To what extent should design be developed immediately prior to signing of a design and build (D&B) contract? This article examines the issue of pre-contract design requirement under the procurement model of D&B. This examination is made in the context of both the Public Sector Standard Conditions of Contract (PSSCOC) and the Real Estate Developers’ Association of Singapore (REDAS) Standard Form of Building Contract. For clarity, the PSSCOC referred to in this article is the seventh edition published in 2020 whereas the REDAS form referred to is the third edition published October 2010. Notwithstanding that the latest edition of REDAS form is the fourth edition published in March 2022, the substance of this article is not meaningfully affected by the changes introduced in this latest edition. For clarity, the general differences between the third and fourth edition of REDAS form pertain to Covid-19 pandemic related prolongation costs and co-sharing mechanism of certain construction expenses, advance payment for material fabricated offsite, the introduction of delay certificate prior to recovery of liquidated damages etc.

Pre-contract design requirement is an interesting subject because it is in essence a balancing act due to two competing interests in D&B contracts. On one hand, there is a desire for clarity and specificity in the scope of works included within the contract sum so as to objectively identify any variations which may give rise to claims for additional payment and/or extensions of time. Clarity in scope of works in turn requires a significant extent of design development. On the other hand, one of the fundamental advantages of D&B is allowing the main contractor to develop its design after award so as to shorten the time taken for the entire design and construct process. Under the latter consideration, the pre-contract design proposal expected from the D&B contractor will not be fully developed at the point of contract. Therefore identifying the pre-contract design requirement becomes a useful point of reference to appreciate how these competing interests are balanced. To this end, it will be helpful to understand how the standard forms of contract widely used for D&B in Singapore balance these competing interests. For further context and background, there is a related article published in this website entitled ‘How To Administer The Procurement of A Design & Build Project?” available for reference. 

Unfortunately, the degree to which pre-contract design should be developed prior to contract formation is not an issue that can be objectively defined. By way of illustration, if tenderers are instructed to provide its 50% developed design during procurement for tender evaluation, this instruction can be ambiguous and subjective. Should the tenderers only provide a concept design with artist’s impression? Or should the design be developed with schematic details beyond just the initial concept design? Therefore how the procurement process is structured should be in sync with the provisions of the standard form of contract. Any gaps or conflicts in this regard would inevitably give rise to disputes between parties.

So what are the provisions in both the PSSCOC and REDAS that determine its specific pre-contract design requirement? The subsequent sections of this article focus on certain provisions in the respective contract forms that may shed light and provide clarity on this matter.

Definition of ‘Contractor’s Proposals’ Under Articles of Agreement

In order for the contractor to qualify for a proper tender evaluation it has to submit its proposal, otherwise known as the ‘Contractor’s Proposals’ in response to the design brief that sets out the Employer’s Requirements. Within such proposal, the contractor is expected to provide, amongst others its design that should demonstrate its competence, understanding of the project’s nuances and to provide a basis of its tender sum offer. These submissions are in effect part and parcel of pre-contract design requirement that is stipulated by the Employer and its consultants. The term ‘Contractor’s Proposals’ is uniformly used by both the PSSCOC and the REDAS. It is useful to understand how the Contractor’s Proposals are defined under both these contract forms so as to appreciate what is expected from the contractor as part of its pre-contract design requirement. A proposal is in effect an offer from the contractor that is submitted to the Employer for its consideration and acceptance. An accepted offer is key to contract formation. 

The PSSCOC includes a template document of the ‘Agreement’ that is usually included in the tender document that will be signed by the parties upon award of contract. Under the second recital of the Agreement, it is stated amongst others that “the Contractor has submitted his developed design documents for carrying out the Works” and such developed design documents is referred to as “the Contractor’s Proposals”. It is worth emphasising that the term “developed design documents” appear in past tense which meant that it is not the parties’ expectation for any significant design development effort to take place after the contract is formed. In fact the degree of development of the design document is so advance that it becomes the basis of the contractor’s lump sum tender price offer. In the third recital of the Agreement, it is also stated that the Employer has relied on the contractor’s development of the Contractor’s Proposals to fully meet the suitability, integrity, durability and practicality of the Employer’s Requirements. When the second recital is read in conjunction with the third recital, it is evident that the design included in the Contractor’s Proposals is developed to such an extent that it is sufficient for the Employer to make an informed opinion that such design satisfies the Employer’s Requirements in the manner described above. Under Clause 4.5 of the PSSCOC which deals with the subject of sufficiency of tender, the contract sum shall be deemed sufficient to bring the project to its full completion. In other words, the contract sum is not merely a provisional figure that is derived based on a partial design. This interpretation is further supported by Clause 6.1(2) where the Contractor’s Proposals is fit for its purpose and takes into account and addresses any insufficiency or impracticality that may exist in the Employer’s Requirements. It follows that under the PSSCOC a mere concept design or an abbreviated partial design submitted by the contractor prior to contract is not sufficient. 

