Under the Design & Construct (D&C) contract method, the client lets a contract to develop a concept design, and then lets a D&C contract under which the contractor both designs the project on the basis of the project specifications as set out in the concept design as well as builds it, but without having involvement in the development of those project specifications. Contractors are appointed on the basis of price and quality.
The process for the Design and Construct method is generally:
• the public sector party engages expert advisers to assist its internal project team with project specification
• the project is specified based on input requirements and a concept design
• a competitive tender process is run to select a contractor:
- Expressions of Interest (EoI) process to select a shortlist
- request for tender process to select a preferred tenderer from the shortlist
• a contractor is appointed and the parties enter into a fixed price, fixed time contract to undertake the design and to construct the project. Most (but not all22) design and construction risks are transferred to the contractor
• the contractor prepares a detailed design that meets the requirements of the public sector party through a consultative review process and constructs the project based on the final agreed design, and
• the contractor is paid on the basis of progress during construction. In fact, the contractor can find itself to be in a cash positive situation, if it receives progress payments before it pays subcontractors.
The two main features that are relevant for a comparison between procurement options are:
• the incomplete transfer of risks means that the final outturn cost is often higher than provided for in the contract. And the management of risks that remain with the client may not be managed efficiently
• the practice of making progress payments means that the contractor does not bear the full cost of delays (unless large penalties are included in the contract for every week the project goes over time). The incentive to complete the project on time is therefore weakened.
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22 For example (in the case of a tunnel contract), ground conditions if they are not known prior to letting the contract.