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While industry executives still cite a number of hurdles blocking design-build from reaching its full market potential, the combination of a rallying economy and recognition of the need for infrastructure investment point to promising years ahead. This survey of the top 250 U.S.-based design-builders, furnished courtesy of Engineering News-Record, indicates that single-point responsibility and cost certainty continues to attract clients with a wide range of construction needs.

As transportation demands outstrip tax revenues and owners turn to innovative financing, design-build provides the cost certainty demanded by investors, says Steve Dobbs, Fluor Corp.’s group president for infrastructure. Alternative financing and delivery is often necessary to fund large-scale transportation programs. A Fluor design-build-maintain joint venture is now building one of the largest U.S. highway projects, Texas’ $1.5-billion, 49-mile SH 130 toll road, which could be part of the Trans Texas Corridor, a proposed 4,000-mile, $180-billion transportation and utility network.

But nowhere is the design-build movement more prevalent than in water and wastewater. "We see design-build happening in all corners of the U.S.," reports Mark E. Alpert, vice president of design-build for Denver-based CH2M Hill Cos. Owners are "looking for risk transfer, date-certain delivery, with certain types of performance guarantees." This year, a team led by Black & Veatch, Overland Park, Kan., and St. Louis-based McCarthy Building Cos. is scheduled to start construction on North America’s largest design-build-operate water project, the $336-million first phase of Phoenix’s Lake Pleasant Water Treatment Plant.

In the manufacturing sector, "we’re going to continue to see automotive as a good market," predicts Jim Gray, chief executive officer of Gray Inc., Lexington, Ky., the holding company for James N. Gray Co. Even in long-dormant industrial process markets like chemical manufacturing and pulp and paper, "we’re starting to see an uptick," says Dennis Schroeder, president of the engineering division at BE&K Inc., Birmingham, Ala.

Globally, the Middle East and Asia "are really the hot power markets right now," says Keith Small, market analyst at Black & Veatch. "I would say that 50% of the projects Black & Veatch looks at in the U.S. are design-build. We’re seeing a lot of coal opportunities, many of which are design-build," he adds. Whether the client is a regulated utility or an independent power producer, "you’re going to want cost certainty," Small says. "So the design-build model, as a lump-sum type of structure, lends itself to that." As the power industry reduces in-house engineering staff, "it makes a lot more sense to them to look toward a design-build model," says John Felski, B&V market analyst.

Though the climate for design-build is warming, executives still see challenges in project delivery and procurement. "As a rule of thumb, the more constituents there are (in a project) the tougher it is for the contractor/vendor to manage it," notes Gray. Around the globe, says Small, "there’s certainly a recognition that it’s a buyer’s market, and they’re pushing the envelope" on schedule, performance guarantees, and liquidated damages. As design-builders themselves push the envelope in a bid to keep pace, "you have to differentiate between being competitive and being aggressive, and going over the edge," says Small.

Risk allocation, especially clients’ eagerness to push risk entirely onto the design-build team, remains an overriding concern. The risks of underground construction have "made us far more cautious about a design-build job, about the way we approach it and estimate it," says Robert Pond, executive vice president, Frontier-Kemper Constructors Inc., Evansville, Ind. "You have to spend more time trying hard to identify the risks...before you make a proposal." Frontier-Kemper has long delivered mine projects via design-build, Pond notes, and "it works very well because clients don’t have unrealistic expectations."

Topping many executives’ wish lists is standardized procurement and contracts. Adoption of a model contract for transportation projects, for example, would save time and money and enable the client to focus on special-conditions components, Fluor’s Dobbs argues. In a bonus for builders, standardized procurement would mean that as you moved from state to state or location to location, it wouldn’t be a completely new ballgame. And more uniform procurement would boost competition by encouraging smaller contractors who can’t afford to spend big bucks for legal advice to develop contracts.

By Paul B. Rosta

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