Division 4 presentation_dugan_design_build_claims_2013_03_26

ABAMarch 26, 2013

Design-Build Gone WrongLessons Learned

J. Mark DunganDelta Consulting Group

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Design-Build vs. Design-Bid-Build

The Growth of D/B Method (DBIA 2004)

82.3%

72.0%

65.0%

54.0%

40.5%

5.3%

16.0%26.0%

36.0%

45.3%

50.0%

12.4% 12.0%9.0% 10.0% 9.4% 9.5%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

1985 1990 1995 2000 2005 2010

Traditional Design/Bid/Build Design/Build Construction Management @Risk

Design-Build Projected Trend in 2004

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3

Design Risk in a Design-Bid-Build Contract

Design-Bid-Build vs. Design-Build

4

Design Risk in a Design-Build Contract

Design-Bid-Build vs. Design-Build

5

Owner

DesignProfessional

CONTRACT

SUBCONTRACT

SubContractors

Comparison of Contractual Structure Design-Bid-Build vs. Design-Build

ConstructionDocuments

CONTRACT

Contractor

Bid Based onDefined Scope

Design-Bid-Build

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Design-Bid-Build Design-Build

CONTRACT

Owner

Contractor


Owner

DesignProfessional

CONTRACT

SUBCONTRACT

SubContractors


CONTRACT

Contractor

Bid Based onDefined Scope

Bid Based onPerformance Criteria and

General Specifications

Designer Builder

SUBCONTRACT

SubContractors


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ContractorDesigner Builder

Design-Build

• Provides Performance Criteria

• Provides General Specifications

Owner

• Provides Design Team• Detailed Construction

Documents• Management of

Construction

Contractor

CONTRACT

Owner

Bid Based onPerformance Criteria and

General Specifications

SUBCONTRACT

SubContractors


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Design Build Concept

Owner Specifies

Project Needs

Owner and Design Builder agree on Price and Contract

Design Builder Prepares Detailed Design

Documents

Owner Approves

Design

Contractor Builds

According to Agreed Designs

Owner Reviews Design for

Compliance

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10


Both Owners and the Design Builders Occasionally Misapply the Design Build Concept…

We will present examples of each.

Typical Problem Areas

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ScopeDesign Construction

DB designs minimal to meet performance, Owner expected higher standard

Unlike DBB, Scope is sometimes vague, a change to the DB is a design evolution to the Owner

DB may provide basic industry standards while Owner expected greater standards

Example of Owner Misapplied Concept

Owner Specifies

Project Needs

Owner and Design Builder Agree on Price and Contract

Design Builder Prepares Design

Documents

Owner Approves

Design

Contractor Builds


Owner Burdens Design Process

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Typical Problem Areas

Design

DB designs minimal to meet performance, Owner expected higher standard

Example:Large Industrial Complex.

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A1

• Design development to point of Owner review.

AFC orRev 00

• Incorporates Owners Comments to A1, Approved for Construction

Rev 01

• Incorporates any minor comments or from unforeseen issues

DB’s Expected Drawing Development

Evolution of Drawing 101

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101 – A1

101 – A2

101 - 00

101 Rev. 1

101 Rev. 2

101 Rev. 3

101 Rev. 4

………………….

101 Rev. 12

12/21/07

20092007 2008

J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

Work Started in July 2007. The evolving design, due to owner

changes, delayed the initial drawing submittals until

December.

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E1


Owner Rejects Drawing:

• Comment #1: Owner prefers the two plans be combined and produced at a larger scale.

• Comment #2: Owner directs preferred labeling of Walls

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E2

2/24/08

20092007 2008


Contractor adds changes complying with Owner changes.

The two drawings were combined into one as

requested.

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• Comment #3: Owner states that the combined drawing scale is now too small to describe the details desired.

• Comment #4: Owner comments that the line width used on the drawings was to narrow.

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00

4/4/08

20092007 2008


102 103

104 105

106 107

20

Rev 00The Owner requires what was a

single drawing now be broken out into six new detail drawings

101Key Plan

102 103 104 105 106 107

Effort x 1

Design Effort Increased x 6

Drawing 101 Becomes 7 Separate Drawings

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01

4/20/08

20092007 2008


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Drawings Issued for Construction on April 4th

Floor slab revised to accommodate preferential

Owner decision to add Storage and Bathrooms.

Change required on 3 separate drawings



• Comment #5: Owner requires the removal of an a reference to another drawing, wants detail on each drawing.

• Comment #6: Owner requires that a note describing a typical expansion joint be specifically added at each joint location.

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03

10/18/08

20092007 2008


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Walls moved to increase size.



• Comment #7: Owner now wants 20 more expansion joints. Although all are the same, the Owner requires that each has to be specifically detailed.

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04

10/31/08

20092007 2008


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All 7 Drawings reissued specifically detailing 20

Expansion Joints.



• Comment #8: Owner increases size of equipment in the building, rejects drawing and directs that it be changed to accommodate the new equipment.

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101

102 103 104 105 106 107 108 Count of Drawings

11/4/07 A1 A1 A1 A1 A1 A1 A1 7

11/18/07 00 00 00 00 00 00 00 7

12/12/07 01 01 01 01 01 01 6

2/7/08 01 02 02 02 02 02 02 7

2/14/08 03 03 2

3/21/08 04 04 2

10/10/08 02 05 02 03 05 03 03 7

5/22/09 04 1

5/29/09 03 04 2

8/19/09 06 06 2

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A1

• Design development to point of Owner review.

