Under a traditional procurement approach, the Employer engages an Architect and Engineer to design its building and separately engages a Main Contractor to construct based on the given building design. As design responsibility and construction responsibility are undertaken by two or more separate and distinct entities, the Employer could be in a bind if and when defects arise due to finger pointing between relevant parties. The Design & Build (D&B) approach may be advantageous in this regard because the Employer is presented with a single point of responsibility in that one entity is responsible for both the design and construction of the building. 

Whether D&B delivers the purported advantages remain keenly debated. However, those who are keen to adopt the D&B approach may be wise to have a reasonable understanding of how to administer the procurement of D&B project. This is to ensure that one is able to select the most suitably qualified D&B contractor with the most compelling commercial proposition including the appropriate terms and conditions. 

Procurement is in essence the process of soliciting offers from tenderers. These offers are shaped by the nature and extent of information provided to the tenderers. In general, the more project design details are provided to the tenderers, one would reasonably expect more complete and comprehensive offers in return. The reverse is true as well. This can quite accurately be summarise through a computer science parlance of ‘garbage in, garbage out’. Whilst this principle holds true under a traditional procurement approach, it may not necessarily be applicable under a D&B procurement approach. This is because the tenderers that are being considered to perform D&B are also responsible for the building design. Therefore these tenderers are not expected to be provided with much project design details. In fact, different tenderers may be suggesting different design proposals as part of the appeal of D&B. When considering ways to administer the procurement process of a D&B project, it is therefore critical to recognise that if the tenderers are relieved from extensive design requirements to comply with, the more design flexibility and latitude are given to the tenderers. Therefore it is less meaningful to make direct pricing comparison between tender offers due to very different underlying scope of works. By contrast if the Employers wishes to have greater control over the design requirements and design development, the lesser design latitude would translate to greater basis of pricing comparison between offers. The trade off between design control and pricing comparison should be the key consideration in the administration of procurement and subsequent process of tender evaluation.

With this trade off in mind, there are in general three methods to administer the procurement of a D&B project namely:

Method A – Tenderers are given complete design
Method B – Tenderers are given partial design
Method C – Tenderers are given minimal design

In developing a comprehensive method of administering the procurement process, it is important that such process facilitates proper evaluation of various offers, provides clarity to tenderers as to what is expected from them in their submission of tender offer and ensuring a level playing field between the tenderers. To this end, it is critical that the tender documents which includes design brief, tender drawings and tender evaluation criteria are presented clearly. The following sections in this article will further elaborate the intricacies involved in the said methods.

Method A – Tenderers Are Given Complete Design

At first blush, it seemed contradictory to provide D&B tenderers with complete design when any of these tenderers if appointed is expected to design the building in hand. Is the selected main contractor expected to design if design is already place? The short answer is that occasionally the Employer is keen to look for a financially established main contractor to be contractually responsible for the integrity of an existing design rather than for a main contractor to develop design from scratch. This could be driven by the Employer’s motivation to establish a single point responsibility for the design and construction of its building. Where defects in building arises after its completion, it is often not immediately clear whether such defects are caused by design default or workmanship related problem. The Employer may be required to expend considerable amount of time, effort and money to carry out investigation in order to identify the root cause of the problem. Single point responsibility effectively eliminates any of such concern that the Employer may have. 

On the other hand, with the right amount of financial incentive, an established main contractor may not be averse to being responsible for design developed by a third party if the associated risks are manageable. This is particularly so where the building in question serves a functional purpose with regular design e.g. an industrial warehouse, school etc. 

The pre-existing design developed by a third party refers to the team of consultants comprising structural engineer, architect as well as mechanical and electrical engineer engaged by the Employer weeks or even months prior to the D&B procurement. The design would have been developed completely by this team of design consultants in a manner similar to one under the traditional design-bid-build approach. For this pre-existing design to be effectively subsumed under a prospective D&B contractor, the consultancy agreements with this design team would have to be novated from the Employer to the eventual D&B contractor. In other words, the design consultants must agree for a change in contracting party through an eventual substitution of the Employer with the D&B contractor via novation. The design consultants might object to such novation if they are surprised since they could have offered a deal to the Employer that would not have been offered to a contractor or any other parties. This in turn highlights the importance of ensuring that the D&B approach had to be agreed and established by the Employer as early as possible even before the design consultants are engaged. This ensures the inclusion of novation provision in the consultancy agreements with the design team as well as clear demarcation of tranches of consultancy fees payable at different junctures of project milestones including at the point of novation. Clearly, after the point of novation, all remaining design fees will be payable by the D&B contractor to the design consultants.

