by Michael C. Loulakis, Esq., FDBIA, President, Capital Project Strategies, LLC
One of my typical roles as an owner advisor is to review proposed construction management at-risk (CMAR) and design-build contracts from a commercial perspective—i.e., what’s the likely marketplace reaction to the contract and is the contract consistent with the philosophy behind collaborative delivery? I am continually amazed by what I see.
by Michael C. Loulakis, Esq., FDBIA, President, Capital Project Strategies, LLC
I have always been perplexed as to why dispute boards are so rarely used on water/wastewater projects. They enjoy a long history of successful use on transportation projects—particularly tunneling projects and big-dollar design-build projects. Most transportation owners find dispute boards helpful, and it is clear that they provide the parties with a vehicle to get real-time resolution of project challenges. But it seems that water/wastewater owners and owner advisors don’t even give a thought (let alone a second thought) to considering the use of a dispute board when they put together their contracting approach for a non-tunneling project.
by Michael C. Loulakis, Esq., FDBIA, President, Capital Project Strategies, LLC
Looking for something different to do this holiday season? Reach out to 100 of your favorite friends and family members, play a single-round game of Family Feud, and ask them to name a US Supreme Court decision. Even if they have had more than their share of spiked eggnog, they will likely have the presence of mind to think about the Kavanaugh hearings and big constitutional and social issues.
by Michael C. Loulakis, Esq., FDBIA, President, Capital Project Strategies, LLC
Collaborative project delivery creates a terrific opportunity for all members of the project team to work together in a cooperative, trusting, and transparent environment. Unfortunately, this opportunity can be quickly squandered if project leadership loses sight of what it takes to create and maintain this collaborative environment.
DC ST § 2-356.01
The following project delivery methods are authorized for procurements in construction projects and related services: architectural and engineering services; construction management; construction management at risk; design-bid-build; design-build; design-build-finance-operate-maintain; design-build-operate-maintain; and operations and maintenance.
W.S. § 16-6.10 -1001 and 16 -6 -701 – 708
All political subdivisions are authorized to use design-build delivery methods.
WS § 13.48(19)
The Wisconsin Building Commission is authorized to use alternative contracting practices when it is in the best interest of the state.
W. Va. Code § 5-22A-1 – 16
All state departments, agencies, authorities, quasi-public corporations, and all political subdivisions are authorized to use design-build.
Link Coming Soon
RCWA 39.10.300
Public bodies may utilize the design-build procedure, including progressive design-build, for public works projects in which the total project cost is over two million dollars and where:
(a) The construction activities are highly specialized and a design-build approach is critical in developing the construction methodology; or
(b) The projects selected provide opportunity for greater innovation or efficiencies between the designer and the builder; or
(c) Significant savings in project delivery time would be realized.
VA Code Ann. § 2.2-4303
State agencies are authorized to use design-build. Any public body can use design build for a fixed-priced design-build project or construction management.
29 V.S.A. § 161
Design-build is authorized for use by the Department of Buildings and General Services.
U.C.A. § 11-39-107
Reference: *TEXAS GOVERNMENT CODE, TITLE 10. GENERAL GOVERNMENT, SUBTITLE F. STATE AND LOCAL CONTRACTS AND FUND MANAGEMENT, CHAPTER 2269. CONTRACTING AND DELIVERY PROCEDURES FOR CONSTRUCTION PROJECTS.
Highly permissive for water and wastewater with some limitations centered around population size of the public entity (must have a population of more than 100,000), and a total number of collaborative delivery projects per fiscal year (a governmental entity with a population of 500,000 or more within the entity’s geographic boundary or service area may enter into contracts for not more than six projects in any fiscal year).
T.C.A. 12-10-124
Public building authorities are authorized to use design-build.
SDCL § 15-18B-20
Any purchasing agency may enter into design-build contracts for public improvements. The agency shall establish and publish procedures for the solicitation and award of such contracts.
SC St § 11-35-3005
Design-build is authorized for procurements relating to infrastructure facilities.
RIGL 37.2.27 and 37.2.31
Design-build is authorized if it is in the best interest of the state.