The PSSCOC’s approach is quite contrasting when compared to the REDAS’ approach. The REDAS’ template Articles of Agreement serves a similar function as the Agreement under the PSSCOC. Under Item (B) of the Articles of Agreement, the Contractor’s Proposals include a contract sum which the contractor will require for carrying out such works that includes those necessary for completing the design, construction and maintenance of the said works. In other words when the Articles of Agreement is signed, namely at the point of contract formation, there is still a necessity for the contractor to complete the design. This suggests that the design included in the Contractor’s Proposals is not expected to be fully developed. This interpretation is further supported by Article 2 that appears in Articles of Agreement which set outs the contractor’s obligations. Under the said Article 2, the contractor in consideration of the contract sum paid by the Employer shall, amongst others carry out and complete the design of the works. Under the Articles of Agreement of the REDAS, unlike the PSSCOC’s Agreement, there is no express provision to attest that the Employer had examined the Contractors’ Proposals at the point of contract to satisfy himself that such proposal meets the Employer’s Requirements. It follows that the design available at the point of award remains at an early stage such that it is not sufficient for the Employer to examine its adequacy. Therefore as part of the contract obligations, the contractor undertakes to further develop and complete design after the award. 

Design Fees Included In  Progress Payment Claim

As pointed out in the preceding section of this article, it appears that the pre-contract design requirement differs between the PSSCOC and the REDAS based on the descriptions of Contractor’s Proposals. In general, the PSSCOC anticipates an advance detail design available immediately prior to the point of contract formation whereas the REDAS takes the opposite approach where the design available could be brief and abbreviated. This interpretation is also supported by the format of progress payment claim submitted by the Contractor on a monthly basis. The scope of activities that entitles the contractor to interim progress payment provides an insight on the nature of works undertaken by the contractor during its time for completion.

Under Clause 22.1.1.1 of the REDAS form, the payment claim from the contractor shall include, amongst others, the value of the design payable in accordance with the Schedule of Fees included in the contract document. Therefore, there are significant design developments works expected from the contractor. This is why the contractor had to be paid according to the extent of design activities performed each month. However, there is no equivalent design fee payment under interim progress payment of the PSSCOC that is found under its Clause 32.1. This is not surprising since the design would have been significantly developed at the point of contract formation, such that there is no major design activities expected post contract. 

Drawings and Design Requirements Prior To Commencement of Works

Another contract provision that is worth examining in this regard is the definition of ‘drawings’ and its associated approvals prior to commencement of works. Given that drawings are important part of the contract documents, it provides a perspective on the extent and availability of design during tender that ultimately formed the basis of the parties’ agreement. 

Under the PSSCOC, ‘Drawings’ mean drawings referred to in the contract document including such drawings which have been prepared by the contractor and accepted by the Superintending Officer (SO) pursuant to Clause 6.2 therein. Definition of Drawings also include such other drawings, as may be prepared and submitted by the contractor in his tender or at any time before the contract. First and foremost, Drawings shall primarily refer to those listed comprehensively in the contract document for avoidance of any doubt. Therefore, these drawings would have exhibited a significant degree of design that had been developed during the tender process and are also accepted by the Employer as being compliant with its requirements. There may also be cases where certain part prints, hand sketches or drawings produced that are not to scale but are helpful in providing important context to the Contractor’s Proposals. These documents may also be defined as Drawings where the context permits. Given the significant design development that would have already taken place immediately prior to contract, it is within expectation for the PSSCOC to be all encompassing in its definition of ‘Drawings’. Under Clause 6.2 of the PSSCOC, the contractor shall not proceed with the execution of any part of the permanent works until he has submitted to the SO such Drawings, Specifications, manuals, calculations and other information as shall be necessary to demonstrate the suitability, adequacy, integrity, durability and practicality of such design. It appears that Clause 6.2 restricts overlapping design activities and construction activities. In the absence of such Clause 6.2, the D&B contractor would ordinarily plan its work such that its design activities occur concurrently with the construction activities. In this regard, priority is given to design of works that are scheduled to take place immediately thereafter. However, Clause 6.2 in this case makes sense where considerable design would have already been developed at the point of contract, with perhaps residual detail design taking place after the project is awarded. Therefore, having all design submitted and approved by the SO prior to commencement of works allow an overview of the design in its entirety before such design are executed on site. 

The REDAS form takes a fairly different approach as compared to PSSCOC primarily because contractor’s design is likely to be at its early stage when the parties enter into an agreement. Therefore, it will be difficult to conclusively identify the drawings included as part of the contract document when much of the design and the associated drawings will only be developed much later. In this regard, the REDAS defines the word “Contract” to mean the Articles of Agreement, the conditions and its appendices, the Employer’s Requirements, the tender documents, the letter of acceptance, the Contractor’s Proposals, the Contract Sum Analysis and other documents which the parties may specifically identify. It should be noted that there is no reference to the word ‘drawings’ in the Contract. Parties are then required to provide a list of documents that they consider to be part of the Employer’s Requirements and Contractor’s Proposals. It is likely that there will be some concept design drawings, artist impressions, sketches, preliminary design documentation identified by the parties to represent the design that is available at the time of agreement that is subject to further development. In other words, the concept of “contract drawings” as understood under traditional procurement route is not in place under REDAS form. However, Clause 4.4 of the REDAS form which deals with design review by the Employer’s representative is similar with Clause 6.2 of the PSSCOC as mentioned above. In essence, Clause 4.4 states that the contractor shall submit its full design drawings, plans, specifications for review and acceptance by the Employer’s representative. This shall be fulfilled prior to submission of the same to the relevant authorities for approval and before the commencement of construction. It should be pointed out that not all aspects of design require approval by the relevant authorities.  Only certain aspects of design do require authorities’ approval such as works concerning health and safety matters. By way of illustration, whilst the Employer may be concern about the choice of colour of the carpet used at its main lobby, the statutory authorities do not equally share the same concern. Therefore, it appears that the design had to be accepted by the Employer on a case by case basis as with the approvals required by the relevant authorities. Consequently, the requirement for approval prior to commencement of construction could mean only the part of the works that is under design review as oppose to the construction of the project as a whole. 