Under the traditional procurement approach, the supervision and quality control during construction phase of the project is undertaken by the design consultants. This is because firstly, being the party that conceptualised the actual design, these consultants are in the best position to determine whether or not the design intents are met by the contractor. Secondly, the design consultants are deemed “independent” from the contractor due to the absence of any direct contractual relationship. However, under the D&B approach where the design consultants are now contractually managed and paid by the D&B contractor, conflict of interest arises. Therefore, as part of the administration of procurement of D&B project, the Employer should consider retaining a suitably qualified consultant who will not be subject to novation such as a project management consultant or quantity surveyor. Such consultant would then be required to perform the supervisory and quality control role that was vacated by the design consultants. As a natural extension to such supervision role, this consultant should also be required to assume the role of a certifier under the D&B contract to carry out certification functions such as interim progress payment, practical completion, issuing instructions for variation works etc. Under the traditional procurement approach, such certification functions are typically performed by an Architect or Engineer. 

Clearly, prior to the procurement of D&B contractor there are various preparatory procurement activities that are required to be performed as illustrated above. These include the novation provisions in design consultancy agreements, appointment of a contractual certifier such as a project management consultant etc. Therefore the D&B route should not be approached as an ad-hoc and last minute decision. Another important aspect to the procurement preparatory activities include the shortlisting of D&B tenderers. In an ideal world, the most competent D&B tenderer with the most competitive commercial proposal should be selected, which after all is the objective to any procurement exercise. To this end, an appropriate shortlist of D&B tenderers should be created based on merit. If and when the Employer decides that its team of design consultants will be involved in the shortlisting process including the eventual tender evaluation, it is of paramount importance to ensure that the assessment criteria continues to be strictly based on merit. Some may argue that the design consultants participating in the assessment process may not be entirely driven by merit but rather its ability to establish a comfortable working relationship with the D&B contractor. Employer has to be acutely aware that having certain healthy professional tension between the design team and the D&B contractor may be necessary to an effective project execution. By way of example, a competent D&B contractor that pushes for absolute clarity in design documentation or challenges the design philosophy during procurement may not be entirely popular with the design team. However such design clarity may be both essential and beneficial to the Employer in understanding what exactly it is paying for. 

The procurement process is also an opportunity for the Employer to understand the costs it may be incurring in exchange for the benefits of single point responsibility. This is primarily a commercial decision by the Employer. In the administration of the procurement process, D&B tenderers should be requested to identify clearly the costs or premium that it is charging for assuming the design risk vis-a-vis the Employer. Whilst the D&B tenderer may pursue any design liability separately against the design consultant, such assumption of design risk is not insignificant. An unusually high risk premium proposed by the D&B tenderer may be quite revealing as it potentially indicates certain design issues from the tenderer’s perspective or that the tenderers foresee a considerable degree of effort required working with the design team in the construction phase of the project. These are issues worth further investigation on the part of the Employer. 

Prior to the issuance of tender document to the D&B tenderers, it is also important to examine the standard form of D&B contract that will be used to ensure that the terms therein are modified where required. Most D&B type of standard form of contract may anticipate that the design is produced by the contractor and can therefore be defined as the ‘Contractor’s Proposal’. It may be contractually defined as design submitted by the contractor to satisfy the Employer’s requirements. Where the design was fully developed prior to being presented to the D&B tenderer for acceptance, these sequence of events may be at odds with the strict contractual definition included in the standard form of contract. Therefore, certain modifications are required to ensure that the actual events are congruent with the terms and conditions between the parties. This is not merely to provide administrative clarity but it also carries certain legal significance in defining the scope of responsibility of the D&B contractor. If the D&B contractor is only responsible for proposals that it submitted, there may be an argument whether or not it is responsible for third party’s design which it had not submitted.

In the next section, we will examine a different method of administering procurement of D&B project where the tenderers are now given partial design.

