With the design-build-finance (DBF) procurement model, one contract is awarded for the design, construction, and full or partial financing of a facility. Responsibility for the long-term maintenance and operation of the facility remains with the project sponsor. This approach takes advantage of the efficiencies of design-build procurements and also allows the project sponsor to defer paying all or a part of the cost of the project during construction.
With DBF procurements, the constructor agrees to provide all or some of the construction financing. The design-builder is repaid with milestone and/or completion payments made by the project sponsor. These arrangements are typically short term and extend no more than a few years beyond the construction period. Responsibility for the long-term maintenance and operation of the facility remains with the project sponsor.
Project sponsors generally use DBF procurements to overcome cash flow constraints or out of a desire to defer paying for projects. With some DBF procurements, the owner identifies the current amount of available project funding and requires the design-builder to finance any development costs in excess of that amount for a specified period of time. In other cases, an owner may specify the maximum amount that it can pay a design- builder each year for a project. That specified amount and the cost of the project would determine the length of the repayment period.
Private sector design-builders may provide self-financing and front their own implementation costs until the sponsor is able to pay them. They may also borrow money using existing commercial credit liens, or arrange project-specific financing. In addition to all the potential benefits of design-build procurements, the DBF approach allows project sponsors to accelerate the construction of projects that they would otherwise have to wait to procure until they had amassed the required funding. DBF procurements are being used with increased frequency to deliver a broad range of projects.