Design-Build Under Ohio Construction Reform

Reprinted from the Spring 2012 BrickerConstructionLaw.com Newsletter
Download the complete Spring 2012 BCL issue

Design professionals and contractors are usually very good at their jobs. When everyone performs well, as they do on the vast majority of projects, all of the various project delivery models we have discussed in past issues of this publication produce good results.

However, over more than two decades, our office has seen a large number of roof, HVAC, building envelope, treatment plant, and renovation projects that have not performed as hoped and planned. With the notable exceptions of Ohio House Bill 264 projects (and similar energy conservation programs), projects performed by some charter cities, and a few other exceptions, public owners pursuing construction projects have been required to hire a separate design professional under a design-bid-build model of project delivery.

When problems arise, this model often results in finger pointing between the design professional and the contractor, with the owner caught in the middle. However, construction reform has now made design-build contracting available to public owners. This model shifts more of the risk of a dispute regarding the responsibility for a failure onto the design-builder and away from the owner.

The Criteria Architect/Engineer

As we have discussed in more detail in past issues of BCL, the rules promulgated by the Ohio Department of Administrative Services (DAS) under the new construction reform legislation require every public owner that wishes to use design-build to engage a criteria architect or criteria engineer. This person or entity is engaged to assist the owner in identifying the nature of the project and establishing the owner’s performance goals for purposes of preparing design criteria for the project to be provided to interested design-build firms and to be used in receiving and evaluating requests for qualifications (RFQs) from design-build firms, requesting proposals (RFPs) from the short-listed design-build firms, and evaluating and ranking those proposals based on the determination of which proposal provides the “best value” to the owner.

If the public owner maintains a current file of qualifications for design professionals and the anticipated fee will be less than $50,000, the criteria architect/engineer can be selected from the firms with current qualifications on file and the first step of the design-build selection process can be accomplished without going through a formal selection process. Alternatively, if the owner has a registered architect or registered professional engineer on staff, the owner can notify DAS and that individual can serve as the criteria architect or engineer without going through a formal selection process.

If neither of these exceptions apply, the owner must go through the qualification-based selection process outlined in ORC Sections 153.65 through 153.70, through which qualifications are solicited, evaluated, and ranked to select the criteria architect or engineer, which will be the individual or firm determined to be the best qualified to provide the required services.

As we have discussed in prior articles on construction reform, the criteria architect or engineer can do more than assist with defining the project by developing the criteria that will be provided to the design-build firms and assisting with the selection of the design-builder. On many projects, it may make sense to keep the criteria architect or engineer on the project until it is completed to serve as the owner’s eyes and ears and to make sure that the owner gets what it is entitled to receive under the design-build contract (i.e., to review the progress of the design to confirm that it fulfills the design criteria developed for the project and to continue on during construction to confirm that the project as built fulfills the design criteria for the project).

The one activity that the criteria architect or engineer may NOT perform is the final design of the project as a consultant to the design-builder. This service is expressly prohibited, although the extent and detail of the project criteria are not specifically limited under the statutes or the rules.

The RFQ/RFP Process

Once the design criteria for the project has been developed, the owner can follow the two-step selection process for (1) advertising and receiving qualifications from design-build companies followed by ranking the entities that have submitted qualifications, and (2) requesting proposals from the three top ranked design-build companies (which can include fee information and other financial data). An open-ended set of expectations can be issued by the owner (i.e., a performance specification), and proposers can propose and price a number of different options.

If a simple roof replacement is desired, for example, a guaranteed maximum price (GMP) can be requested at the time of the proposal and may be a realistic expectation. However, it will be important in determining the “best value” to compare apples to apples. For example, although the rules do not specifically require them to be included in the proposals, life cycle costs, warranty terms, and the like should be requested, compared, and weighed against the GMP and/or the fee information provided in the proposal.

Especially for a non-HB 264 (or other similarly funded) energy savings project, life cycle costs, anticipated maintenance regimens, and projected operating costs should be requested and evaluated as part of the “best value” determination. When the utility bills start rolling in, the owner wants to avoid unpleasant surprises. In addition, compatibility with existing systems may be considered in determining “best value.” Specific information or examples showing the content of the operations and maintenance manuals, training that will be provided, the terms of warranties, and even available maintenance agreements may be requested and considered.

For more complex projects, or projects where the owner has not yet settled on key design concepts, the owner may wish to consider paying a modest stipend to the short-listed firms, which can expend significant time and expense in responding to RFPs, especially when a GMP is requested.

Summary

The design-build selection process takes a little more work and thought on the front end and may add cost to the project, but it can pay dividends if problems arise later. Having a single point of responsibility for failures in the system has value in this era of multiple roof system and HVAC options.