The Design And Build Procurement Route Changes Construction Essay

ABSTRACT

Design and build procurement method is a delivery method in which the design and build contractor is contractually responsible for the design and construction. According to Konchar and Sanvido (1998), the design and build procurement system has been shown as a method of efficient delivery and has gained its popularity abroad. However it does not receive the same popularity in the Sri Lankan construct industry because the traditional procurement method has been widely adopted in the Sri Lankan construction industry. This study first conducts a literature review to identify the factor that affects the selection of the design and build procurement method in general and then it gives an overview of the Sri Lankan Construction industry.

In this research, the success of adopting Design and Build procurement method is investigated through analyzing the feedback of project stakeholders in the Construction industry in Sri Lanka by questionnaires. In this study, the surveyed parties include professional from consulting firms and construction firms (contractors) who has handle both private and public sector projects in Sri Lanka. Furthermore, the popularity of the procurement method adopted in Sri Lanka is discussed the gain a better understanding of trends of the construction industry. The characteristics of different Design and Build procurement methods are also introduced and discussed.

Apart from the above objective, this research also provides information for the stakeholders in the construction industry for reviewing and selecting an appropriate procurement method for the up-coming projects respectively.

Keywords: Design and Build, Procurement, Key success factors

ACKNOWLEDGEMENT

This research would not have been possible without the support and assistance and encouragement of many people. I wish to express my sincere appreciation to my thesis supervisor Prof. Chitra Weddikkara for her guidance, assistance and encouragement.

A special Thank you must be given to Mr Indunil Senevirathne, Head of the Department, Department of Building Economics, Dr Sepani Senarathne, Academic Coordinator for Research and Dissertation, and Dr. Yasangika Sandanayaka, for their contributions.

The Architects, Quantity Surveyors, Engineers, Project Mangers and Builders for providing the necessary information for this research Without their help and assistance, this dissertation would be harder for me to complete.

Last but not least, my thanks also to those who have directly or indirectly gave their

helpful advice and comments for the success completion of this dissertation.

CHAPTER 1 INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Over the years, the construction industry has become familiar with contractual arrangements for allocating responsibility and risk of all the parties under the traditional procurement method. However, many employers have become increasingly dissatisfied with the traditional form of project delivery and seek other methods of procurement, such as design and build to meet their more exacting needs. With the mixed roles of tradesman and design consultant under the Design and build system, its contractual arrangement is drastically different to the concept in traditional procurement method. Indeed it tends to reverse the risk and the role of team members in a development project.

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The design and build concept, as originally conceived, was based on the concept that a single firm had the in-house staff and expertise to perform all planning, design, and construction tasks. Later, increased interest in the concept had engineers, architects, and conventional contractors seeking to compete with the original design and build firms to meet the growing interest by owners in the project delivery process.

In Sri Lanka, over the last decade many construction projects have been implemented using the traditional procurement method. But in recent years, design and build procurement method has become popular in Sri Lankan construction industry as an alternative to traditional procurement method.

According to research carried out by Rameezdeen and Ratnasabapathy (2006) traditional procurement method is widely adapted from 1970’s to 2000’s in Sri Lanka. However, disadvantages were found for using this method. It has been started to seek for the

alternative method to solve those problems. The Design and Build procurement method is widely used in the public projects initially in the Sri Lankan Construction Industry. The mature of using Design and Build procurement has been entered into various private projects recently such as Residential/Condominium Development Projects , Hotel Development Projects , Entertainment Facility Building, etc.

1.2 RESEARCH OBJECTIVES

The main objective of this study is to assess the success of design and build procurement method in Sri Lanka. This study also provide insights into the factors that influence the adaptation of design and build method.

A successful procurement method should lead to efficient use of money and resources and maximization of benefits. To understand the success of the design and build procurement method, the meaning of success should be identified. The meaning of success may differ to employers. It is difficult to measure the success of the project but the goal achieved with the Employer’s requirements will be regarded as success of the Design and Build project.

Within this aim the following objectives are pursued:

To understand the trend for the Design and build procurement method in Sri Lanka

To identify the factor that affects the selection of the procurement method.

To find out the reason for using the Design and Build procurement method.

