The Revay Report

Project Management and Published by Revay and Associates Limited

Construction Claims Services Volume 33 Number 1 January 2018

A Contractor’s Guide to Managing Design Risk

By Graeme P. Green, [Link], MICE, MBA
Branch Manager
Revay and Associates Limited, Vancouver

Graeme P. Green, [Link]., MICE, MBA, is the branch manager of Revay’s Vancouver office and a senior consultant. He has
30 years of experience in the UK and Canadian construction industry. He has previously been vice president at a major North
American engineering consultancy and business design manager at a top-3 UK contractor. His areas of expertise include
claims and disputes, procurement, design management best practice and project recovery for large projects. He is also a
member of the UK’s Chartered Management Institute and acts as an expert witness and independent certifier.

Introduction this Report, contractors can take measures to owner in a Design-Bid-Build contract or by the
In its forty-seven year history, Revay has mitigate their exposure to it. contractor in a Design-Build contract) and when
produced a number of articles regarding Unless noted otherwise, the Report considers it has been confirmed that there are no unknown
best practices for contractors on construction design risk from the perspective of general project conditions that could impact the design.
projects. Some of these previous issues of contractors and large trade contractors. Owners’ project requirements are generally
the Revay Report include “Best Practices extensive on all types of projects. They typically
for Managing Construction Projects 1. Design Risk Defined include ensuring that the project simultaneously
in Good Times and Bad” (Volume 28, Design risk is inherent to all construction projects. meets budgetary targets, construction schedule
Number 1, 2009) and “The Pitfalls of In the context of this paper, design risk is the targets, specific environmental requirements,
Incomplete Contract Documents” (Volume 29, risk of delays and increased project costs to the specific stakeholder requirements, statutory
Number 1, 2010). contractor. Design risk manifests itself through permit requirements and core project technical
Design problems continue to be a major poor coordination, unclear specifications and (i.e. functional) requirements. The design must
cause of claims and disputes on construction requirements, omissions, insufficient predesign address all of these parameters.
projects. In this Revay Report, we specifically investigations and technical errors. The impact On Design-Bid-Build projects, owners usually
look at how contractors can mitigate the risks of design risk (delays and extra costs) varies arrange financing and commence the
arising from design issues on their projects. throughout the life of a project. Design risk construction procurement process before they
The Report examines contracts where the has a low impact during the early development have a completed, fully coordinated design.
owner is responsible for design (Design-Bid- phase of a project, when funding, financing and Design risk therefore already exists on the
Build) as well as those where the contractor is construction contracts have not been finalized project at this stage and, in theory, the owner is
responsible for design (Design-Build). Under and few financial commitments have been solely liable for it 1. As the contractor is not liable
either project delivery method, the contractor made. However, design risk has a high impact for this design risk and must competitively price
can incur additional costs due to unforeseen after the award of construction contracts, when its bid to have the best chance of being awarded
problems arising from design. the parties involved have committed to funding, the contract, it generally does not consider
Where used in this Report, the term “design financing and their contractual responsibilities. design risk in its pricing. In reality, however, the
risk” is limited to a contractor’s exposure to By definition, design risk can only be zero when contractor often incurs costs during construction
delays and increased costs (direct and indirect) design is 100% complete and no more design through no fault of its own, as these are caused
resulting from design issues on infrastructure changes are possible. This situation exists only by the owner’s design requiring amendments
and building projects. when all of the owner’s project requirements during the construction period.
By implementing best practices in the are defined by a complete and fully coordinated Similarly, on Design-Build projects, owners
management of design risk as described in design (whether such a design is produced by the usually arrange financing and commence the
2 The Revay Report

construction procurement process before they usually unclear. Although technical design risk is time the owner has to accept such submittals
have a completed and coordinated design. not taken on by the contractor in its contract, the (such as shop drawings)? Contractors should
This time however, the design risk is formally contractor is often exposed to residual design be wary of agreeing to unrealistic timescales
passed on to the contractor under the contract. risk if it is unable to effectively coordinate and that they have little chance of achieving.
The contractor’s pricing now must consider resolve the practical design issues on site. As • Do the project specifications appear to be
and price these design risks as the contractor an example, mechanical contractors on building well thought-out, or are they just “cut and
is now responsible for them. In Design-Build, and industrial projects are often assigned paste” from similar projects, with parts of the
it is extremely difficult for contractors to pass responsibility for producing a significant specifications clearly not directly applicable
increased costs resulting from the design risk number of coordination drawings. Ensuring that to some of the works on the drawings? “Cut-
back to the owner, except in cases where the owner direction or approval is always in place and-paste” specifications usually contain
owner’s functional requirements or performance prior to any deviation from the owner’s plans, many errors.
specifications were not clearly defined at the specifications, construction sequences, permit • Does the contract unreasonably oblige the
outset, or were changed after the contract award. requirements or special conditions is always contractor to build in compliance with a long list
Having said that, the situation is different as the contractor’s best defence against accepting of applicable codes as a substitute to detailed
the contractor is entitled to keep any savings it design risk on a project. and coordinated plans and specifications?
