Cost savings from design-build contracts are generally attributed to a closer working relationship between the designer and contractor, who are the "design-build team." The team approach allows the designers and contractors to resolve design and constructability issues before they arise in the field. Thus, the team is able to incorporate greater construction efficiencies throughout the entire construction process, including more economical design features and cost-saving construction methods.[42]
From the vantage point of a State agency, design-build contracts have an added advantage in that they can be procured with greater price certainty than traditional low bid contracts. This is because State agencies negotiate fixed prices for these contracts based on the design-build team achieving a particular result within a set period of time. The design-build team is given greater latitude to control the timing and cost of completion. Traditional low bid procurement is based on pre-established contract specifications. The contractor must build to these specifications. When the specifications change or are found to be inadequate the State, not the contractor, bears the responsibility for increased cost and delay. As a result, some contractors file a flurry of change orders requesting additional fees for designing and building around unanticipated problems. Under a design-build contract, the design-builder is responsible for the design and any necessary changes as the project develops. This responsibility includes the risk associated with the determination of final quantities. The lump-sum, fixed-price approach for most design-build contract eliminates virtually all change orders because the design-build team is responsible for adapting and solving most unanticipated challenges.
The increased collaboration allowed by design-build also generates benefits in the area of value engineering. Design-build's better use of systematic value planning programs initiated early in the development period allows for a more detailed value engineering process during preliminary engineering. Having the design-builder lead this effort provides a greater opportunity to incorporate construction cost efficiencies, and optimize life-cycle costs for the project.
State DOT's experience with design-build projects under the FHWA's SEP-14 program varies widely. Some projects noted significant cost savings while other experienced increased costs.
In 1998, the Transportation Equity Act for the 21st Century (TEA-21) became the new funding legislation for the nation's surface transportation programs. Included in TEA-21 was section 1307(f) which required that a comprehensive national study be conducted to evaluate the effectiveness of design-build contracting in the Federal-aid highway program, with the results subsequently reported to Congress. FHWA contracted with Science Application International Corporation (SAIC) and AECOM Consult, Inc. to perform this study, whose objectives are to:
∙ Compare the effect of design-build contracting on project quality, project cost, and timeliness of project delivery vis-à-vis the traditional design-bid-build approach, based on SEP-14 and other related reports;
∙ Determine the appropriate level of design for design-build procurements given such project criteria as nature and complexity of project, total project cost, and environmental sensitivity;
∙ Assess both the positive and negative impacts of design-build contracting on small businesses, particularly small contractors and design firms;
∙ Assess the variation, use, and fairness of cost and non-cost factors used in the award of design-build contracts; and
∙ Develop recommendations concerning design-build contracting procedures and implementation approaches.
The FHWA anticipates that a final report will be available in late 2004.