To analysis the result from the questionnaire to understand the current situation of the Design and Build procurement method.

To summarize the findings from the questionnaire to obtain the advantage and

disadvantages for using design and build procurement method.

1.3 METHODOLOGY OF STUDY

The methodology is designed to achieve the aforementioned objectives. The first step is to rationalize the issue to help set up the topic of study. Then the aims and objectives are set. For the knowledge acquisition phase, the literature in connection with this study is reviewed including materials published in journals, books, newspapers, standard contract forms, conference papers, and websites. As an empirical study, questionnaires and semi-structured interviews are conducted among construction industry professionals. The data collected are be analyzed and conclusions are drawn with reference to the objectives.

1.4 CONCLUSION

The introductory chapter presents the reasons for the study and it discusses the background, identifying the reasons for the design and build is becoming a popular alternative method in Sri Lanka. It provides opportunities for innovation and excellence while rewarding both employers and contractors who choose that route. The reason to adapt better procurement methods is to optimize the project design, schedule, and quality while fostering pleasant and therefore constructive working relationship among employer and contractor.

Methodology of study is essential critical to obtain high quality results. Methodology used in this study is literature review, data collection, data analysis, and drawing of conclusions. The literature review is used to identification of the issues; questionnaire is used to collect the data while interviews are conducted to collect data related to the case study. Statistical and analysis and qualitative interviewing method were used to analyze data. Finally, the conclusion and recommendation with reference to the objectives are created, subsequent to the analysis from the interviews and questionnaires.

CHAPTER 2 LITERATURE REVIEW

GENERAL

The design and build procurement route changes the traditional sequence of work. It answers the Employer’s wishes for a single-point of responsibility in an alleged attempt to reduce risks and overall costs. It is now commonly used in many countries and forms of contracts are widely available.

Design-Build is sometimes compared to the “master builder” approach, one of the oldest forms of construction procedure. Comparing design-build to the traditional method of procurement, the authors of “Design-Build Contracting Handbook” noted that: ” from a historical perspective the so-called traditional approach is actually a very recent concept, only being in use approximately 150 years. In contrast, the design-build concept — also known as the “master builder” concept — as been reported as being in use for over four millennia.” (Songer,1996).

The disadvantage of the traditional procurement method had been identified in many reports. According to Lathem Report (1994), it stated that the traditional method has the problem of adversarial and inefficient way of doing things and separation of the roles and responsibility of team members. According to the Construction Industry Review Committee Report (2001) stated that a high degree of fragmentation with an adversarial culture and a contractual and confrontational culture would be developed.

The alternative procurement method would be sought for solving those problems.

Describing “Design and Build” as a “viable alternative method”, Songer and Molenaar (1996) concluded that there are a number of advantages associated with Design and Build such as: cost savings, improved constructability, time savings and claim reduction. From the Employer’s perspective, the single point of responsibility is the most attractive benefit derived from the D&B procurement approach (Chan 2000). With the support of case studies and quantitative data, Hale et al. (2009) pointed out the Design and Build is superior to the traditional procurement system hence recommended to use Design and Build approach in both public and private sectors. Levy (2006, p.197) even suggested that “the design-build delivery system appears to be a perfect vehicle by which to pursue sustainable or green building construction”.

According to Chan and Chan (2004), the completion time as it relates to speed of a project depended on the procurement method adopted for the project. They attributed the slow delay observed in one of the projects to be due to the use of the traditional procurement method. However, they recognize the possibility of other factors playing a role that it was noted as the project who has suffered delays; obtained better results in terms of cost compared those obtained through the method of design and build method

The increasing the complexity of the project, the Employer would be hesitated to how to reduce the time for design and the time for construction. The Employer was willing to seek for the alternative method to reduce the time of the design stage and the construction time and improve the performance of the projects. There are many alternative procurement methods have been developed in recent years such as Novated Design and Build and Enhanced Design and Build. The traditional procurement method is not the only choice for the Employer.