makes as a result of innovative design. • Does the contract language (usually in the
Whether in Design-Bid-Build or Design-Build, Design Risk and the Decision to Bid supplementary conditions) attempt to limit the
Revay’s experience in construction claims is In reality, contractors must decide to bid on owner’s responsibility for errors or inconsis-
that poor-quality design, poorly coordinated contracts that are somewhere on a sliding tencies within the plans and specifications?
design and design document deficiencies are scale of “very desirable” to “too risky to bid on”. • Does the contract contain unreasonable
often the main causes of delays and increased Because of the high level of competition in the requests for the contractor to investigate
project costs. These need to be either avoided or construction market, the “too-risky-to-bid-on” unresolved project design constraints (to
recovered by the contractor. decision is rarely made. Poor-quality design is determine that the design intent and/or the
often the biggest single cause of increased project planned construction methodology can be
2. Design-Bid-Build – Overview costs. The reason for this is that many changes implemented) prior to proceeding with some
Under a traditional Design-Bid-Build project, an occur after a contractor has been selected of the works?
owner engages a designer to prepare the design with poor-quality design. Therefore, in making • Does the contract give unreasonable time for
and then tenders the work to contractors. The a Go/No Go bid decision, a contractor should the contractor to price change orders?
budget and schedule for the project are prepared carefully evaluate whether significant design risk This is not an exhaustive list of design-related
by the owner before the contractor is engaged will be directly or indirectly “laid at its door”, and questions. However, such questions should
and usually include contingencies for additional if so, whether it can manage it. In this context, be considered by the contractor at the bidding
time and money. However, these budgets and “manage” means avoiding acceptance of risk due stage, along with the other queries it may have.
contingencies are usually not disclosed to the to deficiencies in the owner’s design. Critically, The answers to these questions will allow the
contractor 2. The construction contract gives however, poor design and uncoordinated contractor to sensibly conclude whether it can
the contractor a fixed time to complete the work drawings are not always evident at the bid stage adequately manage the direct or indirect design
for a fixed dollar amount (with some margin for (which is usually a rushed undertaking) and this risk to which it will be exposed. Wherever possible,
increased quantities on a unit-rate contract). makes the contractors’ assessment of design a contractor should attempt to negotiate with
The contractor’s costs often increase due to the risk very difficult. Questions the contractor must the owner to reduce or eliminate its exposure
impacts from late design, poorly coordinated examine in assessing if design risk should be a to unreasonable design risk, and if this cannot
design or technically faulty design. However, material consideration in its Go/No Go decision be done, it should add contingency dollars to
the contractor can generally only recover such (and dollar risk allowance in its bid) include: its price or rigorously pursue compensation for
additional costs if it can prove that they are • Does the contract contain language that can disruption during the contract.
compensable under the contract. be interpreted as requiring design coordination Note that all contracts contemplate that owner
The contractor’s goal with respect to design risk between the different trade disciplines to be changes will occur and, often, most of these
is to (i) avoid assuming design responsibility that the responsibility of the contractor? (This changes are design related. So by implication, all
it does not carry under the contract and (ii) ensure coordination responsibility is particularly often contractors accept some implied responsibility
that no design changes are necessary during passed on to mechanical contractors). for managing changes caused by design. The
construction due to coordination/construction • Is the project design completed or not (i.e. are question is always whether what they are
failures on site for which the contractor might the drawings and specifications stamped and required to do on site is reasonable or not.
later be held responsible. An example of this Issued for Construction)? If the bid drawings
would be using a construction sequence in a are only at 90% complete, then, by definition, Mitigating Design Risk – Managing
building that is different to that assumed by significant coordination risk could still exist the Impact of Design Changes
the designer, which results in a revised design within the design. (The reality is that drawings Effective management of owner-initiated design
due to a new build-up of structural loadings labelled as 90%, or even 100% complete, do changes is the contractor’s primary defence
not previously contemplated. The owner relies not necessarily have all of the design issues against having to absorb additional costs due
on the contractor bringing practical aspects of properly resolved!) to design revisions. The owner is responsible
construction to the implementation of the design, • Does the contract clearly identify contractor for both the technical adequacy of the design
but the risk to the contractor in this process is submittals and reasonably limit the amount of and coordination between all of the design
The Revay Report 3

disciplines. However, the owner’s inter-trade acknowledged as such. These can be generated regularly update a detailed schedule, regardless
coordination is often very poor. Contractors by the owner’s revisions to shop drawings or of whether a project schedule has already or not
are builders and they inevitably get “drawn into” comments on other submittals for approval. If been produced by the owner. In rebutting delay
helping solve coordination issues on site. The they have a potential to, or if they do, result in claims, owners often state that a contractor’s
key issue is for the contractor to have a “line extra costs for the contractor, they should be failure to produce and update such schedules is
in the sand” beyond which excessive effort formally challenged (and priced) at the time of proof that it was never in a position to properly
in resolving coordination issues or accepting their occurrence. manage its work. Such accusations by an owner,
revised designs is documented as evidence for Owner changes, either individually or whether true or not, can potentially undermine
compensation entitlement. collectively, can have a significant impact upon a any genuine claims made by a contractor;
Contractors have an implied (and often an contractor’s productivity and, therefore, its costs. this, in itself, is a strong enough reason why
expressly defined) duty to inform the owner When pricing the cost of changes, the contractor the contractor should always produce its own
as soon as possible of any errors, omissions should generally not agree to a final value for schedule. It should do this regardless of whether
or coordination problems they discover. It impact costs unless the full extent of these costs the contract requires it to produce one or not.