N.M.S.A. § 13-1-119.1
With the exception of road and highway construction, design-build is authorized when the state purchasing agent or a central purchasing office makes the determination that it is in the best interest of the public body.
62 PA.C.S. § 322(2)
Commonwealth agencies are authorized to use design-build, subject to the Separations Act requiring separate prime contracts for plumbing, heating, ventilating, and electrical work.
The Public Improvement Alternative Contracting method enables an agency to use innovative techniques and processes to procure public improvement projects. Examples of contracts that use this method include:
OK St. T. 61 § 202.1
DEQ Guidance Document
Design-build can be used with the written approval of the Director of the Office of Management and Enterprise Services, or the Director’s designee, when those projects are constructed for a state agency or by an act of the legislature.
The Oklahoma DEQ-Water Resources Board has issued a specific Project Alternative Delivery Methods Guidance (Aug 2018) for the use with the SRD.
OH ST § 153.693
Design-build is authorized for public improvements. The agency must select from a list of not fewer than three firms in the procurement process.
NDCC 44-08-01.1
Political subdivisions shall accept only sealed bids. They must choose the lowest and best bid.
N.C.G.S.A. § 143-128.1A
Government entities are authorized to use design-build provided they provide criteria for determining when that method is appropriate.
Wicks Law (Currently being changed)
N.Y. Senate Bill 6293a (Passed Assembly and Senate)
Wicks Law requires that government agencies hire four separate contractors for general construction, plumbing, electrical work, and heating and ventilation. As a result, design-build is generally not allowed.
On June 16, 2019, the State Legislature passed the “New York City Public Works Investment Act” to permit several city agencies to use design-build contracts. They include the Department of Design and Construction, Department of Environmental Protection, Department of Transportation, Department of Parks and Recreation, Health and Hospitals Corporation, School Construction Authority and Housing Authority. The authorization applies only to contracts valued at greater than $1,200,000 and expires in June 2022.
NJ Assembly Bill 3377 (Introduces S-865)
Design-Build Construction Services Procurement Act, introduced 2-12-2018, provides the following: If a contracting unit can demonstrate why the design-build approach meets their needs better than the traditional design-bid-build approach established under New Jersey public procurement statutes for the project or projects under consideration, it shall be the public policy of this state to permit that contracting unit to enter into design-build contracts as defined in P.L., c.(C.) (pending before the Legislature as this bill), provided the following conditions are met:
(1) The contracting unit shall, prior to issuing solicitations, publish procedures consistent with regulations promulgated by the Division of Property Management and Construction in the Department of the Treasury or the Department of Transportation, where applicable for the solicitation and award of design-build contracts, and shall adhere to P.L. , c. (C. ) (pending before the Legislature as this bill) and those procedures; and
(2) The contracting unit shall, for each public project or projects under this act, make a determination based on the timeliness of the project or projects that it is in the best interest of the public to enter into a design-build contract to complete the public project or projects.
Under S-865, government bodies, including school districts, municipalities, counties and state entities, may enter into a public-private partnership agreement with a private organization, which would assume the financial and administrative responsibility for the development, construction, reconstruction, repair, alteration, improvement, extension, operation, and maintenance of a government-related project that is financed in whole by the private sector organization.
Miss. Code Ann. § 31-7-13
State agencies may use design-build or dual-phase design-build for capital construction projects. They must prove that these methods satisfy the public need better than design-bid-build in that it (a) saves time or cost and (b) that the size and type of the project is suitable for design-build.
N.H. Rev. Stat § 21-I:80
The commissioner is authorized to use the design-build and construction management methods of contracting for any project. The capital budget overview committee shall approve preliminary plans prior to construction, reconstruction, alteration, or maintenance if the project is part of a capital project and:
(1) The construction management method of contracting is used; or
(2) The design-build method of contracting is used and the estimated cost is more than $500,000. If the design-build method of contracting is used and the estimated cost is $500,000 or less, preapproval of the capital budget overview committee shall not be required, but the department shall notify the committee of all such projects and shall provide quarterly reports on project status.
