CCOOBBRRAA 22000044The international construction research conference of the Royal Institution of Chartered Surveyors

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COBRA 2004 was held on 7-8 September 2004 atHeadingley Cricket Club, Leeds.

It was organised by the School of the Built Environment, Leeds MetropolitanUniversity and the Yorkshire and Humberside Region of The Royal Institutionof Chartered Surveyors.

The proceedings were edited by Robert Ellis and Malcolm Bell of LeedsMetropolitan University.

COBRA 2004 sponsors were:

• White Young Green• Faithful and Gould Worldwide• Hays Montrose

ISBN 1-842-19193-3

SUITABILITY OF DIFFERENT DESIGN AND BUILD CONFIGURATIONS FOR PROCUREMENT OF BUILDINGS Kassim Gidado and Shamsaddin Arshi University of Brighton, School of the Environment, Construction Research Team (CresT), Faculty of Science & Engineering, Cockcroft Building, Lewes Road, Brighton, Sussex, BN2 4GJ, UK ABSTRACT Financial investment in property seems to be one of the main alternatives to investment in shares and stocks and it is growing rapidly. The investment can be in any of the types of buildings or infrastructure. The nature of the investor or client falls within a very wide spectrum, from an experienced developer to a novice investing in a one-off residential or commercial development. The construction industry offers a variety of procurement systems, ranging from the traditional architect-led through management-led to contractor-led. One of the fastest growing in today's UK construction industry is the design-build procurement system (D&B), but the system has a variety of configurations, each with various advantages and disadvantages. This research therefore, is to identify the constraints affecting the use of design-build and carry out a comparative analysis on the suitability of the various configurations of the D&B system for chosen building types. The research is based on an in-depth literature search and questionnaires sent to practitioners. Keywords: design-build, project constraints, procurement systems.

INTRODUCTION Research has shown that there is a continuous increase in the use of Design and Build (D&B) over the last 15 years. Many clients regard it as providing value for money and the contractors see it as an opportunity to apply their key strengths in management and coordination of design and construction works. However, with the variability of types of construction projects and the experiences of clients in such projects, recent research indicates that contractors may lack proper understanding of managing the varying types of design processes. It is not uncommon to observe communication breakdowns on D&B projects, as well as misinterpretation of client goals or wrong interpretation of design documents. Since different configurations offer different responsibilities to the contractor, using the appropriate configuration may improve quality and the client's value for money, and at the same time reduce contractor's risks. The aim of this paper therefore, is to establish the suitability of the various configurations of design and build to the major classification of project types. The research is based upon an in-depth literature search and using a questionnaire sent to 150 top UK construction companies. The questionnaire identified the suitability of the various configurations in D&B for various types of projects and the constraints and problems facing practitioners in the management of design process in D&B procurement system. DESIGN AND BUILD (D&B) Ndekugri and Turner (1994) suggests that the use of design and build is on the increase with many clients perceiving it as providing better value for money and giving rise to less disputes than other procurement methods. Lindsey (2003) indicates that the value of contracts using the JCT D&B form has doubled since 1995 and exceeds the total value of works procured under all other JCT standard forms. In 2001, about 42 percent of measured value of contracts were placed using the D&B form. One key advantage of using D&B is the opportunity to integrate the design and construction components, and Saxon (2000) argues that integration of design and construction offers better performance in time and cost and results in lesser defects. Adams (1999) has shown that majority of clients regard D&B as the optimum route to obtain value for money. Smit (1995) suggests that the popularity of D&B arises from its perceived ability to bring design and construction processes closer together culturally, while Hughes (1992) argues that D&B offers a high degree of cost certainty, encourages economical solutions, and enables value to be considered as well as price. For the past three decades, although some confusion still exists among inexperienced clients, the term D&B has almost been unanimously interpreted and defined as: An arrangement where one contracting organisation takes sole responsibility, normally on a lump sum fixed price basis, for the bespoke design and construction of a client’s project. Masterman (2002) argued that this definition contains three elements that are fundamental characteristics of this system. Namely: the responsibility for design and construction lies with one organisation, reimbursement is generally by means of a fixed price lump sum, and the project is designed and built specifically to meet the needs of the client.

