Choosing a Construction Delivery Method

By Robert Mitchell,
Mitchell Associates Architects

This is the third in a series of articles being published in The NYSAFC Bugle about the design and construction of fire stations. The titles of the articles are:

Article 1. Defining the Size, Features and Preliminary Budget of Your Fire Station Project
Article 2. The Schematic Design and Estimate
Article 3. Choosing a Construction Delivery Method – Part 1
Article 4. Choosing a Construction Delivery Method – Part 2
Article 5. The Drawings and Specifications for Your Fire Station Project
Article 6. Bidding, Wickes Law and Prevailing Wages
Article 7. The Construction Phase

In article 1 we discussed how to create a program and budget that define the size, scope and reasonable budget for your new or renovated station. In article 2 we discussed how to develop schematic building and site plans to effectively and efficiently provide the spaces and relationships defined in the program. In this article we will discuss some of the different methods of construction, including:

Design-Bid-Build
Design-Build
Design-Build-Lease

In our next article (Choosing a Construction Delivery Method – Part 2) we will discuss:

CMA (Construction Manager Advisor)
CM (Construction Manager) at Risk

Point 1 – Under New York State Law, a building designer must be a licensed professional, typically an architect, although in some instances the design can be provided by an engineer.

Point 2 – Because the architect is a professional under New York State Law, you are not required to bid these services, or take the lowest price. The architect should be selected using a "qualification based selection process."

Point 3 – The New York State Education Department Division of Professions expects design professionals to protect the public interest. They are typically employed by the owner, not the contractor, developer, or any other entity. Employment by the contractor could compromise the architect’s normal responsibilities such as:

Making design decisions that are in the owner’s interest rather than in the contractor’s interest.
Rejecting non-conforming work and assuring that the proper materials and systems are used.
Approving or rejecting the design-builder’s applications for payment.
Resolving disputes between the owner and the contractor.
Determining the fair value of change orders.
Demanding that the contractor remove completed non-conforming work or to stop work.

Point 4 – The bidding laws of New York State Law require that for publicly funded construction, the "lowest responsible bidder" must be selected. This typically results in a "cheaper is better" mentality among the general contractors who are bidding the project, so there is the tendency to seek out the lowest cost sub-contractors in a given market. In strong markets, general contractors will be able to be selective about which projects to bid, but in lean times the desire for work usually forces the contractor to provide the lowest bid amount and therefore the low bidder of each trade is selected. This usually compromises the quality of construction and can threaten the viability of the general contractor. In the extreme, it can lead to serious disputes involving quality of the final product, or bankruptcy of a sub-contractor who is on the brink of insolvency, desperate for work.

Point 5 – A private entity typically is not bound by the bidding laws of New York state, and is not obligated to publicly bid construction work or take the lowest bid. If the fire company builds and owns the fire station, it may be exempt from the public bidding laws. If this is a consideration, seek legal advice from an attorney familiar with fire district and construction law.

Design-Bid-Build

The design-bid-build method is the most widely used and well-established project delivery method. This approach splits construction projects into two distinct phases: design and construction. During the design phase, the architect and engineers prepare detailed project drawings and specifications. Once project designs are complete, bids are accepted from contractors and construction occurs. During construction the architect acts as the owner’s agent to review the progress of the work and to issue site instructions, change orders, or other documentation necessary to the construction process. The architect is the agent of the owner, and has the responsibility to determine if the work conforms to the contract requirements and if it is of adequate quality. The architect has the right to reject non-conforming work.

Design-bid-build became popular as a reaction to the favoritism, corruption, and waste associated with major public projects in the 19th century, and remains the required procurement method of choice for public agencies.

Proponents of design-bid-build claim the following advantages:

Because the design team is completely independent of the contractor, it is able to protect the owner’s interests in a way that would be impossible if the architect was employed by the contractor.
Decision-making by the owner is improved by providing a range of potential options, maximizing owner control.
The design team prepares documents on which all general contractors place bids, resulting in an "even playing field" for all bidders. This form of bidding results in the lowest possible cost.
It identifies new potential contractors through advertising and open bidding.
It uses competition to improve the efficiency and quality for owners.

Opponents of design-bid-build claim the following disadvantages:

It may result in a more costly project that takes longer to build than with design-build.
Because the project is not bid until after it is completely designed the bids may come in above the budget. This may result in delays or additional costs related to redesign, or the embarrassment of having to go back to the voters for additional funds.
Since the contractor is brought to the team after the design is complete, there is little opportunity for input on effective alternates being presented.
Selecting the low bid makes it difficult to obtain a high quality result.