NRS § 338.1711 – 1727
State and local agencies may contract through design-build for the construction of a public work that is a discrete project, if the public body has approved the design-build team. The public work must be a park or the appurtenances thereto, the rehabilitation or remodeling of a public building, the construction of an addition to a public building, or if the project is estimated to cost more than $10 million.
Neb. Rev. St. § 13-2904 – 2914
Political subdivisions may not use design-build for water, wastewater, utility, or sewer construction except that a city of the metropolitan class may use a design-build contract for the purpose of complying with state or federal requirements to control or minimize overflows from combined sewers.
MCA 18-2-501 – 503
Design-build is authorized for state, county, municipal construction projects, airports, counties, fire districts, service areas, and sewer districts.
V.A.M.S. 67.5060
V.A.M.S. 249.425
All political subdivisions are authorized to use design-build.
Sewer districts are authorized to use design-build for projects costing over $1 million.
MSA §§ 383B.158 – 383B.1585
All state agencies are authorized to use design-build and CMAR.
M.C.L.A. 18.1240 – 1250
State and local contracting entities are required to use a competitive bid process but they have discretion to choose the method.
Mass. Gen. Laws c.149A, §§ 14-21
Section 14. Notwithstanding section 39M of chapter 30, for each contract for the construction, reconstruction, alteration, remodeling or repair of a public works project by an awarding authority and estimated by the awarding authority to cost not less than $5,000,000, the awarding authority may utilize design build for the construction, reconstruction, alteration, remodeling or repair of any public works project pursuant to this section and sections 15 to 21, inclusive; but, before using the design build, the awarding authority shall seek the approval of the inspector general pursuant to section 16.
MD Code, State Finance and Procurement § 3-602 – Capital Projects
(g) Total project funding may utilize alternative construction methods, such as: (1) design/build which involves a single solicitation to design and build the facility; or (2) “fast track” in which design and construction are implemented concurrently.
MD Code Public Utilities § 20-104
(d)(1) Except as provided in paragraph (2) of this subsection, the Commission may enter into any type of contract under this subtitle that promotes the best interest of the Commission.(2) The Commission:(i) may not enter a cost-plus-percentage-of-cost contract; and(ii) shall prohibit a cost-plus-percentage-of-cost subcontract under a contract with the Commission.
(e) The Commission may only enter into a design/build contract for a facilities construction contract with costs exceeding $2,000,000.
https://casetext.com/statute/code-of-maryland/article-public-utilities/division-ii-washington-suburban-sanitary-commission/title-20-procurement/subtitle-1-water-and-sewer-procurement-contracts/section-20-104-design-and-construction-of-system-in-general?
5 M.R.S.A. §1743
3. Alternative methods of project delivery. As an alternative to the competitive bid method provided in subsection 2, a public improvement contract may be undertaken using the construction-manager-advisor, construction-manager-at-risk or design-build method of construction.
https://legislature.maine.gov/statutes/5/title5sec1743.html
La. Rev. Stat § 38:85
Subject to the provisions of this Section, the governing authority of Jefferson Parish may let contracts for hurricane protection and flood control projects in which the design and construction phases of a hurricane protection or flood control project are combined into a single contract.The provisions of this Section shall only apply to those projects located in an area of the parish impacted by Hurricane Katrina or Hurricane Rita and undertaken in preparation for the 2006 hurricane season.
https://www.legis.la.gov/Legis/Law.aspx?d=366149
La. Rev. Stat §33.2740.27 – Algiers Development District and La. Rev. Stat §33.2740.70 – Gentilly Development District
J.(1) Notwithstanding any law to the contrary, if the board determines, in its discretion, that it is in the best interest of the taxpayers and that completion of public improvements and facilities will be expedited, the design and construction phases of any project may be combined.