Over the years, several different configurations of D&B procurement have evolved. Pain and Bennett (1988) states that there are four principal ways of organising design and build. Akintoye (1994) identified six principal types. While Andrews (1999) has identified five different forms. Chevin (1993) states that there is evidence to suggest that these developments have caused some confusion amongst clients and have served as a drawback to the adaptation of D&B. This paper adopts the following configurations: A. Traditional design and build: The contractor accepts the total responsibility for both the

design and construction to meet the requirement of the client. B. Package deal (including turnkey contracts): The contractor provides standard buildings or

system buildings that are adapted to suit clients’ space and functional requirements. C. Design and manage: The contractor gets a fee for managing all aspects of planning and

design and supervising the subcontractors. The contractor has design responsibility. D. Design, manage and construct. This is similar to ‘design and manage’ except that the

contractor is involved in construction of some work sections in addition to coordinating the activities of the subcontractors on site.

E. Novation D&B. The client passes his architect to contractor to produce detailed drawings as part of the contractor’s team. During the design stage through to the appointment of the D & B contractor, the architect works directly for and is paid by the client. Once a contractor had been appointed the architect’s appointment is assigned to the contractor for whom the architect produces any outstanding information, which is necessary to construct the work. In some cases, once the practical completion of the work has been reached, the architect reverts back to be employed by the client. Beyond this stage, he/she is to prepare the list of defective and outstanding items, monitor the completion of the same and certify the completion of the project at the end of the defects liability period.

F. Develop and construct. This is a hybrid of D&B in which the contractor inherits the design that might have been produced by client’s consultants up to Stage D on the RIBA Architect’s Appointment Scale. This is developed further by the contractor in terms of detailing taking into account the construction technique to be adopted for the project. This is different from Novation D & B in the sense that the architect that provides the concept design is not passed to the contractor by the client.

Akintoye (1994) states that the Traditional D&B, the Develop and construct, and the Novation D&B are the most commonly used in practice. DATA COLLECTION, RESULTS AND ANALYSIS A six-page detailed questionnaire was sent to 150 top UK construction companies. The questionnaire was accompanied with a letter that clearly states the objectives of the study and definitions of the terms used. All the respondents were senior managers (managing directors, regional directors, construction directors, chief engineers, etc) with an average of over 20 years construction industry experience. About 30% quality response rate was achieved. The data received was analysed using the formulae cited in Akerele and Gidado (2003) to calculate the Importance Index (IM) and the Severity Index (SI). The analysis adapted the IM equation to analyse the suitability of the various D&B configurations to the various types of

construction projects, while the SI index focused primarily on the effect of the constraints affecting the design management in D&B projects. The mathematical expression of the severity index is: Severity Index SI = ∑ Rw W Rt

Rw is the number of respondents W is the weight or points assigned Rt is the total number of responses obtained for that variable The scale of how the issues were rated is given below: SI < 3, implies not very serious, never felt its effect (Low) SI = 3 -5, implies moderately serious / effects some of the time (Medium) SI > 6, implies very serious or felt its effects most of the time (High)

The mathematical expression of the importance index is: Importance Index IM = 100 x Σ(a x f) A x F

a – the weighting, ranging from 1 to 9, given to each variable, A – the highest weight, which is 9, f – the total number of respondents rated the specific issue, F – the total overall number of respondents. The scale of how the issues were rated is given below: IM < 60 implies not suitable (Low) IM = 60 – 70 implies suitable (Medium) IM > 70 highly suitable (High).

Initially, the respondents were asked to indicate their personal preference among the various types of D&B configurations. The results shown in Figure 1 indicate that the respondents have knowledge and experience in using all the types of configurations with each scoring a relatively high score ranging from 19 to 65%. This reinforces the confidence in the reliability of the source of data.

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Figure 1: Personal Preference among types of D&B configurations Majority of the respondents favours the use of Traditional Design and Build (65%), Design and Manage (41%) and the Novation design and build (41%). This is followed by Develop

and Construct (35%), then the Design, Manage and Construct (30%) and Package deal including turnkey (19%) which are less popular. This is consistent with two out of three of Akintoye (1994) findings, but suggests that Design and Manage has overtaken the Develop and Construct and places the Package Deal as the lest favoured configuration. Akintoye (1994) indicates that practitioners consider the Package Deal second most favoured configuration. Therefore, this research seems to suggest a change in perception in the suitability of using Package Deal D&B type in construction projects.