is important for the contractor to formally is known. Best practice is to reserve the right to If the owner has provided a schedule as
notify the owner of these discoveries in strict claim impact costs at a later date (in writing) as part of the bid package, the contractor should
accordance with the notice provisions set out part of the change order dialogue with the owner. use it as a starting point for producing its own
in the contract, if any, to maintain a record of This is because accurate impact cost calculations detailed work schedule. Ideally, the contractor
all such notifications and to quantify time and can usually only be produced after the event. If should submit its work schedule with its bid. This
cost impacts as soon as possible. If an owner an owner refuses to allow inclusion of impact can then be revised as necessary during the
inadequately addresses such notifications with costs in the cases where they are known at the contract period. Even if the schedule produced is
respect to timeliness and substance, then the time of the change, or refuses a contractor’s right not a CPM, it can still serve to clearly identify the
ability to demonstrate the requests and when to claim for them later, a formal letter of objection owner’s deliverables that the contractor needs.
they were made and properly answered will help should be submitted to the owner thereby putting If the owner has produced no schedule at all
the contractor to subsequently demonstrate the contractor’s disagreement “on record”. In the for the project (which is quite common), this is a
entitlement to additional time-extension costs. rare circumstances when all of the impact and warning sign that the project may not have been
As already discussed, in the heat of delivering extended duration costs can be calculated at adequately planned by the owner. Any project
a construction project a contractor will usually the time of the change, the contractor should of with no owner’s schedule at bid stage should
feel compelled by circumstances to assume course then quantify these costs alongside the be treated as a potentially high-risk project. For
some level of design coordination responsibility, direct costs at the same time, and include them example, the schedule consequences of dealing
as stopping work partway through an activity in its price for the change. with stakeholders and other impacted parties
to seek owner direction is often unfeasible. might have been completely ignored and left for
Such scenarios include work during temporary Mitigating Design Risk – Having a the contractor to “sort out”, but the contractor
weekend closures of pedestrian and vehicle Robust Schedule might have no idea of the real risk implications
commuter routes, night work required to maintain A contractor’s best defence against liability at bid stage. In this situation, the contractor
building safety systems and maintenance work for delay and extra costs caused by design should always prepare its own schedule from
during planned outages. In such instances, the risk is to ensure that its bid’s key assumptions first principles (preferably a CPM schedule) to
contractor should ensure that its coordination about the issue of design information and the submit with its bid. As a minimum, this schedule
efforts are documented (via photographs and interface thereof with its work sequences are should show when the contractor expects to get
site diaries, etc.), that the required notices are clearly reflected on a critical path method (CPM) a) all of its accesses, b) all of the design and
sent to the owner and that what occurred, and schedule. It then becomes much easier to prove c) all of the approvals to its submittals. If the
why, is recorded at the next owner meeting (if compensable delay and extra costs due to design contractor elects not to submit a schedule, either
it is materially significant). This provides a) the issues that have impacted the contractor. Ideally, at bid or soon after award, it may be very difficult
owner with the earliest possible opportunity to the schedule should identify all areas where the to demonstrate entitlement for design-related
object, or not, to the contractor’s actions before contractor’s performance depends upon receipt delay at a later date, basically because the
further construction costs on site are incurred, of design information from the owner, such as cause and effect relationship between design
and b) records that can be used for future the transmittal of Issued for Construction (IFC) change and construction change will not be
contractor compensation claims. drawings, owner’s review of shop drawings, clear. The contractor must have done enough
Contractors often have to produce extensive and any construction “hold” points requiring analysis at bid stage to ensure that its part of the
coordination drawings for approval by the owner. inspection by the owner’s designer within a overall project schedule is achievable.