Design and build is now one of the most frequently used procurement routes in construction and it is a radical departure from the traditional design-bid-build method. The use of design and build is on the increase with many Employers perceiving it as providing better value for money and giving rise to less disputes than other procurement methods. As per the surveys of Royal Institution of Chartered Surveyors,2004 , new procurement trends can be identified which may be associated with the boom period in construction in the early part of the decade and it clearly shows that the Design and construction has become the single dominant method since the previous survey in 1995, it was the traditional methodUnder a design and build contract the contractor assumes primary responsibility for the design of the development, in addition to its traditional role to supply work and materials. The contractor engages the design consultants, or more usually, has the appointments of the design Consultants novated to him.

2.1 THE DEFINITION OF THE DESIGN AND BUILD PROCUREMENT METHOD

“Design and build is and arrangement in which a building contractor enters into a contract with you to design and construct your new building. It is the simplest approach, as one firm is responsible for producing the building you want rather than this responsibility being divided amongst several firms, as is the case with every other approach.” (Sarah Peace and John Bennett, How to use a design build approach for a construction project, CLOB, P2)

Masterman(1992) state that the term Design and Build has almost been unanimously interpreted and defined as being an arrangement where one contracting organization takes sole responsibility, normally on a lump sum fixed price basis, for the bespoke design and build of a Employer’s project. This contains three main elements: the responsibility for design and build, contractor’s reimbursement is generally by means of a fixed price lump sum and the project is designed and built specifically to meet the Employers’ needs.

According to David Chappell (1997), Design and Build contracts place responsibility for both design and erection in the hands of the contractor one point of responsibility for everything. In this system contractor will carry out two functions: design and construct.

In other definition, design and build is an arrangement where one organization design and build to the firm order for the Employer to a single financial transaction. The Chartered Institute of Building (CIOB-1983) defines Design and Build as the process where the Employer deals directly with the contractor for the complete building and it is the contractor who is not only responsible for but also coordinates the separate design and build process, including engagement of the design team who are, therefore contractually linked with the contractor and not the Employer.

The diagram below shows the contractual relationship in the design and builds procurement method.

Client

Design Build

Contractor

In-house designers or

external consultants

Specialist

Contractors

Source: Sarah Peace and John Bennett, How to use a design build approach for a construction project, CLOB, P2

In practice, Design and Build procurement is generally structured in one of two ways;

The Employers employ a dedicated Design and Build organization with its own in house design team.

The Employers engage a general building contractor who employs external design consultant members of the contractor’s team for the duration of the project.

2.2 STRENGTHS OF DESIGN AND BUILD PROCUREMENT SYSTEM

As the Design and Build defined, it is therefore important to reveal the strength or advantages

of Design and Build as procurement system.

One of the prominent feature of Design and Build is to provide a single point responsibility. This is achieved by allocating all design responsibility and liability to the contractor alone. The owner may have more design options to choose from the respective design builders who enter the tender. Owner will tend to have variation of design ideas together with the expected cost that was proposed based on his requirements. Unlike traditional approach which only appoint a single unit of design team to come out with the design ideas, Design and Build will produce much more different design ideas from the design builder who enter the tender (P. Chan et al.,1997).

The owner’s administrative burdens may be reduced because the procurement of design and build services is consolidated into a single selection process. After award of the Design and Build contract, the owner will not be required to spend time and effort coordinating and arbitrating between separated design and build contracts. While the process does require the owner to provide prudent oversight of the design and build process, this responsibility is considerable less time consuming and exposes the owner to far fewer risks than the traditional approach (P. Chan et al.. 1997; Dennis Turner, 1986).

Figure 2.0: (A): Single point responsibility – D & B Contract ,(B): Fragmented

responsibility – traditional contract (Source: Bennett and Grice, 1992)

In addition to the single point responsibility, cost and completion time is firm in the Design and Build procurement method. This means the Employer knows his total financial commitment in the initial stage of the project, provided he does not introduce any changes throughout the project.

The Design and Build entity is responsible for quality, budget, schedule, and performance of the completed facility. With the single point of contact, Employers can concentrate on definition of needs and timely decision-making rather than on coordination between designer and contractor. Besides, the Design and Build entity has total responsibility for the finished product and cannot shift design errors of construction defects to another party.

Therefore, it will likely to end up with the expected or higher quality of end product. Unlike Design and Build approach, traditional approach contracts rely on restrictive wording, adversarial audit and inspection requirements and the legal system to attain project quality (Jeffrey L. Beard et al., 2001).