Method B – Tenderers Are Given Partial Design

There are instances where D&B tenderers are provided with partial design as the basis of the tender process. Admittedly, the term ‘partial’ is somewhat subjective and vague. How much design had to be developed for it to be considered ‘partial’? This query relates to the basics of the process of design development. The Royal Institute of British Architects (RIBA), as an example, through its RIBA Plan of Work 2020 organises the lifecycle a building into eight stages. For the purposes of this article, Stage 2 to Stage 8 are of relevance. These stages are described in the sequence of concept design, spatial coordination, technical design and construction, which effectively illustrates the gist of a design development process. Whilst this article is not intended to delve into the details of these prescribed stages of work, it illustrates the idea that design development process as an incremental process of adding layers of details and granularity to an initial architectural design, commencing from a very basic concept design.

Even under traditional procurement approach where the main contractor does not undertake any design responsibility, the main contractor routinely produces various drawings during construction phase such as shops drawings, coordinated services drawings etc to ensure that the construction works complies with the intended design. Therefore, a competent main contractor  should be familiar with the development of detail design as part of the downstream phase of the design development process. When D&B tenderers are given partial design, the key premise is that not every single design detail are needed to be made available before the works can be priced by a tenderer with reasonable level of accuracy. Part of the art of being successful in any tender is the ability to price risk which involve commercially grappling with the unknown. Where necessary, the tenderers could hedge their risk by outlining their pricing assumptions to provide a basis to their tender offer. Therefore where there is a meeting of minds in terms of risk appetite between the Employer and D&B tenderer, it is viable for parties to enter into a D&B agreement based on partial design. It cannot be over emphasised that such D&B approach is not without risk. This is because the portion of detail design that has yet been developed at the point of agreement could be a source of dispute if the subsequent detail produced by the D&B contractor is not up to the Employer or its consultants’ requirement. Therefore, parties are advised to include performance based specification rather than prescriptive specification in respect of down stream detail design that has yet been developed. This would provide some objective standards for parties to adhere. 

Given the inherent uncertainties involved in this method, what could be the advantages that compensates for the risk? One key advantage is time savings. This method does not require every detail design to be fully developed before appointing a main contractor to commence construction works. The D&B contractor can develop the detail design in parallel with the construction works. In other words, it enables the construction activity and design development activity to overlap. By way of example, the D&B contractor could commence with erection of structural works whilst concurrently developing detail design for carpentry and joinery works as part of the internal furnishings.

There is no exact science in terms of the ideal level of design that needs to be developed prior to launching this method of D&B procurement. With reference to the RIBA Plan of Work, one may choose to issue concept design to the tenderers whilst others may prefer to issue technical design which is relatively more developed. The more developed the design becomes, the more defined the scope of works are when received by the tenderers. On the flip side of the same coin, the less opportunity there is for time savings as there is now less overlap in activity between design development and construction. In short, it is a trade off between schedule benefit and clarity in scope of works. 

So how should the tender offers be evaluated under this approach apart from price comparison? Ordinarily price competitiveness remain the predominant evaluation criteria. This is because the tenderers are usually not expected to produce any design as part of their tender submissions since any detail design development would be undertaken after entering into an agreement. The Employer should be careful if it stipulates that the tenderers submit their respective detail design development as part of their proposal to facilitate evaluation. This may give rise to several issues. Firstly this may erode any potential schedule benefits since ultimately the detail design would still be developed prior to commencement of construction. Secondly, potential contractors may be reluctant to participate in a tender exercise which require expending considerable design resources that may not yield any return if they fail to secure the project. Finally, it remains questionable how could the detail design be reasonably meaningful in distinguishing one bid from another for the purposes of tender evaluation.

In the next section of this article, we will proceed to examine the third and last method of administering the procurement of D&B project, with the issuance of minimal design.