Insufficient coordination by the designer equates limited time window. The schedule should also Contractors (and particularly trade contrac-
to significant coordination efforts required on site identify when the contractor receives access tors) do not regularly utilize professional con-
by the contractor. Where such site coordination to work areas, especially when staged access struction schedulers during their bid proposal
is onerous, use of a regularly tracked and handovers are involved. stage, either because they see no need for it, or
updated coordination drawing schedule is The Canadian Construction Documents because they feel it is an unnecessary additio­nal
strongly advised. Committee (“CCDC”) suite of contracts and cost. However, a professionally prepared con-
The contractor needs to be vigilant with many standard municipal contract forms for struction schedule showing where the contractor
respect to constructive changes by the owner, design-bid-build projects often contain standard will be waiting for design, design reviews, design
particularly those which are not formally clauses requiring a contractor to produce and inspection and key non-design items such as ac-
4 The Revay Report

cess to work areas is a good investment and an responses received within the time provided contractor always have a trusted independent
effective insurance policy. Even if the contractor for by the contract or in a reasonable time third-party record of what key change events
has no professional construction scheduler on period, and was the number of RFIs issued occurred and when, etc.
staff, these services can be engaged quickly “industry norm” for the size of the project?
and inexpensively if they are planned ahead. • Accurate minutes of meetings in relation to 3. Design-Build Projects –
All sizes of general and trade contracts gain a significant design issues. Whether or not such Overview
management benefit from utilizing an accurate issues are captured in the regular meeting This section of the report applies to both
baseline schedule from which change can be minutes, the contractor should always strictly traditional Design-Build projects and to Design-
accurately measured. comply with the notice provisions stated out in Build teams contracted by P3 project sponsors
the contract. via bespoke P3 contract agreements. It also
Proving Design Change Impact – It is essential for the contractor to keep a log of partly applies to major trade contractors who
Keeping Accurate Records all mitigating actions performed “in good faith” may have design responsibility within their
Proving productivity loss and impact costs to keep its work progressing despite changes scope on larger projects.
caused by design changes can be challenging. or other problems in the owner’s design, and Under Design-Build contracts, the contractor
The better the records a contractor has, the the contractor should consider communicating generally “inherits” a preliminary design
more easily convincing calculations can these formally to the owner on an item-by-item produced by the owner, which, in reality, may
be produced in order to demonstrate its basis. This is essential as the contractor has a vary from conceptual to an almost completed
additional costs. Therefore, for all design- duty to mitigate its damages under the law and detailed design. The contractor is then
related changes, the contractor should it is very important in a claim situation that it can responsible for adopting and completing the
ensure that sufficient resources are in place prove that it has actually done so. design in accordance with the performance
to record all of the associated impacts. These The extent of all of this accurate record keeping specifications. All existing errors, incorrect
may include loss of access to other work, may be perceived as onerous. However, without assumptions and mistakes in the inherited
productivity loss due to trade stacking, being it the contractor is at a major disadvantage in design become the responsibility of the
forced into winter working, additional safety making a claim against the owner, or in rebutting contractor. The owner’s performance criteria
or environmental requirements, additional a claim against itself from the owner. Strategies may be at many different levels, ranging from
management requirements, the need for for making this record keeping as painless as extremely prescriptive to expressing only
additional coordination activities, negative possible (subject to the project being able to the very basic functional requirements. The
impact to other ongoing projects, inefficient afford them) include: contractor completes the outline design by
use of materials and plant, being forced into • Using email in lieu of formal letters for speed hiring its own designer 3, which is the situation
night and/or weekend working and the hiring and convenience (but with the discipline of for most Design-Build contracts in Canada.
of additional equipment and manpower, etc. clearly referencing all emails against the However, for the industrial sector, the designer
Such records should of course also be kept correct parts of the contract and addressing may also be a joint venture partner with the
for all other relevant project changes that are contractual issues to the party named in the lead contractor.
not necessarily design related. contract). This, however, does not dispense During the bid 4 period, the contractor and
Keeping accurate records of project events, the contractor from strict compliance with the its designer must develop the design to a
but particularly those related to impacts caused notice provisions stipulated in the contract. stage where they can generate a construction
by design changes, is essential if a contractor • Having a formalized document management schedule and quantities suitable for pricing.
ever needs to pursue a design-change claim process with a dedicated document controller. However, the contractor has limited time
against the owner, or to rebut such a claim. • Taking date-marked daily or weekly and money during the bid period, and so by
Referencing accurate project records is critical. photographs of the contractor’s work sites. necessity its bid design will contain significant
The necessary records in relation to the owner’s This is inexpensive to do and very useful to risk as it will never be complete at the time of
design change impacts include: help justify claims at the end of a project. submission. By implication, risk money must be
• Date of issue of all IFC drawings and • Verifying the accuracy of the minutes of added to the bid for design and can often form
their revisions. Were they produced in a meetings (a contractor must never rely on a substantial amount of the overall project risk
coordinated manner before the start of the owner-produced minutes until it has verified contingency. Contractors often underestimate
contractor’s activity? them itself). the amount of risk transfer that has actually
• Date of issue of all IFC specifications and • Keeping monthly project reports. occurred from the owner to themselves under
their revisions. Were they produced in a • Enforcing the discipline of producing accurate a Design-Build contract. All the extra costs
coordinated manner before the start of the and detailed daily site diaries (and ensuring caused by design issues that could normally
contractor’s activity? periodical review of these by the project have been claimed from the owner on a
• Date of approval of all contractor submittals management team). Design-Bid-Build project are now almost wholly
(i.e. shop drawings) for review and their • Keeping accurate logs of the issue and owner the responsibility of the contractor. This is a
revisions. Were they approved (or were responses to RFIs, change order requests huge pricing challenge.