Cost has always become the key considerations affecting adoption of Design and Build procurement method. Whilst project time is relatively easy to interpret and potential savings clearly identified, project cost is more ambiguous and therefore difficult to evaluate. A prominent consideration for the Employer, in any procurement form, is that final cost does not exceed the project budget. In this respect, Design and Build certainly presents a better chance of the Employer obtaining his completed building within budget. Jerry Adanison (2001), explained that several financial considerations make Design and Build desirable. Private sector have implement Design and Build for financial reasons. Completing a project quickly can save Owners used to finance projects.

On the question of cost, real cost savings can also be made in Design and Build. According to Mastermann (1992), when using this system, the initial an final costs are lower than when using other methods of procurement because of diminished design costs, the integration of the design and build elements and in built build ability of the detailed design. Cost savings may also result in timesaving. The overall effects is reduction in the Employer’s financing charges, lesser effect of inflation and faster building operation, which, in a commercial context, produces an earlier return on the capital, invested, (Frank 1998).

2.3 FACTORS CONSIDERED IN PROCUREMENT METHOD SELECTION CRITERIA

Requirements of the Employer

The successful of the procurement method should fulfill the requirements of the employer. The objective of the Employer should be identified. Employer would require the best design for their project and meet his requirement stated in the Employer’s requirement. Time should be as fast as possible for the construction period. The cost of the building should be as lower as to satisfy his requirement. The Employer would prefer to minimize the contractual risk to avoid the unnecessary trouble.

Time

As time is money, the duration of construction period of the project is very important. “Time at large”, the time spending on the planning, construction and development would affect the economic scale of the Employer. The Employer would seek for the shorter construction period to earn for the greatest profit. The time- related cost item such as the cost of site office, human resources would increase as the duration of the construction period become longer. The early release the building, the greater profit for the Employer.

Quality

The quality of the workmanship and the quality of material is one of the main concerns for the Employer in general. The quality of the building should meet the requirement stated in the specification of the contract.

Cost

The development cost, the construction cost and the operation cost are the concern of the Employer. They totally affect the profit of the Employers. The construction cost is the cost for the building construction such as material cost, plant cost, labour cost. The operation cost is the running cost for the building such as maintenance cost, management cost. The development cost is the land cost, construction cost and other all expenditure which has paid for the development.

Communication

One of the major reason for choosing design and build arrangement is to benefit from the good communication that can occur between the design team and the construction team (Gould, 2003). Many of the large design and build companies specialize in particular areas and have developed a smooth flow between the design and build phases of the project. This collaboration allows the project to be easily fast-tracked, cutting down on overall schedule for the project.

Direct contact between the Employer and the contractor as provided a Design and Build system lines of communication and enables the contractor to adapt more promptly to the Employer’s needs. Integration and encouraged inherently within the system (Griffith, 1989).

The Employer and contractor will communicate closely during the process of the project. Communication between them will start at the beginning stage of the project. Therefore, in design and build it provides the Employer and contractor an opportunity to interact more often and more directly than traditional contract. In general, this arrangement allows easier incorporation of changes due to scope or foreseen conditions since their coordination occurs within the same contractual entity. The Employer is less heavily involved and sits outside the direct day to day communication between designer and constructor. This keeps owner staffing to a minimum and puts the full responsibility for good communication and problem solving.

Risks

The Design and Build contract transfer more risks to the contractor than any other construction contract. Among a variety of risks, a contractor usually takes on many speculative risks. Risks that can vary in incidence between the parties as they wish.

Speculative risks can be within or out with the control of a contractor (Turner 1990). However, the suitability of a project to the Design and build approach must be carefully undertaken by ensuring that the contractor is able, willing and has relevant experiences to control the risk satisfactorily, otherwise they may pass these back to the Employer (Hogg & Morledge, 1995)

Figure 2.0: Risk allocation for each type of procurement system (Hogg & Morledge, 1995)

2.4 THE FACTOR AFFECTING THE SUCCESS OF THE DESIGN AND BUILD

2.4.1 THE PROJECT CHARACTERISTIC

Large and complex projects take longer construction durations. It is difficult to use the design and build procurement in such projects. Because it is unfair for the contractor to take risk on the material inflation on the lump sum fixed price contract. Therefore, the size and the complexity of the project should be considered.

