Progressive Design-Build: Reducing Risk With Two-Stage Procurement

Design-build (DB) is an increasingly popular method of project delivery in construction due in large part to its inherent efficiencies in collaboration and cost management. However, this method can increase risk to owners and developers, who effectively sign a construction contract before the project is fully designed and the budget is developed. 

A new delivery method has emerged in recent years to address this challenge: Progressive design-build (PDB) is a two-stage approach to design-build contracts that can effectively mitigate risk to both owners and contractors alike by giving them an “off-ramp” if they fail to reach agreement during the design phase. 

In this article, we explore the structure of a progressive design-build contract and the benefits of this delivery method.

Progressive Design-Build: The Basics

Progressive design-build is a branch of design-build in which the contract for design and construction is separated into two distinct phases. The selection of the DB firm is based primarily on their qualifications and design proposal. Because the design and budget have yet to be determined, construction costs and timetables are not part of the tendering or procurement process. 

Phase 1: Preconstruction Services

During the first contract or phase, the design-builder works closely with the owner and their design consultants on programming. They will provide input on feasibility and constructability of preliminary designs, and continue design development. This stage of the project is highly collaborative: The contractor submits comprehensive and transparent cost estimates to the owner for simultaneous development of the project budget.

Once the design is sufficiently detailed — generally 60% or more complete — the DB contractor will submit a formal proposal to the owner with a guaranteed maximum price (GMP) for construction along with a preliminary timetable. If the owner accepts their proposal, they will either sign an extension to the original contract or create a separate contract for the construction services. 

However, this is where PDB differs the most from design-build: If the owner and contractor cannot agree on the design or budget for construction services, the owner can decide to use the “off-ramp” built into the PDB agreement. In this case, they will typically use the designs to tender out the construction phase of the project separately. 

It is important to note that ownership of the designs at this point will depend on the original agreement – if the DB firm reserved rights to the design in the contract, the owner would need to re-tender the entire project, including the design development. 

Phase 2: Construction Services

Once the owner accepts the DB firm’s proposal, they will move to phase two – the actual construction of the project. If the designs haven’t been finalized, the contractor will complete the drawings and specs and begin procurement of subcontractors and vendors. 

The rest of the project will continue as a typical design-build project. 

PDB vs CMAR

The Construction Manager at Risk (CMAR) or CM/GC method of project delivery is very similar to progressive design-build, and shares many of the same advantages. The Construction Manager is hired during preconstruction to consult and provide input on the constructability of the designs. However, unlike PDB, a design firm is hired under a separate contract from the CM or GC. The owner has two separate contracts: One with the CM/GC and another with the architect or design firm. 

On a PDB project, the owner has a single contract with the design-builder who provides both design and construction services, streamlining communication throughout each phase of the project. 

Unique Features of Progressive Design-Build

As an offshoot of design-build, PDB shares several key elements with its parent delivery method. However, the two-stage structure of the contract creates a unique relationship that brings unique features to the table. 

Transparent Estimating & Budgeting

Progressive design-build is highly collaborative, and the owner is generally highly involved in estimating and budgeting discussions. During the initial phase of the contract, the design-builder shares transparent cost information with the owner as the budget is developed. The owner and DB firm want to reach an agreement on the construction phase, so cost transparency helps reduce disagreements or disputes during the budget negotiation. 

Number of Contracts

A typical design-build project uses a single contract with a design-builder who performs both design and construction services. The price for the entire project is set during the contractor selection process. 

Progressive design-build, by contrast, uses a single contract in two phases (or, in some cases, two separate consecutive contracts). The owner and design-build firm enter into one agreement for design services. During design, they will negotiate the cost for the construction phase and enter into a second agreement (or an extension of the original contract) for the construction phase. 

A traditional Design-Tender-Build (DTB) project typically consists of two separate contracts: One with the designer and the second with the contractor.

Off Ramp

One of the defining features of a Progressive design-build (PDB) project is that it offers the parties an off-ramp. If the owner and design-build team (DB team) can’t agree on pricing before moving on to the construction phase,  they can agree to part ways.  

Owners may or may not retain all intellectual property, including the designs, if they part ways with the design-builder. This detail is generally negotiated in the initial design contract.

Design-build (DB) is the most similar to Progressive design-build in that one team handles design and build. However, it offers no such off-ramp. The parties are married to each other until the project is complete.

In Canada, having an off-ramp can be especially beneficial when working in provinces like Quebec or Alberta, where regional construction practices and labour laws may complicate projects. Progressive design-build allows for a smoother transition if agreements can’t be reached.

Project Cost Negotiation

One of the key differences between progressive design-build and traditional design-build is when the contract price for the construction phase is negotiated. On a design-build project, the contractor typically submits a single proposal and price for the entire project, including both design and construction. The contract amount for all services is set up front.

Progressive design-build essentially separates the construction phase into a separate agreement. The budget for construction is negotiated during the design phase, typically when the designs are nearly complete. If the two parties can't agree on a price, the owner can terminate the relationship and explore other contracting options.

Qualification-Based Selection

Owners select the design-build team (DB team) based primarily on their qualifications, rather than price, in the PBD method. This is because the price for construction services is negotiated after the team has made significant progress on the design.

Design Process

With PBD, the design-builder team is the major player in terms of design. They’re selected before a baseline design has been developed. This is similar to Construction Manager at Risk (CMAR). 

However, it contrasts with design-build, where the owner’s team develops a baseline design. Then, a design-builder team creates something based on the owner’s design.

When to Choose Progressive Design-Build

Despite its advantages, progressive design-build isn’t necessarily the right delivery method for every project. Owners or developers who have built similar projects in the past can typically draw on historical cost data for accurate budget forecasting, so might not benefit as much from the PBD method. 

Progressive design-build can be a good choice for owners developing complex projects with a variety of unknowns. For example, PDB may be attractive when the project: 

• Is located in a province or region where the owner or developer hasn’t built before
• Differs substantially in scope or scale from past projects
• Is similar to others that have historically gone over budget
• Could be built on several different sites

PDB can also benefit owners who want to try working with a new, untested DB firm. 

In provinces with distinct regulations, like British Columbia and Ontario, progressive design-build flexibility helps accommodate provincial differences in labour laws and building standards.

Build collaboratively with progressive design-build.

Ultimately, choosing a delivery method depends on a wide variety of factors, and no contracting method will work on every project. For risk-averse Canadian owners and developers, or those seeking a more collaborative approach, progressive design-build may provide the right fit.  

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