Water Design-Build Council Blog

As discussed in the previous blog, the underlying principle of allocating and managing risk in projects using CMAR or design-build delivery methods is to embark upon a collaborative process between the owner and construction professionals with initial discussions on how to allocate specific risks to the party best positioned to manage and assume the risk. These decisions ultimately end up in the contract between the owner and construction professional.

As part of the initial discussions when formulating a contract, the following additional areas are highlighted for your attention. In addition, WDBC’s 2018 education program now includes a specific module on contracts which also addresses the elements of risk.

The underlying principle of allocating and managing risk in projects using CMAR or design-build delivery methods is to embark upon a collaborative process between the owner and construction professionals with initial discussions on how to allocate specific risks to the party best positioned to manage and assume the risk. Chapter 3 of the WDBC Water and Wastewater Design-Build Handbook, Fourth Edition, Apportioning and Managing Project Risk, is an excellent resource on the subject of risk in collaborative delivery projects. However, the purpose of providing this more specific commentary is to share some of the risk allocating scenarios observed during the contractual process.

For any business or organization (public or private) to be successful, risks must be proactively evaluated and addressed with mitigation plans. Risks, by their very nature, can sometimes produce undesirable consequences.

As we observe the growth of design-build as a project delivery method in the municipal water market, I am reminded that our industry was a late adopter of collaborative delivery. In those early days of delivery method evaluation, some of us would point to the success achieved in the industrial markets using design-build as a reason to consider “alternative project delivery” in the design-bid-build world of water. But what is the reality of the industrial design-build market? 

One of the benefits of collaborative project delivery is that it allows owners to transfer risks to the design-builder that they would normally have to retain in a standard design-bid-build project delivery framework; however, owners should resist the temptation to divest themselves of all project risk and transfer everything to the design-builder.

Rather, owners should carefully weigh the cost/benefit of risk transference and develop a project risk allocation strategy.

A major advantage for utility and agency owners who chooses a design-build procurement process is the flexibility to optimize overall project risk to reduce cost and schedule. In contrast with design-bid-build procurement, owners are limited by the contracting approach and regulations that separate responsibilities for design and construction, and do not value overall performance.

In Engineering News-Record's March 30 Editorial on “Covering Risks in Design-Build” delivery, a representative of the Association of General Contractors posted the question as to whether “design-build projects were introducing industry contractors to risks for which they are unprepared?” While AGC’s statements are directed to those in the mechanical, electrical, and plumbing industries – they can seriously misconstrue and/or misinterpret the successful achievements of allocating risks in water design-build projects contracts. 

As I reflect on this year's DBIA conference, I was encouraged by the dialogue between owners and practitioners during the General Session “Finding Common Ground Through Best Practices.” The open and candid discussion centered heavily on the key role owner's advisors (OA) and owner's engineers (OE) play during the life cycle of the project, from procurement planning through delivery and startup.