Quality, Consequences and the Construction Industrial Complex (part 129).
Is design and build (D&B) the worst procurement method ever for high quality outcomes? I am starting to think so.
I am talking about D&B not design, build, finance and maintain (DBFM or P3). DBFM is another procurement myth to be discussed in a future post.
D&B Sounds great in theory because it promises:
- Vertical integration with one team for the owner to manage.
- Design and construction risk in one location with a guaranteed maximum price (GMP). An owner told me that a GMP contract is the “leakiest bucket in the world”.
- Synergy (owners read this as cost savings) between design and construction.
However, D&B is a zero sum game. As prices fall during biding and negotiation, the project quality level falls and the talent pool thins out with the following results:
- Construction team subcontract a design team and then bully them.
- Design team stop work at DD or DD+20% stage.
- Construction team build using under engineered, uncoordinated, drawings and specifications.
- Project management, supervision and QC resources evaporate.
- B and C level players arrive and the A team exit.
Real D&B owner outcomes:
- Risk is not laid off and remains at an enhanced level with the owner.
- The owner has to hire deeply skilled and knowledge people to brief and police the project. If the D&B contract is weak with no performance based penalties, good luck with this.
- Short cuts and poor quality work are incentivized and taken.
- Unqualified sub-contractors work on the project.
- Late, low quality buildings.
I am not against any particular form of contract. I am passionately for innovation, great work and high quality outcomes i.e. buildings that actually work with zero defects.
My frustration is that high quality property development outcomes are unusual and completion dates seem to be just a suggestion. Much of this is down to owners delusions, lack of expertise and macho culture regarding procurement.
The best property developers I worked with who develop to own over the long term do not use D&B, they use design, bid, build with construction management (CM). This allows control over design management and the tender process. Also, CM allows flexibility if a tenant is signed mid build and wants modifications.
D&B is a “zero sum game” that only really works for developers who “build to sell”, so latent problems are passed on to owners.
The answer if D&B is used, is for the owner or development manager to aggressively manage the design process and police the construction, all backed up by contracts that have performance-based penalties and rewards.
Bad work should be discriminated against and good work rewarded IMHO.
Related posts & links:
#61 – Too Big to Succeed? ( https://bldwhisperer.com/blog/too-big-to-succeed )
#54 – P3, unicorns and rainbows – the 2 biggest issues ( https://bldwhisperer.com/blog/p3-unicorns-and-rainbows-the-2-biggest-issues )
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