https://www.legis.la.gov/Legis/Law.aspx?d=89986https://www.legis.la.gov/Legis/Law.aspx?d=631497
La. Rev. Stat §49:214.6.2
A. The authority shall administer the programs of the Coastal Protection and Restoration Authority Board. The executive director may use his contracting authority, or the contracting authority of any state department or agency, to implement the provisions of this Chapter. His contracting authority shall include construction management at-risk, operation and maintenance, design-build, design-build-operate and maintain, design-build-finance-operate and maintain, outcome-based performance contracts, or any combination of design, construction, finance, and services for operation and maintenance of an integrated coastal protection project, where appropriate.
https://www.legis.la.gov/legis/law.aspx?d=672078
La. Rev. Stat §2740.70.1 – Downman Road Economic Development District
K.(1) Notwithstanding any other provision of law to the contrary, if the board determines, in its discretion, that it is in the best interest of the taxpayers and that completion of public improvements and facilities will be expedited, the design and construction phases of any project may be combined.
https://www.legis.la.gov/Legis/Law.aspx?d=815457
La. Rev. Stat §2225.2.4
Notwithstanding any other provision of law to the contrary, a public entity may use the construction management at-risk project delivery method to contract for a project to construct public works as set forth in this Section. CMAR shall not be used for any project that is estimated to cost less than $5 million.
https://www.legis.la.gov/legis/Law.aspx?d=919372
K.S.A. 75-37, 143
Design-build and CMAR is authorized for the sole and exclusive use of planning, acquiring, designing, building, equipping, altering, repairing, improving, or demolishing any structure or appurtenance thereto, including facilities, utilities, or other improvements to any real property, but shall not include highways, roads, bridges, dams, turnpikes or related structures, or stand-alone parking lots.
Effective 6-14-2022: Senate File 183, an Act relating to a construction manager-at-risk commercial construction alternative delivery method and prohibiting certain other alternative delivery methods in the public sector and including effective date and applicability provisions:
Sec. 2. Section 262.34, Code 2021, is amended by adding the following new subsection: NEW SUBSECTION. 6.
The state board of regents shall not be authorized to enter into a design-build contract to construct, repair, or improve buildings or grounds.
Sec. 6. NEW SECTION. 26A.2 Authorization.
Notwithstanding any other law to the contrary, a governmental entity shall be authorized to enter into a guaranteed maximum price contract for the construction of a
public improvement pursuant to this chapter.
I.C.A. 26.9 –
https://www.legis.iowa.gov/docs/code/26.9.pdf
The contract for the public improvement must be awarded to the lowest responsive, responsible bidder. However, contracts relating to public utilities or extensions or improvements thereof, as described in sections 384.80 through 384.94, may be awarded by the City as it deems to be in the best interests of the City.
IC 5-30-1-1 through IC 5-30-8-5
IC 5-32 (CMAR)
A design-build contract awarded as provided in this article is valid and enforceable.
Before entering into a design-build contract, a public agency must appoint a technical review committee of at least three (3) individuals: A representative of the public agency; at least two of the following, but not more than one under each clause:
(A) An architect registered under IC 25-4
(B) A professional engineer registered under IC 25-31
(C) A qualified contractor under IC 4-13.6 or an individual employed by the qualified contractor
30 ILCS 537/5
(Section scheduled to be repealed on July 1. 2027.)
The Capital Development Board is allowed to use design-build if it is shown to be in the state’s best interest for that project.
I.C. § 67-5711A
The director of the department of administration, or his designee, is authorized and empowered, subject to the approval of the permanent building fund council, to employ the use of the design-build method of construction in the letting of any and all contracts for the construction, alteration, equipping, furnishing, and repair of any and all buildings, improvements, or other public works of the state of Idaho. For the purposes of this section, a design-build contract is a contract between the state of Idaho and a nongovernmental party in which the nongovernmental party contracting with the state of Idaho agrees to both design and build the structure, roadway, or other items specified in the contract.
I.C. § 67-2309
Design-build may be employed by public officials in contracts for the construction, repair, or improvement of public works, public buildings, public places, or other work.
HRS § 103D-303
All state agencies and counties have discretion in choosing their project delivery methods. Design-build is authorized and has been used on public projects. Stipends are authorized on design-build projects, provided the cost of the entire project is greater than $1 million. Construction projects may be solicited through a request for proposals to use the design-build method.