2.4.2 THE CONTRACTOR SELECTION

According to Sarah Peace and John Bennett, it is very important for the selection of the contactor to process the design and build project. From the figure shown that the design and build project in increasing because of the government is willing to use Design and Build procurement method. As the adopting design and build procurement method by the Government, there is the system for selection of the Contractor as per the “Procurement Guide Lines”

The selecting the Contractor is not only concern the tender price, but also the quality Time, Contractor’s financial status, potential contractor with good reputation, manpower good record for the previous project as per the pre-qualification marking scheme of National procurement guide lines. Therefore, the contractor who meets the Employer’s requirement for time and quality at the best price would be selected.

2.4.3 THE EMPLOYER’S REQUIREMENT

The Employer should fully state their requirement, idea and specification of the workmanship in the Employer’s requirement. The more detail of the Employer’s requirement is, the fewer disputes will be occurred in the later stage. The design of the building and the standard of the building is according to the Employer’s requirement. The Employer should understand what he needs in the building and the idea should be fully explained in the Employer’s requirement.

The proposal responded from the Contractor should be carefully checked by the Employer’s representative. Once the Employer accepts the proposal from the Contractor, the contract will be formed between them. The design of the building and the construction method will not be changed which stated in the contractor’s proposal. The changes by the Employer would cause the great amount of the variation. Therefore, the accepted proposal should be fully understand by the Employer which is suitable to his ideas.

According to Ashley et al. (1987) identified 4 factors contributing to project success and grouped them into five areas including (1) management, organization and communication; (2) scope and planning; (3) controls; (4) environmental, economic, political and social; and 5) technical. The implications of the Employer should develop a thorough project plan in which the scope of work is clearly defined, and the contractor should understand and commit to the achievement of project objectives. The contractor’s capability and experience in managing Design and Build project is critical to project success and project team members’ commitment toward the project goals is also important.

Songer and Molenaar (1997) identified 15 characteristics of successful Design and Build. They found that the top five important project characteristics were well-defined scope, shared understanding of scope, owner construction sophistication, adequate owner staffing, and establish budget.

Although the Design and Build projects are expected to deliver the project faster and cheaper as compared to the traditional bid and build projects, not all the Design and Build projects can really accomplished it. Many empirical studies have been conducted to examine the impact of various project success factors such as the study of factors for a successful public sector Design and Build projects by Songer and Molenaar (1997), study on architects’ and builders’ views on Design and Build procurement method in Hong Kong by Mo and Ng (1997) and many others (Albert P.C. Chan et al., 2001).

Accordingly Chan et al., (2001) has developed a series factors contributing to the success of Design and Build projects. These factors are the duties, responsibilities and capabilities of different project participants including end-users, contractor, architect and design consultants in Design and Build projects.

CONCLUSION

The intention of this chapter is to present an overview of the literature published on the subject of ‘selecting the procurement method from the current construction industry’; The objective of the Employer in terms of time, cost, quality and risk would be found out also. And the factor that may determine the successful of the procurement method would be identified. They are the project characteristic, the contractor selection and the employer’s requirement.

In general, it can be summarized that Design and Build provides single point responsibility for the whole design and build. Contractors, who are responsible for the implementation of the project, have power to control all over the projects. This nonetheless does not deter the involvement of the Employer. The Employer’s need and requirements are always been taken into consideration, which this consequently presents uniqueness of the system.

In conclusion, it is essential that whoever really want to procure Design and Build method need a thorough understanding of the types and characteristics of that kind of procurement. Therefore, benefits of Design and Build can be exploited. Many studies also showed that the characteristic of Design and Build that make Design and Build different from other procurement system in offering single point responsibility, fixed time and money, communication, allocation of risks and others. Getting success in Design and Build projects enables an assurance of getting the project completed at the right time and within allocated budget. The Design and Build procurement system has better time performance and cost benefits, which are essentially what the end-users are concerned about. This research can be a

key to assessing the performance level of Design and Build projects, and the project participants can learn about the important factors for setting up an effective management system to turn Design and Build projects with excellent performance.