Method C – Tenderers Are Given Minimal Design

Under this method, D&B tenderers are expected to receive either minimal design or just the design brief. Companies shortlisted to participate in such tender are typically large contracting firm with strong design capability or joint venture companies between contracting firms and architectural/ engineering firms. Relative to the first two methods discussed above, this method gives tenderers the most latitude and freedom to express their architectural and aesthetic flair. For this procurement exercise to generate adequate interest, enthusiasm and participation from tenderers of this scale and competence, the project should be sufficiently large and iconic with promising investment returns. All participating tenderers should expect to commit considerable time, effort and resources in this competition. The Employer would primarily be motivated to explore creative architectural ideas that may be offered by the market to fulfil its property development objectives.  This is in addition to its other conventional objectives such as to find the most cost competitive and competent D&B contractor. The benefit of tapping on D&B contractors as opposed to pure architectural or design consultancy firm is that it provides an immediate reality check in respect of the construction feasibility and financial impact of any creative design that pushes the envelope. The Employer is usually a seasoned property developer that understands the reality that every real estate decision is primarily a trade off between novelty and pragmatism. When the Employer is presented with a captivating architectural design, it will simultaneously be confronted with its price tag and any execution risks that it may entail. This is unlike the traditional procurement approach where the construction cost of any given design is unveiled many months down the road. Critics may disagree in that the Employer remain advised by its consultant quantity surveyor at early stages of the development process who will alert any financial concerns as and when it arises. However there is a fundamental difference between a professional assessment and binding tender offer. This is akin to the saying that the true value of one’s property is not the professional valuer’s opinion but what a buyer is willing to pay for. 

The project that would be the subject of this procurement approach is likely to be of considerable scale and financial magnitude. In this regard, the Employer may need to manage a large and diverse group of stakeholders comprising its sales and marketing team, financiers, maintenance department, shareholders etc. Therefore the drafting of its design brief, which is the key component to the procurement exercise can be a challenging process given the diverse input which occasionally can be conflicting as well. Notwithstanding this, D&B tenderers’ proposal will be guided by the scope of this design brief which needs to be coherent. How much architectural latitude is given to the tenderers depends on how the design brief is shaped. Is the document prescriptively specific or is it broadly defined? The Employer should consider only including the absolute necessity in its design brief in order to make the most out of this procurement process. Assuming it’s a mixed development project that will be developed and sold, the design brief should include design parameters that fulfils certain financial objectives. This may include the percentage of strata areas over the total gross floor area which indicates the commercial efficiency of space layout. This will impact the possible financial return based on real estate space that can be sold. The design brief should also set out any requirement for the building’s appearance to comply with in particular any of the government authority’s urban planning zoning rules. The design brief should steer clear away from subjective aesthetic consideration unless it is of absolute necessity such as inclusion of corporate colour, building signage etc. Where possible the design brief should also avoid vague and subjective terms such as ‘vibrant space’, ‘clean and sleek lines’ etc. 

The manner in which the design brief is drafted impacts the procurement process. This is because the degree to which the brief is worded objectively affects the ease with which the proposals can be evaluated amongst a diverse group of stakeholders. The stakeholders who will participate in the evaluation of tender proposals should provide their input for the design brief in respect of their departmental requirements. The leader of the procurement process will need to carefully streamline the different requirements in the drafting of the design brief to ensure that the D&B tenderers are not presented with contradictory and confusing design requirements. By way of example, marketing departments may be inclined to explore novel or even avant-garde design to enhance the development’s aesthetic appeal whilst the facilities management department may have reservation that such design could cause difficulties in maintenance.

A clear and concise design brief not just provide clarity to the D&B tenderers but also facilitates a focused and objective tender evaluation process. Price comparison alone would not be an effective criterion of evaluation since every proposal would be submitted with a completely different design. Since design evaluation is inherently a subjective exercise, the design brief plays an important role. Where the D&B tenderers had conceptualised their design proposals based principally on the requirements included in the design brief, it would seem contradictory if the evaluation process is done in isolation from those very same requirements. In this regard, the design brief can be the reference framework for the design proposal evaluation. The D&B tenderers should be provided with tender evaluation criteria that sets out the assessment criteria for the design proposal at the inception of the tender process. This evaluation criteria should include weightage assigned to different assessment criteria including how the tender price will be taken into consideration in conjunction with the design proposal.

Once the D&B contractor is selected, the parties should also agree on a set of performance based specification for the selected design to facilitate building material and internal finishes selection during the construction stage. Likewise, the drawings submitted by the D&B contractor as part of their design proposal will be included in the contract document as the basis of the scope of agreement.

Conclusion

D&B can be an effective way of enhancing value to any construction process if the procurement process is administered effectively. There is no ideal method of procurement as each option is effectively a choice based on certain trade offs. 

Koon Tak Hong Consulting Private Limited