A B C D E F Health 57.84 56.22 58.92 61.62* 49.46 53.78 Educational 67.57* 63.24* 67.57* 68.65* 58.11 57.30 Housing 62.97* 57.03 59.46 64.86* 50.81 55.95 Commercial 78.38** 67.03* 71.08** 74.59** 65.68* 60.27* Industrial 80.27** 72.70** 71.08** 78.38** 62.43* 66.76* Civil engineering 53.51 51.35 53.78 55.14 44.59 41.89 Refurbishment 31.89 31.89 45.41 44.05 31.89 33.24 A Traditional design and build B Package deal including turnkey C Design and manage D Design, manage and construct E Novation design and build * = suitable F Develop and construct ** = highly suitable

Table 1: Suitability of the various D & B system(s) for the type of project The key aim of the questionnaire is to establish the suitability of the various D&B configurations to the various types of construction projects. Seven questions were dedicated to this aim, each simply asking the respondent to rate the suitability of the 6 different configurations of D&B procurement system for each of the seven classifications or types of construction projects namely: health, educational, housing, commercial, industrial, civil engineering, and refurbishment. The results are shown in Table 1, indicating the corresponding calculated importance index (IM) values. Overall, the results indicate that D&B procurement system is best suited for Industrial and Commercial-type projects. The results shows that for Industrial Type Projects, the traditional D&B system has the highest rating with an importance index of 80, followed by design, manage and construct D&B type with an importance index of 78. For Commercial Type Projects, the traditional D&B system is also rated more appropriate with an Ip value of 78. The suitable D&B configuration for Housing-type projects are the Design, manage, and construct and then followed by the Traditional D&B. For Health-type projects, the only suitable configuration is the Design, manage and construct. Novation D&B is considered unsuitable for Education and Housing-type projects. The results also suggests that D&B procurement system is not suitable for Civil Engineering and Refurbishment both having Ip ratings less than 60 for all types of configurations.

OPTIONS: 1st 2nd 3rd 4th 5th 6th Health D - - - - - Educational D A or D - B - - Housing D A - - - - Commercial A D C B E F Industrial A D B C F E Civil engineering - - - - - - Refurbishment - - - - - -

Table 2: Suitability of D&B Configurations to Types of Construction Projects Table 2 outlines a summary of the suitability of the various D&B configurations to various types of construction projects. The results suggest that configuration types A and D are the preferred options, and that B or C should always be considered before options E or F. With the increase in the use of D&B, the research set out to determine whether contractors are setting up in-house design teams. Interestingly, the result shows that 24% of firms have in-house design team that is capable of carrying out the design work in D&B contracts. Table 3 shows that 39% of the respondents sublet the design work and a further 35% of the firms sublet the design work to external consultants initially involved in the design process.

Types of service Per cent 1 Have in house design team 24 2 Sublet the work 39 3 Appoint sub-designers that are involved in the design process 35 4 None of the above 2

Table 3: Capability to handle Design Work The questionnaire also determined what kind of contractual arrangement with the designers do the contractors normally prefer to use in D&B projects. The results shown in Table 4 shows that 68% of the respondents prefer to have an individual contract with each designer. A further 22% preferred the designers to form a consortium for one contract and 3% would rather to work with multidisciplinary consortium of other specialists.

Types of arrangement Per cent1 Provide individual contracts with each designer 67.57 2 Prefer the designers to form a consortium for one contract 21.62 3 Prefer to work with multidisciplinary consortium of other specialists 2.7

Table 4: Preferred contractual relationship with designers in D & B projects As a follow on question, the respondents were asked to indicate their preference in the maximum number of design consultants/organisations they would prefer to work with in any given project. The results shown in Figure 2 suggest that a maximum of 10 organisations is the preferred limit (80%), with half of which considering a limit less than 5 design consultants/organisations.

