Reducing Risk with Design-Build

Figure 1

Figure 1: Risk can be reduced for water/wastewater projects by using the design-build project execution methodology. Copyright 2019 Tesco Controls, Inc.

A design-build contractor is often in the best position to manage a project, so it should be assigned as much of the associated risk as possible.

By Brian Adams

Cost, schedule and performance risks need to be managed on all capital projects. The best way to do this is often by transferring these risks from the facility or plant owner, often a municipality for water/wastewater projects (Figure 1), to a design-build contractor. This risk transference is a key element of the Design-Build (D-B) project methodology.

Historically, many owners and agencies have used the Design-Bid-Build (D-B-B) model to execute capital projects. With D-B-B, an owner engages a design firm or consultant to design the project and create bid documents. Bids are then solicited from contractors to execute all or part of the project. The designer is required to design the facilities to an “industry accepted standard of care”, and the contractor is required to construct the facilities per the plans and specs. Neither party is contractually obligated to provide a fully functioning facility, leaving all performance risk with the owner, as well as some cost and schedule risk.

By contrast, with D-B the contractor assumes design, schedule, cost and performance risks. The D-B contractor is contractually obligated to design and build a fully functioning facility while adhering to cost and schedule constraints.

This article assumes D-B has been selected as the preferred method of project execution, and examines how this methodology transfers risk from the owner to the contractor to optimize cost, schedule and performance. It then explores why D-B works particularly well when engaging a control system integrator, often referred to as an I&C contractor, in the early stages of a D-B project.

Reducing Risk

A D-B contractor is often best positioned to manage project cost, schedule and performance risk on capital projects for a number of reasons.

Experience and Team: First, an owner and any contracted design consultants typically execute a small number of capital projects per year, and none at all in some years. Most owners therefore don’t have a dedicated capital improvement project team, so with D-B-B they instead rely on their employees to manage projects as a secondary or tertiary duty in addition to their main tasks of keeping the plant or facility up and running. By contrast, an experienced D-B contractor will likely execute multiple capital projects every year, and this experience allows it to employ specialists to manage and execute projects.

Procurement: Second, a design consultant employed by the owner, as a rule, doesn’t generally procure capital equipment and components as part of their project responsibility, so its relationships with the vendors selling these items are not well developed. On the other hand, a D-B contractor regularly procures equipment and typically has very close relationships with a number of key vendors, giving it leverage in terms of delivery, pricing and warranties.

Fabrication and Schedule: Third, without an in-house fabrication or panel shop dedicated to creating equipment for capital projects, owners are forced to rely on outside contractors and vendors for these services with D-B-B. Coordinating multiple contractors and vendors, in addition to maintaining primary plant responsibilities, can be daunting for the owner. It can create issues, delays and cost overruns if not properly managed. In contrast, the D-B contractor’s team will include well-vetted fabricators, specialists and vendors that are closely managed as part of the contractor’s project responsibilities.

Let’s look at how these reasons come into play for the Instrument and Control (I&C) portion of a project.

Figure 2

Figure 2: With design-build, required design changes can often be identified early in the project, greatly reducing cost and schedule impact. Copyright 2019 Tesco Controls, Inc.

The Last Should be First

The control system integration tasks performed by an I&C contractor are the last to be executed in a capital project, so it’s where problems originating in initial design and other earlier project phases are often found. The cost and time to solve project problems rises exponentially as the project progresses (Figure 2), so getting the I&C contractor involved early can help avoid potential issues and reduce risk.

For example, a model or brand of equipment specified by the designer may be inappropriate for the planned control strategy. With the D-B-B model, this type of error often won’t be discovered until late in the project, long after the equipment has been procured and installed, when the I&C contractor is programming and testing the control strategies in preparation for start-up and commissioning.

Figure 3

Figure 3: Assigning the schedule risk for custom power panels to a design-build I&C contractor can reduce delivery times. Copyright 2019 Tesco Controls, Inc.

A seasoned I&C contractor has probably experienced this type of problem before and knows how to deal with it proactively in the design stage. However, this experience can only be brought to bear with the D-B model. With this model, the contractor has assumed risk and is responsible for the design, and hence will use all resources at its disposal to identify these types of mistakes early on. This assures maximum efficiencies are driven into the project because an I&C contractor designs with the start-up and commissioning phase of the project in mind. By contrast, the designer in the D-B-B model has very likely never been directly involved in the start-up and commissioning of a project.

The three specific reasons in favor of the D-B model identified above are also especially relevant to the I&C portion of the project.

Experience and Team: A carefully selected I&C contractor will typically execute multiple water/wastewater projects every year using dedicated project teams. This allows its dedicated project personnel to manage projects proactively by working in close cooperation with the owner and other entities to reduce project risk, starting at the beginning of the project and continuing on through completion. If desired, the I&C contractor can even be available after completion to provide ongoing systems maintenance, and to resolve any issues not detected during startup and commissioning.

Procurement: The I&C contractor will have very close relationships with several key vendors. Although each water/wastewater project is unique, many share common components, allowing the contractor to develop deep relationships with vendors. This can improve pricing and delivery, and can also result in extended or special warranties. This is particularly important for projects with a multi-year schedule where the time between when an item is installed to when it is commissioned can extend to years.

Fabrication and Schedule: Some I&C contractors have in-house fabrication and assembly capabilities. An example of where this comes into play to reduce schedule risk is with motor control centers (MCCs) and other low voltage power distribution panels. Currently, typical delivery times for these assemblies can be a year or more, especially for custom versions with variable frequency drives and other specialized components.

In contrast, an I&C contractor with the appropriate UL extensions can better control this schedule risk by fabricating and assembling power distribution panels in their own shop, instead of relying on the vendor to provide completely assembled units (Figure 3). This allows the I&C contractor to provide the level of customization required, with little or no schedule impact.

For these and other reasons, the I&C portion of a project naturally fits into the D-B model, conferring advantages to the owner in terms of reduced risk.

Most facility and plant owners in the water/wastewater industry don’t have extensive in-house capabilities for managing capital projects and reducing associated risks. This is particularly true for specialty areas such as I&C. Engaging the right I&C contractor within the D-B project methodology will reduce risk by providing better management of the overall project.

Brian Adams
Director of Design-Build Projects | Tesco Controls, Inc.

Brian Adams, P.E., is director of design-build projects for Tesco Controls, and represents the company on the Water Design-Build Council’s board of directors. Prior to joining Tesco, Adams worked for a civil and mechanical contractor.

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