relevant comments made) within the time and notifications of mitigation actions In addition to pricing construction from
provided for by the contract or allocated on performed by the contractor. quantities based on an incomplete design, the
the schedule? • Promoting independent monitoring of contractor must allow sufficient contingency for
• Date of responses to contractor Requests progress (such as the Independent Certifier all the other design issues which could cause an
for Information (RFIs). Were the owner’s concept used on P3s) such that the owner and increase to schedule and cost (such as scope-
The Revay Report 5

creep and adverse impacts upon other project subcontract quotations from trades without interpreting the owner’s requirements 6. Some
areas like stakeholders and the environment). allowing adequate time for their production. owners address this concern by mandating
Successfully managing design risk in the The contractor should ideally produce bid that contractors provide a separate technical
execution of Design-Build projects requires a procedures that clearly and unambiguously submission which must be acceptable to the
level of management from the contractor that identify what bid design deliverables are owner before permission to submit a financial
is significantly greater than that needed for a required, when they are required and the submission is granted. By definition, under
Design-Bid-Build project. This can only be procedures by which they are generated. For this arrangement contractors know that they
achieved by employing the right designer and large projects, the contractor should consider conform with the owner’s understanding of the
experienced contracting staff to manage and having its own staff, such as experienced performance requirements before the entire bid
direct the designer and manage the design/ superintendents or a design manager, based is submitted. This system is beneficial to both
construction interface. On Design-Bid-Build in the designer’s main production office. parties as it eliminates the time and the cost of
projects, the contractor’s design risk occurs preparing non-conforming technical bids.
almost entirely during the construction period Bid Production Schedule – Designer’s
as it has no technical design risk to price in its Deliverables Establishing Design Constraints
bid. This is completely different from Design- The contractor should agree to a detailed bid One of the most important initial tasks in
Build projects, where the contractor’s design production schedule with its designer. Ideally, preparing a bid is to establish the constraints on
risk occurs in both the bid and the construction it should allocate time for design review by the the design: physical, engineering, stakeholders,
periods. In fact, more design risk is actually contractor, securing subcontract quotations, environmental, planning, and, very importantly,
carried during the bid stage, when a fixed price estimating quantities or ratios for pricing and the minimum requirements which will satisfy
is given against an incomplete design. In the producing bid submission documents. It is the owner. The contractor’s bid documents are
construction period, the contractor must try essential that the designer formally accepts usually prepared by its designer and are thus
to “force” the design not to exceed the key and agrees to a bid production schedule – the designer’s interpretation of the owner’s
quantities that its bid is based upon. This can there is no room for misunderstanding the requirements. It is critically important that the
be very challenging and wherever possible contractor’s requirements in a time-limited bid designer and contractor have an in-depth and
the contractor should consider using pain- period. To this end, it is recommended that the thorough understanding of these core owner
gain mechanisms to incentivize its designer designer and contractor agree to a schedule of requirements. If the requirements are scattered
accordingly. deliverables (i.e. the documents the designer throughout the bid documentation, it is usually
must produce for pricing) from the designer at worth summarizing them in a single document
3.1 Design-Build Projects – the earliest possible opportunity. The headings for the bid team. The owner’s design will
Pre-Award or Bid Stage for these deliverables are typically: (i) drawings, need to satisfy many requirements including
The key to winning Design-Build bids at a (ii) quantities, (iii) specifications and (iv) any statutory legislation, promises to stakeholders,
profitable margin is teamwork. The combined other specific owner’s requirements. For some permits and environmental obligations, etc.
expertise of both the designer and the contractor types of projects, however, the pricing may have The contractor should be satisfied that the
is required to find the most cost-effective design to be based more on previous similar contracts designer is incorporating everything materially
and execution strategy that meet the owner’s than on priced tender design. significant into the bid design, or, if not, the
requirements. To properly optimize the design, contractor needs to include an allowance.