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Figure 2: Preferred number of design organisations to work with. The questionnaire also asked the respondents to compare D&B with other traditional project procurement routes (say JCT 98 Contracts) and state what time, cost and quality gains (in percentage) they perceive/often realise from using Design and Build. Table 5 shows the level of expected time, cost and quality gains claimed by the respondents by the use of D & B procurement methods. A significant majority of the respondents (94%) claimed that the use of D & B for project procurement could account for a reduction in overall project time compared to the JCT 98 contracts. Interestingly, up to 27% claimed to have achieved more than 20% saving in time when they use D&B compared to other types of systems. In terms of cost, 75% of the respondents believed that up to 20% saving could be achieved when using D&B system. This seems to agree with the findings of Kenworthy (1992) and Akintoye (1994), that also suggest that cost of buildings can be reduced with D&B compared with JCT 98 by up to 15% and 20% respectively. Akintoye (1994) suggests that the savings can be associated with efficient use of materials and construction techniques.

Time Cost Quality Percentage Per cent Per cent Per cent 0% 6 16 42 1 - 5% 12 31 24 6 - 10% 27 19 15 11 - 15% 18 19 12 16 - 20% 9 6 3 Over 20% 27 9 3 Total 100 100 100

Table 5: Time, cost and quality benefits of design and build Regarding quality gains, a majority of respondents (54%) claimed that the use of D&B procurement could increase the quality of the product, although 42% of the respondents claim that the use of D&B procurement does not make any difference in product quality. This finding is in contrast with previous studies (Akintoye 1994 and 1995) where 75% of the contractors and architects believed that an improvement in product quality does not follow

the adoption of the D&B procurement; and even a minority (10%) positively anticipated reduction in product quality. The questionnaire also asked the respondents to compare Design and Build procurement system (in terms of comprehensiveness, conciseness, clients’ trust and acceptability etc) with each of the Traditional Architect-led, Construction management, Management contracting and Private Finance Initiative procurement systems. The results are shown in Figure 3, indicating that design and build procurement is at par with PFI, but considered much better than the traditional system. D&B is also favoured more than the construction management and management contracting, which were ranked second and third respectively. This means that PFI and D&B are the most favoured systems, followed by construction management, then management contracting, and lastly the traditional system.

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Figure 3: Design and Build Vs Traditional/ Construction Management/ Management Contracting The research have identified from literature the constraints that may affect the implementation of an effective design management system in D&B projects and asked the respondents to rate the severity of their effect on effective project delivery based upon their experiences. The results shown in Table 6 outlines the severity index (SI) for each constraint. All of the identified constraints have a serious effect, but the "D&B contractor been in full charge of the whole project" (item 3) and "poor communication between designers and client organisation" (item 9) are considered to have a very serious effect. This is an expected outcome and confirms the respondents dislike for package deal configuration of D&B since it gives the contractor complete control of the whole project.

Constraints Severity Index (SI)

1 Integrating project members into the team is problematic 5.24

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3 D & B contractors are in charge of the whole project 6.22* 4 Lack of definition of responsibility by the team 5.05

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6 Lack of knowledge of design process by the D&B contractors 5.86 7 Lack of appropriate use of IT system for transmittal of information 5.14 8 Lack of direct communication between designers and client organisation 5.78 9 Poor communication between designers and construction teams 6.11* 10 Poor communication between designers 5.64 Table 6: Severity index of constraints affecting design management in D & B systems. In addition to the identified constraints, the respondents were also asked to list out the problems they often encounter with other members of the D&B project (client, contractors, subcontractors, other consultants, etc). The analysis of the responses produced fifteen major problems facing practitioners in D&B projects. These are:

1. Lack of clear roles and responsibilities for the parties involved. 2. Lack of trust by the client. 3. Designers tend to revert to traditional system. 4. Incomplete information, especially at procurement stage. 5. Poor flow of information. 6. Poor site investigation report at tender. 7. Short tender period. 8. High risk to D&B contractor. 9. Contractors tend to place cost over quality. 10. Poor planning of design (budget and time). 11. Conflict of perception of design between contractors and designers. 12. Lack of clarity of the “employers requirements” and the "contractor’s proposals". 13. Lack of understanding of the design process by the contractors. 14. Lack of the client understanding of what the D&B procurement system is. 15. Lack of trust between the consultants and the contractor.

Further analysis aimed at identifying the source of each problem reveals that almost 42% of the problems seem to be originating from the contractors and 32% of the problems originate from the designers. 26% originate from the client and other stakeholders. The allocation is shown below:

Problems from the designers 1. Designers tend to revert to traditional system. 2. Incomplete information, especially at procurement stage. 3. Conflict of perception of design between contractors and designers. 4. Lack of clarity of the “employers requirements” and the "contractor’s proposals". 5. Poor flow of information. 6. Poor planning of design (budget and time). 7. Lack of trust between the consultant and the contractor.

