Collaborative delivery offers owners the opportunity to access the talents and resources of design and construction professionals in a manner unlike traditional delivery methods. The most common structures for design-build teaming include a) contractor led with an engineer as a subconsultant, b) joint venture (JV) between a contractor and engineer, c) integrated design and construction company, and d) engineer led with construction subcontractor.
In evaluating and selecting the right delivery team for their project, owners should consider the benefits and challenges of each team structure. While each team structure has potential advantages and roadblocks, the integrated joint venture model has the potential to unlock some unique benefits by offering both owners and design-build firms some distinct incentives.
A joint venture is a business entity in which two or more parties pool their expertise and resources to form a collaborative partnership for the purpose of accomplishing a specific project as a TEAM. This partnership is typically codified in a joint venture agreement between the parties which defines the parties’ roles and responsibilities as well as other commercial, legal, and administrative terms. Owners may request the key terms of any JV teaming agreement as part of the procurement process to understand how the JV will function.
In choosing a JV partner, firms carefully evaluate whether a potential partner shares their culture and values as well as their approach to managing risk. Strong JV partners should have a common approach to serving clients with a focus on successful project delivery and collaboration.
Joint venture teaming structures can offer advantages to owners and team members with respect to project execution, risk, cost, and communication.
Project execution. In a fully integrated JV team, the priorities and behaviors of the contractor and engineer are fully aligned. This full alignment drives behaviors from all members of the project team to work together to find the best possible solutions and provide the best value for the owner without focusing only on what’s best for their respective companies. For example, if it is discovered that some redesign could result in construction savings, it is much easier for the designer in an integrated JV to agree to do it—since it is not solely managing to a design budget—and it can focus on the bigger picture. Further, some designers have the ability to provide expertise and staff during the construction phase of the project—not only in a QA/QC or field observation capacity but as full-fledged members of the construction team doing supervision, controls, procurement, and other functions. Similarly, some contractors have valuable design capabilities which can be integrated into the designer’s core design team.
Risk. In a JV, the project risks and obligations are generally shared among its members, such as multiple contractors or a contractor and a design partner. A fundamental principle behind a JV is that each partner agrees to be jointly and severally liable with respect to the JV’s liabilities to third parties. This is a benefit to the owner because if one JV partner is unable or unwilling to meet its share of the JV’s obligations, the other partner company can be held liable not only for that partner’s share but for the JV’s total obligation. The JV partners can benefit from the joint and several liability as well. One benefit is that it provides the contractor and designer some flexibility as to how they want to allocate risk between the JV partners. The partners can agree to allocate liabilities for third-party claims and obligations based on the proportion of fault, or they can allocate liability 50/50 or on a pro rata share based on their respective interests in the JV. If agreeing to allocate liabilities 50/50 or on a pro rata basis, the contractor partner can benefit from the designer sharing in construction risk and the risk of process performance guarantees that are part of many collaborative delivery projects. In exchange, the design partner can share in the financial risks/rewards of a project beyond its typical design fees. For the owner, a JV team structure will provide it with the joint financial backing, bonding, and resources of each JV partner instead of only a single company as is the case when other teaming structures are used.
Cost. A fully integrated JV team can bring together the costing and scheduling capabilities of construction professionals and design engineers to provide real-time cost estimates and schedule updates as alternatives and design features are explored. This can be a crucial advantage during phase one of a progressive design-build project when many options and iterations are evaluated. The result is a minimization of the risk of the owner taking the off-ramp due to the GMP proposal exceeding budget expectations. Further, by its very structure a JV team can drive a project to its lowest total cost by eliminating many of the double markups and layering of contingencies that are inherent in all prime-subconsultant relationships.
Communication. By definition, a progressive design-build project is built on collaboration between the owner and design-builder. In a JV approach, the owner has unrestricted direct access to the entire design and construction team through all phases of the project. This eliminates the layering or filtering of access and communications which can be inherent when the designer is a subconsultant to a contractor or vice versa.
Each option for a design-build team structure has potential benefits and challenges. Owners should evaluate the pros and cons of the various structures and consider factors such as how they wish to communicate with their engineer and contractor and how they value the full integration of design and construction professionals as opposed to a single entity. Contractors and engineers should evaluate the benefits of risk sharing and pooling of not only design but construction resources to provide the highest level of collaboration possible which ultimately drives a successful project outcome.
More information on design-build best practices and evaluation of teaming structures can be found in the Water Collaborative Delivery Association’s Progressive Design-Build Procurement Guide.