AFC orRev 00

• Incorporates Owners Comments to A1, Approved for Construction

Rev 01

• Incorporates any minor comments or from unforeseen issues

Expected Drawing Development

A1

A2

A3

A4

AFC Rev 1

Rev 2 Rev3 Rev4

Rev 5 Rev 6 Rev12

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Impacts Caused by Owner’s Design Process Involvement

>10,000 Additional Drawings

Impacts of Owner Misapplied Concept

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ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

ReviewSheet

Over 12,000 Drawing Review documents

Issued by the Owner

ReviewSheet

Anticipated

Scope

Preferential

Over 30,000 Individual Owner Comments

Impacts of Owner Misapplied Concept

• The Owner’s design involvement caused the Contractor:

– Unplanned additional resources needed for management, development, and production of drawings

– More time required to progress job

– Contractor’s costs to complete the project increased above what was bid

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Construction

DB may provide basic industry standards while Owner expected greater standards

Example:Power Station

Example of Contractor Misapplied Concept


Owner Specifies

Project Needs and Price

Owner and Design Builder agree on Price and Contract

Design Builder Prepares Design

Documents

Owner Reviews Design for

Compliance

Contractor Builds


Contractor Does Not Work With

Owner Specification

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DBB DB

CONTRACTCONTRACT

SUBCONTRACT

Owner

Contractor

SubContractors

DesignProfessional

CONTRACT

SUBCONTRACT

Owner

Contractor

SubContractors

DesignProfessional

SUBCONTRACT


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$

DB

CONTRACT

SUBCONTRACT

Owner

Contractor

SubContractors

DesignProfessional

SUBCONTRACT

• Design Errors and Omissions are Under Contractor Liability

• Subcontractor Time and Money Claims are charged against Contractor to correct design issues

• Possible LD’s to Owner

$ $

Design Build – Liabilities

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• Plant was nearly operational

• Over half of systems turned over

• ~500 well defined punch list items

Completion Work Status

At Termination:


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Opposing Views of Project

Contractor’s Story

• Project will Perform as Contracted

• Essentially Operational

• Owner Being Unreasonable

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Owner’s Story

• Project Not Built as Contracted

• Auxiliary Systems not Built Per Design

• Contractor Failed to Perform

Upon Investigating the Work-in-Place,

–Design did not Conform to Owner’s Criteria,

–Work in Place did not Conform to Detail Construction Design

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$

DB

CONTRACT

SUBCONTRACT

Owner

Contractor

SubContractors

DesignProfessional

SUBCONTRACT

Design Professional’s Contract was essentially a Typical Subcontract Agreement.

When General Contractor was Terminated, Design Professional took the position they had no further contractual obligation.

Design Build – Liabilities

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Punchlist Item:

“Drain funnels are spraying fuel oil on the ground”

EXAMPLE of DESIGN ISSUES

Unit Drain System


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Owner Equipment

Unit Drain SystemProblem Encountered:

Fuel Oil Is Spilling

• Unexpected Result• Environmental Issue


42

Owner Equipment

What Was SPECIFIED: Funnel Connection was Specified by Manufacturer

of this Owner Supplied Equipment

Vendor Required Funnel Connection


2”

1”

43

Conflict in Specifications and Design Drawings.

• Design-Build contractor Changed the Owner’s Requirement for a funnel connection without the Owner’s Review of Approval.


44

Owner Equipment

What was DESIGNED: Contractor’s Design Drawings showed the 1” pipe being connected to a 1” underground pipe by a Flange Joint

1”

1”


45

Conflict in Engineering Design Drawings and Actual Construction.

• Owner Refused to Accept Flanged Connection, they were supposed to have a Funnel Connection.

• Design-Build Contractor, Cut Off the Flange and Welded on a Funnel Connection.


46

Owner Equipment

Field Change: Contractor makes field change for a funnel connection

without the Owner’s Review or Approval


47

Contractor’s Resolution: A 1” pipe with funnel connection runs

underground to a tank

1”

1”

Owner Equipment


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New Design

1”

2”

Owner Equipment


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Owner Equipment

Steps to ResolveRemove Work-in-Place and Install New Work

EXAMPLE of DESIGN CORRECTIONS

• Stop System• Hand excavate and

Remove 1” Pipe• Install 2” Pipe and

Appropriate Funnel• Backfill

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• Unapproved and non-conforming design had to be corrected by the replacement engineer

• Significant portions of work-in-place had to be removed and re-constructed in accordance with corrected design

• As more systems were inspected and design was corrected, the Punch list grew to over 2,000 items

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Lessons Learned

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ScopeDesign Construction

Owner strive to specify its desires pre-contract and then limit review to compliance

Define Scope matrices that specifically identify items and responsible party

Define Standards pre-contract, evaluate experience of Design Builder

Thank You for this Opportunity

The End

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Delta Consulting Group, Inc.4330 Prince William Pkwy., Suite 301Woodbridge, VA 22192703.580.8801 (p) | 703.580.8802 (f)www.DELTA-CGI.com

J. Mark Dungan: Co-Founding PartnerEmail: [email protected]

Delta Consulting Group is an international consulting firm of multi-disciplined professionals in engineering, accounting, construction, project management and litigation support. Our key services include: Dispute Avoidance/Resolution, Expert Witness Testimony, Project Management, Financial Advisory, as well as Troubled Project and Surety Consulting.

http://www.delta-cgi.com/