities a design/build choice based on their charter status and population. It failed. Subcontractor groups were opposed, claiming it gave too much power to general contractors. This year, a similar bill had several committee hearings. The DBIA claimed it had wide legislative support, but the bill was not enacted in the first legislative session, though there are plans to reintroduce it.

The Cleveland Plain-Dealer reported in July 2002 that while design/build “generally saved time in completing projects, it often did not save money and did not work well on complex projects.” Critics believe construction snags offset cost-savings, and “smaller and medium-sized contractors say the process favors large firms and limits competition.”

Nonetheless, legislatures are still busy. In its March newsletter, the DBIA reported that in the first two months of 2003, 18 states introduced more than 40 design/build bills. With this pending legislation, the next few years could be a turning point—especially as U.S. industrial might wanes.

Baltimore’s Gill-Simpson Inc. does nearly all forms of electrical construction, but Michael Gill said his 71-year-old firm “really grew up as an industrial electrical contractor.”

“And it’s just recently because of the decline of America’s industrial base,” Gill said, “at least in capital spending right now, a lot of people like us are being forced out into the public sector.”

Single-source responsibility

Design/build’s advantages hinge on single-source responsibility, which makes the design/builder wholly accountable for a project. DBIA spokesman Richard Belle said design/build eliminates adversarial relationships, making designer and contractor teammates on a fully integrated, “nonsequential” project. There’s no bid process, no lag between the design phase and the contract award. Ideally, the design/builder and client negotiate the contract in an atmosphere of mutual trust and cooperation. In this way, the project can be fast-tracked. Construction essentially starts in the design phase.

Problems can also be anticipated and avoided much earlier, and by working more closely together, Belle said the contractor and designer end up completing a higher-quality project with closer adherence to schedule and budget. Single-source responsibility lessens accusations of who’s accountable for construction difficulties and delays.

“The risk, which is a football thrown back and forth, of design/bid/build, is who was responsible?” Belle said.

Confidence, trust, reputation and cooperation are design/build keywords. Jim Mackey, owner of Seattle’s NetVersant Washington Inc., puts confidence first. NetVersant had a 2002 sales volume of $60 million, and Mackey estimates design/build makes up 35 percent of his business. In 1971, when he graduated from college, design/build work was virtually unheard of, “not like today where electrical contractors are producing plans and specifications, all of the engineering.”

But the second contractor he worked for specialized in design/build, and in 1979 Mackey started his first company, Evergreen Technologies, with design/build as a focus. Two years later, he completed his first design/build project. His business grew, in large part because of design/build commercial and industrial work. His clients’ trust is important, but the design/build relationship is complex.

“There are so many things. Confidence in our ability to do the job. Being able to relate to the client and find out what their needs are. Instead of telling them, listening to them,” Mackey said. “I think the biggest issue is that if you can make your clients’ problems your No. 1 priority, then you’re satisfying those clients’ needs.”

Mackey said one of the major problems is to “over-promise and under-deliver.” Getting the project in on time and on budget is essential, as is making sure you have informed clients on observance to the NEC and local codes; they may not understand how codes affect design.

“If you promise them the diamond ring,” Mackey said, “you’d better give them the diamond ring.”

Your reputation precedes you

For Gill-Simpson’s Michael Gill, a good name is the most important factor. An owner who needs a facility up and running ASAP will seek contractors with first-class track records.

“That client is not going to come to you unless you have a reputation,” said Gill, whose Maryland firm has two offices, employs 290 and had it largest year recently with $47 million in volume. He’s third generation in a company that counts design/build as a quarter of its work, a sector that Gill said has “increased drastically in the past five to 10 years.”

Like Mackey, Gill also sees relating to clients as crucial. Design/build projects are more fluid than traditional low-bid jobs. The client is part of the team and Gill said short-circuited communications are disastrous.