ideally the entire bid team should be involved in Conforming and Alternative
developing a bid strategy from the start of the Submissions Design Rationale Statements
bid period, before any bid drawings, quantities or Owners will usually indicate the extent to which Once the design concept for each major element
specifications are produced for pricing. they are open (or not) to receiving submissions is finalized, the designer should be required to
that vary from their base concept. Generally, produce short, high-level Design Rationale
Time Constraints – The Benefit of contractors should only consider an alternative Statements that briefly summarize the driving
Clearly Understood Procedures if they believe it will give them a significant assumptions behind each chosen design
Time constraints place considerable pressure competitive advantage and that the owner will solution. These documents should primarily
on both the designer and the contractor’s consider it fairly and seriously. address the questions (i) why use this solution
estimator during the bid period 5. For this When preparing a bid, the designer should and these design criteria? and (ii) which cost-
reason, a bid program that allocates highlight for resolution any potential ambiguities driving design parameters are optional? Where
appropriate time for both design and pricing or queries in the owner’s requirements. These applicable, key safety and environmental
activities should be developed. It must be queries should be addressed either via considerations should also be stated. The
noted, however, that not all quantities will be questions and answers with the owner, or by Design Rationale Statements allow the party
based upon tender design; many will have the designer and contractor making decisions commercially responsible for the design,
to be based upon benchmarking previous together as required. These queries should i.e. the contractor, to grasp what is driving the
projects and the use of industry ratios, etc. focus particularly on ensuring that the contractor main construction costs and give the designer
Bid design should be managed tightly via has a clear understanding of the performance “course corrections” as necessary. This minimizes
agreement of a production schedule with requirements in the bid package. As the bid abortive design work on the project. The Design
the designer, as late bid design reduces the design, schedule and price are generally based Rationale Statements can be used to catch
contractor’s (and its trades’) time for pricing. In upon performance requirements, it is essential both unbuildable designs and mistakes in the
particular, it is unfeasible to obtain commercial that the contractor knows that it is correctly interpretation of performance requirements.
6 The Revay Report

Design Freeze choices during construction, which is often the it. This is the only way both the owner and the
It is good practice to have a design freeze only time at which the optimum choice can be contractor can derive the maximum benefit from
meeting identified in the bid schedule in order made for many products and materials. Design-Build.
to record an agreement between the designer Most owner specifications are written on the
and contractor on how far the design of all of assumption that the quality level required to meet Design Risk Analysis
the main project elements will be developed the minimum performance criteria will not be It is good practice for the designer to
for pricing and, where there is a choice, which met without a high degree of over-specification. produce the leanest credible design given
are the preferred design solutions. Ideally, this To bid competitively under Design-Build, the the information available. An assessment of
process involves review and acceptance of the contractor should assume it can ensure that the possible risks, quantitative wherever possible,
Design Rationale Statements. In practice, it required quality standards can be met. Hence, with their associated probabilities should
is not always possible to freeze the concepts the contractor should make sure that its designer then be undertaken by the designer. This risk
for all key designs by the target date. In such is using the minimum compliant standards analysis should not be left until the last minute,
cases, the contractor should set revised dates to meet the requirements. Not following this as proper assessment of design risk is critical
for those items that could not be frozen on their approach will make the contractor’s bid higher to the success of a Design-Build bid. Ideally, a
initial planned dates. Either way, every major and hence less competitive. live listing of risk items should be maintained
element of design should be subject to a formal jointly by the designer and contractor. All
design freeze. The agreed design principles Bid Submission Documentation members of the bid team should contribute to
should never be changed by the designer after The owner’s requirements specify the this list on an ongoing basis. Risks should be
the design freeze. documentation to be submitted with the bid. In reviewed regularly at design review meetings
compiling the documents, two key principles during the bid. In some cases, design risks
Quantities for Estimating should be observed to the greatest extent can be minimized or removed by adopting a
The quantities produced from the designer’s possible: first, submit the minimum information different design approach, but wherever this
documents are the fundamental driver of to avoid disqualification of the bid and second, is done, input from the entire bid team should
the bid, as they have the largest influence in be very careful not to “over-fix” the bid design be sought prior to making the design change.
determining the construction schedule, cost technically (i.e., dimensions, form, finishes, Design risks can cover a huge number of issues
and risk. It is therefore very important that the specifications, work methodologies, etc.). including material and product procurement,
designer’s documents are subject to quality The first principle is important because the environmental impact, constructability, safety,
checking before the contractor receives them owner inevitably asks for far more information, stakeholders and the owner’s own political
for pricing, particularly for completeness of and to a far higher presentation standard, than constraints (such as limits on local road
coverage and correctness of the quantities. is reasonable in the context of a Design-Build closures, for example).
This quality checking of design deliverables in a bid. Full compliance often renders such bids
time-limited bid situation will not usually happen uneconomic for the contractor to produce on 3.2 Design-Build Projects –
unless the contractor forces the designer to large projects. In most cases, contractors should Construction Period
undertake it. Uncertainties in quantities should be confident in focusing on the owner’s “needs” On all but the smallest of Design-Build projects,
be quantified as far as possible, for example rather than on its “wants” (as long as the “wants” the contractor should actively manage the
by a range of quantities and their associated are not contractual obligations!).The lowest bid designer throughout the project for the
probabilities, for review under a separate risk is unlikely to be disqualified because of “average” obvious reason that under the head contract,
assessment. The contractor should require the rather than “excellent” documentation quality. the contractor is commercially responsible for
designer’s bid deliverables to be reviewed by a This principle should be spelled out clearly to the design and its impacts upon the project,
senior principal from the design company using the design team so that the designer accurately not the designer!