Ga. Code Ann. §36-91-20 (c)
Governmental entities (excluding any authority, board, department, or commission of the state) are authorized to utilize any construction delivery method, provided that the public works construction contracts place the offeror at risk for construction and require labor or building materials in the execution of the contract.
FL § 287.055 (9) (c)
Except as otherwise provided in s. 337.11(7), the Department of Management Services shall adopt rules for the award of design-build contracts to be followed by state agencies. Each other agency must adopt rules or ordinances for the award of design-build contracts. Municipalities, political subdivisions, school districts, and school boards shall award design-build contracts by the use of a competitive proposal selection process as described in this subsection, or by the use of a qualifications-based selection process pursuant to subsections (3), (4), and (5) for entering into a contract whereby the selected firm will, subsequent to competitive negotiations, establish a guaranteed maximum price and guaranteed completion date. If the procuring agency elects the option of qualifications-based selection, during the selection of the design-build firm the procuring agency shall employ or retain a licensed design professional appropriate to the project to serve as the agency’s representative.
FL §255.20
This subsection expressly allows contracts for construction management services, design-build contracts, continuation contracts based on unit prices, and any other contract arrangement with a private sector contractor permitted by any applicable municipal or county ordinance, by district resolution, or by state law.
29 Del. C. § 6907
29 Del. C. § 6963
The Office of Management and Budget are authorized to use design-build on 12 projects.
Local governments are authorized to use design-build with legislative approval. In the case of an emergency, state agencies are authorized to use design-build by waiving all provisions of the procurement statute when it is determined to be in the best interest of the agency.
The Clean Water Fund (SRF) program in CT does not allow the use of design-build project delivery methods. CT-CWF program requires all projects to go through the design-bid-build process. CWF is the primary financial program in CT for municipal water and wastewater projects.
RCSA 22a-482-4
(h) Procurement Requirements—General.
(2)(G) A municipality may use innovative procurement methods or procedures only if it receives the Commissioner’s prior written approval.
(j) Construction Contract Procurement Requirements. (This section applies to construction contracts in excess of $10,000 awarded by municipalities for any construction projects.)
(1) Type of Contract. Each contract shall be a fixed-price (lump sum or unit price or a combination of the two) contract, unless the Commissioner gives advance written approval for the municipality to use some other acceptable type of contract. The cost-plus-percentage-of-cost contract shall not be used in any event.
Subject to the limitations of this section, any type of contract which will promote the best interests of the agency of government may be used; except that the use of a cost-plus-a-percentage-of-cost contract is prohibited. A cost-reimbursement contract may be used only when a determination is made in writing that such contract is likely to be less costly to the agency of government than any other type of contract or that it is impracticable to obtain the construction required unless the cost-reimbursement contract is used.
Notwithstanding any other provision of law, any agency may award an IPD contract for a public project in accordance with the provisions of this article upon the determination by such agency that integrated project delivery represents a timely or cost-effective alternative for a public project.
PCC § 22160 – 22169
The Legislature finds and declares that the design-build method of project delivery, using a best-value procurement methodology, has been authorized for various agencies that have reported benefits from such projects including reduced project costs, expedited project completion, and design features that are not achievable through the traditional design-bid-build method.
Al. Code § 23-1-40
Design-build is not currently allowed for water projects.
Ariz. Rev. Stat. §§ 34-101 and 34-602; Ariz. Rev. Stat. § 41-2582
Ariz. Rev. Stat. § 28-7703)
Ariz. Rev. Stat. § 41-2578, 41-2582; Ariz. Rev. Stat. 34-602, 34-603, 34-605)
Design-build is authorized for all State agencies and for all counties, cities, towns, irrigation, power, electric, drainage, flood protection and flood control districts, tax levying public improvement districts, and county or city improvement districts (collectively, “local agencies”).
The following delivery methods are authorized on state and local agency public projects: design-bid-build, construction management at-risk, design-build and job-order-contracting. Design-build, construction-management at-risk or job-order contracts may be awarded using best value or qualifications-based selection (QBS). Horizontal construction under this statute may be procured until June 30, 2025.
