Design-Build System Gaining Popularity, Profits

(The Kansas City Star/MCT) -

A year ago, Midland, Texas was in critical condition, parched by a prolonged drought that was aggravated by the increased demand of its growing population.

Two of the city’s big reservoirs had dried up, and a third was evaporating fast. A solution had to be found, and quickly. Midland officials turned to the Kansas City, Mo.-based team of Black & Veatch engineering and Garney Construction, and a fast-track approach to projects called design-build.

This summer, 20 million more gallons of water are flowing daily to Midland compared with last year, delivered by a $200 million project that includes 44 wells, several pump stations, storage tanks and 67 miles of pipe.

“We delivered that project in under 12 months,” said Dean Oskvig, president and CEO of Black & Veatch Energy. “Done in a traditional design-bid fashion, that would have probably been a two-year undertaking.”

Design-build has been around since as far back as the 1980s, but its use has grown substantially in recent years, as businesses and governments try to save money and get projects done faster.

It’s a streamlined approach that allows an owner to choose one entity to handle an entire project from design to execution, as opposed to the usual approach of hiring a designer, preparing plans and then seeking bids from contractors.

“They don’t have to talk to multiple parties; they have a single point of responsibility,” said Lisa Washington, executive director of the Design-Build Institute of America in Washington.

“The other key element that’s making it popular is that the early integration of the entire team leads to cost savings, faster completion and higher quality.”

And it’s proving to be a lucrative line of business for some engineering firms.

Oskvig said design-build projects now make up almost $1.7 billion in annual revenue – more than half the revenues at Black & Veatch, which has 10,000 employees.

At engineering firm Burns & McDonnell, design-build revenues have grown from $50 million a decade ago to $900 million today, a 1,700 percent increase.

“Our clients were looking for someone to be their sole-source person, who would be accountable for the success of their project,” said Greg Graves, chairman and CEO. “Burns & McDonnell not only accepts that responsibility, we look for it.”

“It has been, and continues to be, one of the delivery models our clients demand and we offer,” said Dirk Schafer, Midwest region president at J.E. Dunn Construction Co.

Oskvig said design-build has been part of Black & Veatch’s business model since the late 1980s, but it wasn’t until 2000 that it began to grow significantly. That’s when independent power companies began a big push to build gas-fired generators.

“They had a different approach than traditional, regulated utilities,” he said. “They were comfortable with turn-key or design-build projects.

“It’s when the same entity, maybe a joint venture, designs the infrastructure, buys the equipment and materials, and then constructs it.”

HNTB, another Kansas City engineering firm, is using the design-build approach on one of the area’s biggest transportation projects, the Johnson County Gateway project, which is overhauling the busy interchange of Interstates 35 and 435, and Kansas 10. The firm was hired by the Kansas Department of Transportation for what will ultimately be a more-than-$500-million project.

Scott Smith, HNTB’s director of corporate development, said the design-build approach can shave several years off a major public works project’s timetable.

“It wouldn’t be unusual for a project to take two or three years to design, and then four to five years of construction,” he said. “Design-build allows a three- to four-year process, easily cutting 50 percent of the total. It also allows the advantage of good prices.”

The practice also has been embraced by architects, although with a caveat.

“We fully support design-build as an alternative delivery method. However, it needs to be based on qualifications, and not just a monetary consideration,” said Sonya Jury, president of the Kansas City chapter of the American Institute of Architects.

Not every firm – engineering, construction or otherwise – is prepared to jump into the design-build world.

Graves, the chief executive at Burns & McDonnell, said companies have to be confident they have the expertise and financial backing to accept a project and deliver it profitably.

“It’s important to have a terrific risk-management program,” he said. “There’s certainly a downside to being in the design-build business.

“If you’re not careful, it’s the same things that can hurt any company – ego and greed. You need to be honest about the size and complexity of a project that you can take on.

“Every project goes through our risk-management program, so we make sure that if Burns & McDonnell is selected for the design-build contract, it’s in the best interest of our client and our employees.”