General Sequence of Project Steps for Design-Bid-Build Projects

Relationship Between the Parties for Design-Bid-Build Projects

Design-Build

Design-build is often thought of as a recently developed alternative to design-bid-build. It can also be compared to the "master builder" approach, a form of construction that has been in use for thousands of years. Under design-build, the owner contracts with a single entity to both design and construct a project. This entity is called a design-builder, not a builder or a contractor. Before inviting bids, the owner has documents prepared that describe the basic concept of the project, as opposed to a complete set of drawings and specifications of the final product. In the bidding phase, the owner typically evaluates bids from design-builders on the basis of what is perceived to be the best value, incorporating technical factors, such as qualifications and design quality, in addition to price. The winning design-builder, which can be a single firm, a consortium, or a joint venture, is responsible for completing the design and all construction at the contract’s fixed price. Although it is possible for an architect to be the leader of the design-build entity, generally a contractor is the leader who employs the architect.

Until 1979, the American Institute of Architects (AIA) Code of Ethics and Professional Conduct prohibited their members from providing construction services. However, today many architects in the United States and elsewhere aspire to provide integrated design and construction services and one approach towards this goal is design-build. The AIA has acknowledged that design-build is becoming one of the main approaches to construction.

Proponents of design-build claim the following advantages:

The design-build method can expedite project completion (and, therefore, reduce construction costs) when compared to the design-bid-build method. This advantage occurs, in part, because design-build allows construction to begin during the design phase.
Because the designer and contractor are members of the same entity, the owner does not get pulled into time-consuming and costly disputes and lawsuits that can occur between the two parties.
Design-build promotes innovative design and construction approaches by giving contractors more flexibility over design, materials, and construction methods.

Opponents of design-build claim the following disadvantages:

If the architect is employed by the design-builder its ability to compel the design-builder to build to a certain standard can be compromised.
Because the owner does not fully define the project upon entering into a contract, the owner gives up control over design and construction quality.
Because the designer and builder are on the same team, they share a financial incentive that can reduce quality to increase their profits.
Design-build does not make use of competitive bidding where prospective builders bid on the same design.
Criteria to select contractor becomes subjective and difficult to evaluate and to justify later.
The design and price selected arouses public suspicion, whether it is valid or not, and can lead to loss of public confidence.

Design-build is forbidden to be used by taxing authorities (fire districts, villages, cities, etc.) under New York State Law, in part because it does not guarantee that the lowest responsible bidder will be performing the work. This may not be the case for a fire company; however, you must seek legal counsel for advice as it applies to your own particular circumstances. Furthermore, as stated earlier, New York State Law forbids contractors to provide design services or come between the architect and owner. The architect must be employed by the owner.

General Sequence of Project Steps for Design-Build Projects

Relationship Between the Parties for Design-Build Projects

Design-Build-Lease

In an attempt to lower costs some districts (or municipalities) have explored having their fire station built through a design-build-lease arrangement. In this arrangement, either the design-builder or a third party is the owner and the district is a tenant.

Proponents of design-build-lease claim the following advantages:

The third party or design-builder will build a station avoiding paying prevailing wages and avoiding the multiple prime obligations of the Wicks Law.
The design-builder or third party, as owner, will hire the architect.
The district will lease the station for an agreed upon number of years.
At the end of the lease period, the district will acquire the station for an agreed upon amount.

Opponents of design-build-lease claim the following disadvantages:

It is possible that the New York State Comptroller’s Office may view this arrangement as an illegal attempt to avoid the Wickes Law and the payment of prevailing wages.
The architect is employed by, and accountable to, the design-builder, or third party, not to the fire district. This is not a violation of the Education Law, since the architect is working for the owner; however, the district would be better served if the architect worked for them.
Part of the appeal of this arrangement is the belief that the district will acquire the station at the end of the lease for a specific amount. If the amount is agreed to at the beginning, this is considered a contract sale, and would be considered a violation of the Wicks Law and prevailing wages. The alternative is that the station would be placed on the open market at the end of the lease, and the district would have to compete with other interested buyers.

NOTE: Under recent New York State Law, several state agencies – the Department of Environmental Conservation, Department of Transportation, Thruway Authority, Office of Parks, Recreation and Historic Preservation, and Bridge Authority – are authorized to use design-build, but only these agencies.

In this article we have explored various relationships between the owner, architect and contractor. In the next article we will examine the role of the construction manager and the clerk-of-the-works.

About the Author:
Robert Mitchell, AIA, is principal of Mitchell Associates Architects, a firm based in Voorheesville, N.Y. that focuses on public safety architecture. He was also a founding partner and a principal designer at Mitchell Ross Associates Architects, P.C. (MRA), and has 19 years experience designing fire stations. He can be reached via e-mail, at (518) 765-4571, or online.

Stop by the Mitchell Associates Architects booth (Exhibit Space #1423 in the Event Center) during FIRE 2013 and speak with Bob Mitchell about this series! Exhibits will be open June 13-15, 2013, at the Turning Stone Resort in Verona, N.Y.