There has been much said about the future of design and build (D&B) as a solution to procuring higher-risk buildings (HRBs) since the introduction of the Building Safety Act – so here’s my view.
Over the past few years, with various clients, I have had the opportunity to lead the process to redraft their standard suite of employer’s requirements (ERs). Whenever I start the process, I explain to stakeholders that they should view their existing ERs as if they were a busy room where everyone is speaking at the same time – clauses added over time, often causing contradiction and lack of clarity.
Rather than trying to untangle the client’s existing document – which would be like stepping in to break up a pub brawl in Albert Square – I look to create a new room (my template) and, one by one, invite clauses from the existing, unruly room to justify their place.
My point? For so long, clarity has been missing from the D&B process and it starts at the beginning of the golden thread with the ERs!
D&B contracts are mostly procured under a single-stage tender process, passing risk to the contractor as soon as possible. Tenderers are often given three months to understand and appraise the tender documents and design, obtain subcontract prices, and provide the contractor’s proposals and a fixed-contract sum, which the tenderer and their supply chain must frequently stand by for more than two years.
Some clients have governance processes that require up to 12 months added time between tender return and commencement of the contract – this is approaching three years of crystal-ball pricing.
Contractors then start the works swiftly, often forcing construction to begin in parallel with design, which has consequences for the clarity of design, build and record information.
Regardless of whether the tenderer wins with an unnecessarily high-risk allowance, or underprices and spends the next two years cutting corners, the employer is not the winner.
Given recent global and national economic challenges, it’s no wonder that so many contractors who have ‘won’ single-stage tenders in better times are now struggling to digest the commercial realities of these contracts.
Adopting a two-stage process would shorten the gap between locking in the price and commencement of works, allowing the contractor and their team to understand the site better and to decipher the ERs before launching the project. This can provide a better platform for true value for money to be the star of the show. I encourage my clients to pursue this process on projects that merit its inclusion, but this is a culture change for the industry.
D&B contracts have been used and abused as a design while you build solution. For HRBs, however, the Building Safety Act introduces the legal obligation to obtain Gateway 2 approval (realistically a design and procurement freeze) before starting work on the site. This is the perfect opportunity for D&B contracts to be used as intended – design and then build.
Let me be as bold as to say I cannot see much commercial justification for procuring a D&B contract for a HRB via a single-stage tender. I believe the combination of a two-stage tender and a D&B contract is entirely congruous with the intentions of the Building Safety Act (see panel,‘Looking at the advantages’).
D&B is here to stay and should be viewed as a good contracting solution to deliver the intentions of the Building Safety Act – but only if it is procured in the correct way.
Looking at the advantages
Benefits of a two-stage D&B tender:
- Single-point responsibility for the design and the build (where the principal contractor should also be the principal designer).
- A platform to conclude the Gateway 2 process before the works and associated contractor’s site costs commence.
- A golden thread with minimal opportunity for frayed edges.
Advice to clients regarding two-stage procurement:
- Have a suitably skilled and resourced quantity surveyor to implement a second-stage tendering protocol to drive value into the trade package procurement process.
- Consider whether the financial assessment criteria at first-stage return should reward the tenderer who provides the lowest ‘on cost’ – how about a ‘race to the middle’ for these first-stage costs? Preliminaries and overhead and profit probably account for only 25-30% of the eventual contract sum (the rest is procured at the second stage), so there is a benefit to ensuring the contractor is resourced to design, procure and build the works in such a way that true value for money is optimised.
About the author
Jonathan Harris is equity partner at calfordseaden