The Downsides of Following a Design-Build Approach

Some professionals say that the savings that come with following a design-build approach are illusory, and insist that the dangers outweigh the benefits. "I would never let an engineer do anything like that all by himself," says attorney James Samson, a partner at Samson Fink & Dubow. "You don't have an independent adviser to say whether it was installed correctly. When we did the solar panel project at Georgetown Mews, we had a design-and-build contract. Nonetheless, we still had our own engineer looking over their shoulders. I wanted my own expert [to tell] me that they had done the work in accordance with the plan that had been prepared and that we had approved. I always want somebody who doesn't know the contractor to get out there and tell me whether I got the right job."

Samson says it's wrong to trust anyone. He points to a building that was going to install a remote water meter. The managing agent told the board that it would cost the co-op $9,500 to install. "And I said, 'Are you crazy? We can get it done for $3,800 and the city of New York will reimburse you for that.' The managing agent looked at me and said, 'You think you can do it for that price?' I said. 'Yeah, I can do for that price.' He said, 'Well, you don't need me.' And I said, 'For $9,500, I don't need you.' I got it done for $3,800."

"I think that [competitive sealed bidding] is critical in most projects," adds attorney Abbey Goldstein, a partner in Goldstein & Greenlaw, even though "it is tempting [to go without such bidding] on smaller projects." Goldstein says the price tag for having independent engineering can be about ten percent of the total project cost. "The engineer would not only design it, but would [also] supervise the work," he says. "As the value of the project grows, [so does] the need for an engineer not only to design but [also] to actually supervise the work."

"To get a competitive price on a construction project, we solicit sealed bids from multiple contractors on every job," says Stephen A. Varone, president of RAND Engineering & Architecture. "We don't have a vested interest in which contractor wins the job, other than wanting the work done properly. But design/build firms do both the design and the construction, so there is no competitive bid on the construction work. In addition, there's a lack of oversight because the same firm administers and signs off on its own construction work. It's hard to avoid that inherent conflict of interest."

"A big project should absolutely have an independent engineer, not somebody who has divided loyalty or who is recommended by the contractor," Goldstein agrees. He says there is another benefit to competitive bidding. "Having several bids is helpful. It's not unusual that you will speak to several contractors and you get new ideas for the job, which could lead to modifications based on a fruitful give-and-take between the contractors and the engineer."

When to Use It

Gene Ferrara, president of the consulting firm JMA Consultants, is a consultant on another project where design-build worked. In this case, it was a very complex rehabilitation of structural columns in an occupied structure. "There simply were not that many contractors who could do the work we were proposing," he says. "I found an engineering firm that did design-build for that type of job and they worked with one contractor."

Those specialty jobs aside, Ferrara says not many boards want to go the design-build route because there is too much potential for liability, "In a sense you have the fox guarding the henhouse," he says. "Most boards want a variety of pricing options."

Sometimes the close relationship between an engineer and a contractor in a job can outweigh potential benefits from sealed bids. "There's no law that requires [sealed bids]," says Goldstein. "Say you have a good experience with one contractor and that contractor has been responsible in the past and the project is not too large, then it's not irrational that you would go with that company without necessarily getting bids. But the bigger the project the more necessary it is to get those bids."

"There can be a lot of value in the relationship," agrees Eric Cowley, an engineer and founder of Cowley Engineering. "Perhaps the mechanical contractor they are hiring knows what needs to be done, or they have the institutional memory with your building, or a specialty that allows them to come up with a solution that saves you money in the end."

Cowley says the process, which he calls a "turn-key" job, can also have other advantages, "If something goes wrong five years from now, there's only one guy to call. And," he adds with a laugh, "if something goes wrong, there's only one guy to sue."

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