ASA. § 22-9-203(j)(1))
Notwithstanding any other provision of law to the contrary, a municipality, sanitation authority, water system, or consolidated waterworks system may enter into contracts with private persons, firms, associations, corporations, joint ventures, or other legal entities, including a combination of any of those entities, to provide for the design, building, operation, or maintenance, including a combination of those activities, of all or any portion of its wastewater system, stormwater system, water system, solar energy generation equipment and facilities, other capital asset, or any combination of those systems and assets.
Ak. Stat. § 36.30.200
2 AAC 12.931 – 12.949
Design-build is authorized for all state agencies.
Government agencies may use best value, two-step, or the low-bid method in determining awards.
Only the Commissioner of Transportation and Public Facilities can determine if a particular design-build procurement process is advantageous to the state.
KRS §45A.045
For capital construction projects, subject to the provisions of this code and KRS 45A.180, the procurement may be on whichever of the following alternative project
delivery methods, in the judgment of the secretary of the Finance and Administration Cabinet after first considering the traditional design-bid-build project delivery method, offers the best value to the taxpayer:
(a) A design-build basis; or
(b) A construction management-at-risk basis.
Proposals shall be reviewed by the engineering staff to assure quality and value, and compliance with procurement procedures. All specifications shall be written to promote competition. Nothing in this section shall prohibit the procurement ofphased bidding or construction manager-agency services.
Effective: June 20, 2005
KRS §65.025
All local governments are authorized to use design-build using best-value procurement and contracting principles and P3 as long as the provisions of KRS 65.028 are followed.
A local government shall not employ the same entity to provide both architectural services and construction management services on the same capital construction project.
Effective April 8, 2016
https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=44859
KRS §45A.075
Except as otherwise authorized by law, all state contracts shall be awarded by:
(1) Competitive sealed bidding, pursuant to KRS 45A.080;
(2) Competitive negotiation, pursuant to KRS 45A.077, 45A.085, 45A.090, or 45A.180;
(3) Noncompetitive negotiation, pursuant to KRS 45A.095; or
(4) Small purchase procedures, pursuant to KRS 45A.100.
Effective:April 8, 2016
https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=44857
KRS §45A.077
A public-private partnership delivery method may be utilized as provided in this section and administrative regulations promulgated thereunder. State contracts
using this method shall be awarded by competitive negotiation.
Effective: July 14, 2022
https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=53096
KRS §45A.180
The secretary of the Finance and Administration Cabinet shall promulgate administrative regulations by October 15, 2003, providing for as many alternative methods of management of construction contracting as he or she may determine to be feasible; setting forth criteria to be used in determining which method of management of construction is to be used for a particular project; establishing a model process parallel to the selection committee procedures established in 45A.810 for the procurement of alternative project services of “construction management-at-risk” and “design-build,” and for a “construction manager-general contractor” and a “construction manager-agency;” and providing that the chief purchasing officer shall execute and include in the contract file a written statement setting forth the facts recommending that a particular method of management of construction contracting be used.
Effective June 24, 2015
https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=44585
KRS §45A.182
When a capital project is to be constructed utilizing the design-build method in accordance with KRS 45A.180, a process parallel to the selection committee procedures established in KRS 45A.810 shall apply when procuring a design-build team.
Effective: July 15, 2010
https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=22364
KRS §45A.183
When a capital project is to be constructed using the construction management-at-risk method, a process parallel to the selection committee procedures established in KRS 45A.810 shall apply when procuring a construction management-at-risk firm and regulations promulgated in accordance with KRS 45A.180 shall apply that set forth requirements for:
(a) Description of the bond, insurance, and other security provisions that apply to a project;
(b) Description of appropriate contract clauses and fiscal responsibility requirements that apply to each project; and
(c) Restrictions relating to conflicts of interest, including a provision that a construction management-at-risk entity shall be eligible to become an offeror of goods or services on a project it manages only when a subcontractor fails to perform and upon prior approval by the contracting body.
Effective: June 24, 2015
https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=44586