Problems from the contractors 1. Clear roles and responsibilities for the parties involved. 2. Poor flow of information. 3. Contractors tend to place cost over quality. 4. Poor planning of design (budget and time). 5. Conflict of perception of design between contractors and designers. 6. Lack of clarity of the “employers requirements” and the "contractor’s proposals". 7. Lack of understanding of the design process by the contractors. 8. Lack of trust between the consultant and the contractor.

Problems from the clients 1. Lack of trust by the client. 2. Poor site investigation report at tender. 3. High risk to D & B contractor. 4. Lack of understanding on the side of client what the D&B procurement system is. 5. Short tender period. 6. Lack of clarity of the “employers requirements” and the "contractor’s proposals". CONCLUSION The traditional design and build, the design and manage, and the Novation D & B techniques are the favourite configurations to practitioners, followed by develop and construct, and then the design, manage and construct. It is surprising to note, the package deal (including turnkey), which was the second highest popular in the Akintoye’s (1994) studies is currently considered the least popular with practitioners. The research has indicated that the use of D&B for Civil engineering and Refurbishment-type projects is not recommended. However, if clients insist in using D&B due to other circumstances, this research suggests that the design and manage or the design, manage and construct configurations should be considered first. As outlined in Table 2 (the suitability of the various D&B configurations to various types of construction projects), the results suggest that configuration types 'A' and 'D' are the preferred options, while 'B' or 'C' should always be considered before options 'E' or 'F'. This suggests that practitioners prefer having the contractor being directly involved in some or all of the construction works. The research further indicates that the vast majority of the respondents prefer the main contractor having an individual contract with each designer rather than the designers forming

a consortium for one contract. The ‘preferring to work with multidisciplinary consortium of other specialists’ is the least preferred by the respondents. The research further indicates that the vast majority of the respondents prefer to work with not exceeding 10 design organisations in any one project. In terms of the influence of using D&B procurement system on project time and cost, the majority of respondents claimed that a saving of up to 20% reduction in overall project time and cost is achievable when compared to the traditional JCT 98 contracts. Regarding quality gains, this research indicates that over 54% of the respondents believe that D&B procurement have a positive effect on the quality of the finished product. This is in contrast with the practitioners' believe in the last decade as shown in Akintoye’s (1994) study, which suggest that practitioners did not expect to see significant quality advantage following the use of the D&B method. This may imply a shift in perception on the effect of D&B system on quality and quality performance. D&B procurement system have improved over the years with the use of the appropriate configurations. This leads to the conclusion that the perception of ‘poor quality’ in the D & B procurement system is outdated and baseless. For further improvement in quality and effective design management in D&B type projects, both clients and practitioners need to focus their attention on the constraints identified in the paper. Each of the main participants (client, designers, and contractors) must address their respective problems as apportioned in the paper. REFERENCES Adams, S. (1999) Update on design and build. Architects Journal, 3 June, 46-8. Akelere, D. and Gidado, K. (2003) The Risks and Constraints in the Implementation of

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Akintoye, A. and Fitzgerald, E. (1995) Design and Build; a survey of architects’ views. Engineering, Construction and Architectural Management. 1995 2 1 , 27-44.

Andrews, S (1999) For the inexperience client, d & b appears the easy option. Architects’ Journal, 3rd June, 1999.

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Lindsey, S (2003) what are the implications of the trends in building procurement Architects' Journal 03/04/2003.

Masterman, J.W.E. (2002) Introduction to building procurement systems, 2nd edition. Spons press. London.

More, D.R. and Dainty, A.R.J (2001) Intra team boundaries as inhibitors of performance improvement in UK design and build projects: a call for change, Construction Management and Economics 19, 559-562.

Ndekugri, I and Turner, A., (1994). Building procurement by design and build approach. Journal of Construction Engineering and Management vol. 120, no. 2, pp. 243-256, 1994.

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Saxon, R. (2000) Special report: design and Build. Architects' Journal 3 February. Smit, J. (1995) Projecting success. New Builder, 17 March.