the 80:20 rule, i.e. that 80% of the value lies understands what should be produced and to
within 20% of the items. what level, allowing it to properly price the work Using a Dedicated Design Manager
for the contractor. On any significantly sized project, the contractor
Specifications The second principle is relevant in that many will achieve substantial design-related risk
Specifications may be required for two public owners have difficulty accepting one of reduction by employing a dedicated contractor’s
different reasons: the first is to enable the the fundamental principles of Design-Build: design manager for both the bid and execution
contractor to seek prices for materials and that the contractor should be free to amend the phases. This person (or persons) should focus
from subcontractors; and the second is to be design during the design-development stage, on managing all the technical and commercial
part of the owner’s required documentation after contract award. If the contractor defines aspects of the Design Agreement, i.e., the
for the bid. Generally, specifications should too much, too rigidly in its bid, the owner may contract executed between the designer and
always be as flexible as possible but used insist on that specific design’s incorporation the contractor to provide the detailed design.
with “locked-in” definitions of the actual work or seek a credit if the design is later amended. Ideally, the design manager will be a seasoned
involved. Performance specifications will These issues can reduce the contractor’s ability professional experienced in the challenges
offer the most flexibility to the contractor and to deliver the project within budget by eliminating faced by both designer and contractor in the
should be used wherever possible. Conversely, design optimization options. delivery of Design-Build projects, usually
prescriptive specifications should be avoided None of the above lowers the quality of the warranting a full-time role on large projects.
wherever possible. This is because prescriptive finished product, but rather allows maximum The design manager should be responsible
specifications restrict the contractor’s available flexibility in the way that the contractor achieves for ensuring that constructability and value-
The Revay Report 7

engineering input from superintendents and level, as design schedules rarely drop down to sub­contractors’ “needs” are accommodated by
trades is integrated with the technical design the level of individual drawings, etc. the designer, as far as practicable.
as appropriate.
Managing the Design Product Managing Design Changes
Producing a Design Schedule The designer and the contractor should fully A clear, formal system of design change control
The contractor should ensure that it has understand the owner’s requirements, the bid should be established by the contractor at the
established with the designer a design schedule design and all of the constraints on the design. start of the project, covering the many potential
that is fully integrated with: subcontract enquiries Before any post-award design work com- sources of design changes (owner, designer,
and bid packages; any required additional mences, the contractor and the designer should contractor, subcontractor, other third parties,
investigations; procurement; temporary works immediately reconcile the scope of the design- etc.). This system should clearly identify the
requirements; and the construction schedule. er’s work as described in the owner’s require- source of the change and the party responsible
The designer’s provision of an adequate design ments and the Design Agreement. for its implementation. All potential design
schedule (to a defined standard) should be an The Design Rationale Statements used changes should be reviewed by the contractor in
explicit condition within the Design Agreement. during the bid design should be “refreshed” and conjunction with other members of the site team
The contractor should verify that the designer expanded as necessary for the detailed design as appropriate for potential impacts on schedule,
has developed the design schedule to enough production. It is tempting for both the designer cost, subcontractor schedules and risk. Note that
detail for each package to permit adequate and the contractor to avoid this step. However, construction team preferences are often a cause
planning and resourcing of the work. In the it is one of the most effective things a contractor of disruptive design changes. Such changes
absence of a well-thought-out design schedule, can do to reduce its design risk exposure. should be allowed only if it can be demonstrated
work is most likely not being adequately planned As previously mentioned, design freezes that (i) the saving from the change is worth the
and the contractor then has little basis for should be rigorously used and both the designer disruption to the design, (ii) other designs will not
believing that the design dates will be met. and the contractor should adhere to them. The fall behind due to the loss of design resources
It is critical for the contractor to allow sufficient designer’s obligation is to produce draft designs required by the change, and (iii) the design
time for mobilization of the design team at for construction review at the scheduled time. The change introduces no new significant risks to the
the start of a project. Design teams need contractor’s obligation is to control and expedite project 7. Contractors’ site staff naturally have
mobilization time in exactly the same way that the comments on the design made by the con- many good ideas to improve the design during
construction teams do, for planning, organization struction team. Comments from the construction the construction period. However, such changes
and establishing communication protocols. team add value to a project only if they are de- must be “filtered” by senior contractor staff who
The contractor should also recognize that livered early enough for the designer to address can properly “rationalize” the disruption, cost
determining the project’s document flow them within the time scheduled for the design. savings, risk and schedule impact involved in
procedure for design is a prerequisite for change decisions.
producing a design schedule, as reviews and Stakeholder Coordination
approvals should be “built in”. The contractor should be fully involved in the Temporary Works Interfaces
The contractor should ensure that the designer decisions made regarding design interfaces The contractor should be mindful of the
has established what, if any, information is between the designer and design-supply- interface between permanent works and
required from other parties in order to complete install subcontractors. Neither the designer nor temporary works. Careful integration of the
the design for each package. Examples are the subcontractors should have the authority design of temporary and permanent works
performance criteria for key materials and to dictate the best decision at such interfaces. is critical to ensure the constructability and
products, etc. and inputs from trade contractors For example, it is common for mechanical optimization of the design. In many instances,
on constructability. These requirements should plant contractors to specify excessively tight the temporary works solutions chosen may
be clearly communicated and these inputs settlement criteria for some items of plant. The have non-technical constraints due to safety,
to design should be actively managed by the cost consequences of applying such stringent stakeholders or environmental considerations.