“That’s a real pitfall and if an argument ensues then the whole trust in the relationship will break down,” Gill said, “and the real key there is for the design/build contractor to have somebody with many years’ experience to a point where he can see a problem coming and can prompt the owner and say, ‘Hey, I see an argument coming, do you think you’re going to need this in your building?’ And the owner says, ‘Oh, gosh, yeah. I forgot that.’”

Gill-Simpson’s experience has given them a “database” of projects that they use for fast, fairly accurate estimates. The owner needn’t consult an engineering firm, get drawings and then bids, which could take months.

“The contractor already has all this history, that’s what he does day in and day out,” Gill said. “He can tell the owner in three days, ‘Hey, you’re looking at $4 million here.’”

Gill contends that most good electrical contractors have been doing design/build since the 1970s. Owners often gave rudimentary instructions and let the electrical contractor take it from there.

“It’s just recently that the moniker of design/build has been attached to it, Gill said. “The owner now sometimes sees a more cost-efficient way to go to the contractor and let them line up the design resources, whether he has it in house or has to go out of house. But design/build was essentially always there. Because an electrical contractor, he’s on the ground floor. An engineer will say this is what we’re looking to do, and the contractor will bring it out. But now it really is a science in itself.”

The general view

Shawn McCadden, owner of Custom Contracting Inc. in Arlington, Mass., is also co-founder of the Residential Design/Build Institute. In a recent article, “Educating The Client,” McCadden wrote, “Selling design/build isn’t easy, at least not yet.” The irony is McCadden was a tough sell at first. He thought nobody in his marketplace would give up the traditional three-bid process.

“And the person who was talking to me said, ‘Well, OK, but I’m already doing it with six other contractors.’ I said, ‘Wait a minute, if somebody else is doing it, sure as heck I can do it. Tell me more about this,’” McCadden said.

There are many competitors in his market now, and McCadden has found design/build has a certain demographic. More affluent parts of the country with better-educated consumers have embraced it, but McCadden said it’s been slow to catch on in rural, less affluent areas.

McCadden realizes design/build isn’t what some consumers consider normal. A contractor needs to “qualify” a client first. They must explain it’s not always the cheapest method, but can be the quickest because details can be worked out after the job has started. “Time is money” makes an attractive selling point.

McCadden, a remodeling contractor, uses a required margin on every project; it’s never increased because a client has more money. That doesn’t remove the “hassle factor,” or the client who needs baby-sitting or asks a million questions.

“If we choose to take that project, we are adding extra costs into that project to service them. Not because they’re a pain in the neck, but because it costs money to service them,” McCadden said.

The contractor’s contractor

McCadden said a design/build team coordinates specialties. He’s used the same electrical contractor for 13 years and looks to him as a resource.

“I don’t want the cheapest electrical contractor out there; what I’m looking for is one who knows what things cost, can deliver a good product and understands how to design the work,” he said. “If I bring him in to provide us with specifications and a quote as part of the design process, he already has that job. He’s not giving me info so I can bid it out to five other electricians.”

Trust and cooperation can fall apart, especially over disagreements on scope and budget. Clients can change the scope, to include more expensive items, but must understand that changes the budget.

When an electrician consults with the client and estimates $6,500 for lighting, McCadden said don’t come back in the middle of design, when it’s time to give real numbers, and say it’s going to be $9,500. He qualifies subcontractors to see if they have standard pricing and don’t make wild guesses. The contractor and sub should have an understanding of costs from the start.

“So, if he’s bidding work for me that can’t start for eight months, he has to give me his price now. Not say, ‘All my prices went up since I gave you that quote,’” McCadden said. “My thought is, he needs to incorporate that into his business plan. That’s something he should have anticipated.”

The future

Design/build is certain to increase in popularity, but its public-sector use will be a topic of debate for some time. Design/bid/build will always be around because of tradition and because it can and does work effectively. DBIA’s Richard Belle thinks some owners prefer an adversarial relationship; they can pit the designer against the contractor or subcontractors if they wish. It’s in their nature to see that as an advantage, and selling them on design/build is an exercise in futility. EC

FULMER, a Baltimore, Md.-based freelance writer, can be reached at [email protected].






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