Implications of Different Approaches In Pre-Contract Design Requirement 

With the distinction between PSSCOC and REDAS in respect of pre-contract design requirement established, what are the implications? In short, it affects some of the very reasons for choosing D&B over the traditional design-bid-build route. In the preface of the very first edition of REDAS form dated August 2001, it was accurately pointed out that the strengths of design and build contracts can be summarised in three main points. Firstly, it offers single point of responsibility where the designer-builder assumes full responsibility for the outcome of the project for most matters. Secondly, it could possibly shorten the time taken in designing and constructing processes in having these tasks undertaken by a single entity. Thirdly, it could reduce claims arising from errors, omissions or ambiguities in the drawings and specifications since these tasks are also undertaken by a single entity. These three strengths will be further examined in the subsequent paragraphs in light of the pre-contract design requirements.

As regards the first strength of having single point responsibility concentrated on the D&B contractor, this appears to be one of the merits that addresses the Employer’s dilemma when its project gone awry. When problem arises under traditional procurement route, it is likely that the architect or engineer blames the contractor for workmanship issue for being the root cause of the problem, whilst the contractor blames the architect or engineer for bad design as being the root cause. Whilst having single point responsibility concentrated under a D&B contractor solves this finger pointing problem, it inadvertently creates another problem. Where the design available for review and acceptance prior to contract is not fully developed, the Employer faces a hard time identifying in detail what exactly is he paying for in exchange for the contract sum. This is particularly so where the pre-contract design requirement merely expects a concept design that appear to satisfy the Employer’s design brief. Certain property developers may have a very ‘hands on’ approach to their projects by wanting to know exactly the types of marble cladding used in its grand lobby, including the extent of veining and colour tonality. An artist impression submitted by the D&B contractor may not be sufficient in quenching the Employer’s thirst for detail and specificity. Under most D&B route, it is quite impossible for the Employer to be making granular design decisions when it merely provides its Employer’s Requirement which usually consists of a design brief. Even if the Employer decides to adopt a more extensive pre-contract design requirement such as the PSSCOC’s approach, it may give rise to a very lengthy procurement process which defeats the very purpose of D&B.  

As regards the second strength of shortening the overall project duration by overlapping design and construction activities, this may not be possible if much of the design are already developed prior to contract, such as the PSSCOC approach. If the design is already developed extensively, there is very limited room for any overlapping with construction activities. Therefore, where there is an overwhelming desire for fast tracking project, one should consider the REDAS approach with significant flexibility for the D&B contractor to design and construct concurrently.

As regards the third and final strength which relates to conflicts and inconsistencies between specification, drawings and other design documentations, this very much depends on the degree of pre-contract design requirement. Very often, whether or not conflicts and inconsistencies exist depend on the availability of developed design to be read in conjunction with specifications. Concept designs are merely tool to express and communicate a broad architectural aesthetic intent that are not usually meant to be read with detail specification. Much of the inconsistencies surface when detail design unfold and can be cross checked against specifications. Apart from this reason, one should also be aware that D&B contractor typically outsourced the design functions to a separate architecture and engineering firm. General contractors do not typically have extensive in-house design capabilities since this will be a burden from a financial overhead perspective. Therefore, even if the Employer is “insulated” from the problems arising from conflicting drawings and specifications, the problems still exist except that it now resides on the lower end of the supply chain, i.e. between the contractor and its designers. Shifting the problem down the supply chain can hardly be considered as solving the problem. In fact most property developers are alive to the distinction between “solving the problem” and “shifting the problem” that they occasionally have conditions of contract that allow them to make direct payment to subcontractors at the risk of violating contract privity. These are the commercial realities when it comes to risk management.

Conclusion

It is quite clear from the above that whilst D&B contracts resolve certain types of problems, it may inadvertently give rise to other issues. Therefore, the methods of procurement and types of contract used should be approached as an issue of trade off. In considering the merits of each option, one has to balance it with the inadvertent costs. D&B remains an attractive proposition where the project has a standard corporate design and there is an emphasis of design consistency across the developer’s portfolio of real estate spaces or buildings. Therefore, the Employer’s Requirement can be interpreted in the context of established precedents with design tweaking reserved on limited occasions based on specific site conditions.




Koon Tak Hong Consulting Private Limited