designer and contractor working together. design criteria should be weighed against the In some projects, such as large bridge projects,
Particularly, if the contractor has long-lead items, alternative of buying a more expensive plant with for example, the temporary works actually drive
it should ensure that these are identified early less onerous settlement requirements, etc. the permanent works’ design.
to the designer so that they can be scheduled The designer should coordinate with, and in-
appropriately in the design schedule. tegrate into the design, the requirements of third Design Communication
It is critical for the contractor to ensure that its parties as stipulated under the main contract. A review of previous projects confirms that
designer has produced a schedule of deliverables Ideally, this interfacing should be controlled by major design problems on Design-Build
list. Without such a list supplementing the design the contractor as it carries the financial burden projects are frequently due to a lack of
schedule, there is no guarantee that the design of any decisions made. As previously stated, communication, rather than to the technical
activities encompass all scopes of work. Such a subcontractor submittals should be reviewed design ability of the designer.
list helps align each of the parties’ understanding to ensure that contractual obligations are For a successful Design-Build design, the
of the scope represented by each activity. met without superfluous and costly additions. designer should be fully integrated into the
Without it, there will usually be missing design Additionally, designers are often poor at ensur- contractor’s team. Ideally, this means that a senior
documents and missed deadlines, since there ing that their designs seamlessly accommodate representative (such as a contractor’s design
is otherwise no precise definition of what has to the major subcontractors’ work methods. The manager or superintendent) is colocated in the
be produced at the individual drawing/document contractor must make time for ensuring that its designer’s office for much of the design period.
8 The Revay Report

The designer should not be treated like a numbering and filing occurs from project by having suitable procedures in place for
subcontractor to be unduly pressured into inception to conclusion. managing the design/procurement/construction
producing what the contractor wants. Every interface. These include producing well-
member of the design team must be an 4. Conclusion thought-out design schedules, clarifying the
enthusiastic and committed project team Design issues can result in significant cost owner’s requirements and the scope of the
member, extending themselves to produce the increases for a contractor, whether the designer’s work, managing design changes
most economic design. The contractor’s “soft project delivery method is Design-Bid-Build and, last but not least, effective communication
skills” are very important here, as the designer or Design-Build. between the design team, construction team
needs to be motivated to make good design and all third-party suppliers and subcontractors.
decisions that are economically advantageous Design-Bid-Build
to the contractor. In order to mitigate the risk of increased costs * Any views expressed in this article are those of
The designer should never be threatened and schedule delays associated with design, the author and may not necessarily reflect the
with claims against its insurance during the the contractor should first determine if a views of the company.
design production phase. This has been shown project is too risky to bid on. If a contractor
to be hugely counterproductive. The contractor moves forward with a bid and is awarded the
should also not assume that all members of the contract, knowing the contract requirements is 1 In the context of its contract with the contractor.
designer’s team understand the challenging paramount. Key aspects other than scope of
design process on Design-Build projects, or work are the contract requirements regarding 2 Note that this is not the case for Early Contractor
that the design team intuitively knows what the notification, schedules and entitlement to Involvement or Progressive Design Build projects
contractor requires. The contractor’s mantra compensation for changes, including delays. where a contractor is brought on board at the
needs to be “tell the designer what you want and The contractor must be rigorous and timely development phase.
then tell him again and again”. with respect to changes and notification. In
order to improve the chances of remuneration, 3 Note that some larger contractors have their own
Document Control detailed documentation is key. And finally, in-house design team which can be used.
On a Design-Build project, the contractor will frequent communication amongst the parties
have to manage somewhere in the order of can help ensure that everyone’s interpretations, 4 The term “bid” is used herein but represents bids
five to ten times the amount of documentation concerns and changes regarding the design and/or proposals.
it manages on an equivalent Design-Bid- (and the project in general) are addressed
Build project. Managing design generates promptly. While this will not eliminate all 5 For large P3 projects however, the bid period can
huge additional communication and recording design-related issues, it will go a long way be lengthy, often up to 6 months.
requirements. The importance of appointing an towards mitigating the impacts caused by
experienced professional on the contractor’s design changes and inadequacies. 6 An interpretation of the owner’s performance
team to set up and manage document requirements that is different from the owner’s
control and information flow should never be Design-Build engineer’s view is a common cause of disputes on
underestimated. Best practice includes the In order to mitigate the risk of increased costs Design-Build and P3 projects in Canada.
use of cloud-based database systems that can and schedule delays associated with design,
be customized for any given project. Robust the contractor should actively manage the 7 The author’s experience is that it can be useful for
systems for exchanging and storing information designer throughout the project. This can the project to require any design change to have a
are imperative and should be well thought-out only be achieved by employing experienced minimum total project saving, such as more than five
in advance to ensure that consistent coding, staff dedicated to managing the designer and times the cost of implementing the existing design.

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