A design-build contractor is often in the best position to manage a project, so it should be assigned as much of the associated risk as possible.
Brian Adams, Director of Design-Build Projects for Tesco Controls, Inc., wrote an article for the February 2019 issue of Water Finance Management magazine titled Reducing Risk with Design-Build. Here’s a summary, click on the link above for the full text.
Adams writes that cost, schedule and performance risks need to be managed efficiently on all capital projects:
The best way to do this is often by transferring these risks from the facility or plant owner to a design-build contractor. This risk transference is a key element of the Design-Build (D-B) project methodology.
Historically, many owners and agencies have used the Design-Bid-Build (D-B-B) model to execute capital projects. With D-B-B, an owner engages a design firm or consultant to design the project and create bid documents. Bids are then solicited from contractors to execute all or part of the project. Neither party is contractually obligated to provide a fully functioning facility, leaving all performance risk with the owner.
By contrast, with D-B the contractor assumes design, schedule, cost and performance risks. The D-B contractor is contractually obligated to design and build a fully functioning facility while adhering to cost and schedule constraints.
Reducing Risk
A D-B contractor is often best positioned to manage project cost, schedule and performance risk on capital projects for a number of reasons.
First, an owner and any contracted design consultants typically execute a small number of capital projects per year. Most owners therefore don’t have a dedicated capital project team, so with D-B-B they instead rely on their employees to manage projects, who often have other more pressing duties.
By contrast, an experienced D-B contractor will likely execute multiple capital projects every year, and this experience allows it to employ specialists to manage and execute projects.
Second, a design consultant employed by the owner doesn’t generally procure capital equipment and components as part of their project responsibility, so its relationships with the vendors selling these items are not well developed.
On the other hand, a D-B contractor regularly procures equipment and typically has very close relationships with a number of key vendors, giving it leverage in terms of delivery, pricing and warranties.
Third, without an in-house fabrication or panel shop dedicated to creating equipment for capital projects, owners are forced to rely on outside contractors and vendors for these services with D-B-B. In contrast, the D-B contractor’s team will include well-vetted fabricators, specialists and vendors.
The Last Should be First
The control system integration tasks performed by an I&C contractor are the last to be executed in a capital project, so it’s where problems originating in initial design and other earlier project phases are often found.
For example, a model or brand of equipment specified by the designer may be inappropriate for the planned control strategy. With the D-B-B model, this type of error often won’t be discovered until late in the project, long after the equipment has been procured and installed.
A seasoned I&C contractor has probably experienced this type of problem before and knows how to deal with it proactively in the design stage. However, this experience can only be brought to bear with the D-B model. With this model, the contractor has assumed risk and is responsible for the design, and hence will use all resources at its disposal to identify these types of mistakes early on.
The three specific reasons in favor of the D-B model identified above are also especially relevant to the I&C portion of the project.
Experience and Team: A carefully selected I&C contractor will typically execute multiple water/wastewater projects every year using dedicated project teams.
This allows its dedicated project personnel to manage projects proactively by working in close cooperation with the owner and other entities to reduce project risk, starting at the beginning of the project and continuing on through completion.
Procurement: The I&C contractor will have very close relationships with several key vendors. Although each water/wastewater project is unique, many share common components, allowing the contractor to develop deep relationships with vendors.
Fabrication and Schedule: Some I&C contractors have in-house fabrication and assembly capabilities, allowing them to manage delivery risk for these critical components.
An I&C contractor with the appropriate UL extensions can fabricate and assemble power distribution panels in their own shop, instead of relying on the vendor to provide completely assembled units.
Adams summarizes:
Most facility and plant owners in the water/wastewater industry don’t have extensive in-house capabilities for managing capital projects and reducing associated risks. Engaging the right contractor within the D-B project methodology will reduce risk by providing better management of the overall project.
Author
Director of Design-Build Projects