To D&C or not to D&C, that is the question

The business case has been made, project been authorized by management and you’re busy planning following establishment of scope. The plan is progressing well and you’ve now come to what procurement model to use. A team member suggests that maybe a design and construct approach would be the best method to deliver the built product as it passes a whole bunch of risk onto others with potential for benefit in cost and time. But is it really this simple?

Why Design & Construct?
D&C contracts are not new and over recent years have grown rapidly in popularity mainly due to the efficiency based upon practical experience of the contractor leading to savings in both construction cost and project duration. Research by Sanvido and Konchar [1] of Pennsylvania State University found that design–build projects are delivered 33.5% faster than projects that are designed and built under separate contracts (design-bid-build). They also showed that design–build projects are constructed 12% faster and have a unit cost that is 6.1% lower than design-bid-build projects.

D&C vs Traditional contract
In a D&C procurement model the client develops a concept (which might be the basis of a development approval), and issues this along with any specifications and finishing schedules for a tender inclusive of detailed design of architectural, structural, mechanical, hydraulic and general code compliance. The successful tenderer is then responsible for creating the construction package and seeking authority approvals before executing the works onsite.

In comparison, the traditional method creates a distinct hierarchy with the client engaging all design consultants and has managed the development of a detailed set of tender documents which stipulate every aspect of the project allowing for complete control of quality, and minimization of design change. The key disadvantages are the lack of practical experience of those carrying out the design works, possible errors/discrepancies in the design docs that might lead to variations, and the high cost of tendering which adds to the project sum.

The Pros & Cons
Proponents of the D&C model see three key benefits to the client:

A major shift in risk from the owner to contractor with the latter assuming responsibility for developing project documentation in accordance with the tender requirements;
A potentially cheaper solution with design based upon the contractors experience of cost effective detail in both materials and buildability;
Total visibility of the project budget earlier in the life-cycle with risk of cost overruns mostly with the Contractor;
In addition, the D&C model can also mitigate the often difficult client-architect-builder dynamic which can lead to conflict over scope and detail which is time consuming and costly with a fee per service consultant.

But what are downside risks to D&C? There a number of issues to consider not the least of which is what level of experience your organisation possesses in the field, the type of project, and the experience of the tenderers. It is particularly important to recognize the following:

The tenderer is responsible for a greater portion of the overall project works, hence the tender period will need to be longer than a traditional method to allow for development of assumptions and responding to RFI’s. However it is noted that D&C shows an overall improvement in project time including this phase;
A D&C bid is always going to be harder to evaluate as the client will struggle to be certain that the tenderers are actually bidding on the same design and analysis will take more time;
The tenderer is now making decisions on design issues with impact on costs due to a profit motive. It is likely that their consultants will be briefed as how to meet specifications without pushing the boundaries;
Because the final design will be weighted to the contractors view of the final solution, quality when measured to the concept and specifications will be harder to manage.

The bottom line
In summary, when making the early procurement decision its important to understand that the D&C approach is well suited to clients who are experienced in the area and can confidently manage a contractor through use of an appropriate contract without the intervention of external experts. This means before you make a decision to adopt a D&C strategy you need to be critically aware of your organisations resources and level of competency. In particular projects which display a highly complex nature, or an uncommon level of technical requirements, or have a high value of aesthetics are probably best executed through a traditional approach.

Like to know more..?

EQ House has a team of industry specialists supporting our partner clients with all aspects of design, specification and construction of Equipment Houses (E-Houses), switchrooms and communications buildings for utilities, mining and oil & gas industries. For more information on how we can help you, please email solutions@eq-house.com or visit http://www.eq-house.com/