Road less traveled

State mulling design/build for highway construction

By Jeremy Harrell
Daily Reporter Staff

Wisconsin's road-building community is joining a growing list of states that is either considering or passing design/build laws to bring large-scale road projects to a speedy completion.

Two years ago, Wisconsin sent up a trial balloon for road construction design/build when the state approved the $52 million Sixth Street Viaduct project, which is now under way in Milwaukee. And for the last nine months, the state Department of Transportation has been holding roundtable discussions with road builders, engineers and state officials from around the country to draft a Wisconsin blueprint for design/build in case a law ever clears the state Capitol.

"The department has decided to investigate the design/build methods used by other states," said John Haverberg, director of the DOT's Bureau of Highway Development. "We have recognized that it's an issue that's out there. There are concerns about using it and there are advantages, and we've talked about both sides."

The misgivings over design/build for road projects are similar to the arguments against it in the rest of the construction industry, Haverberg said. It could limit competition; it could pit state contractors against larger, better-financed or out-of-state builders and engineers; it entails an indeterminate risk that contractors are wary of assuming.

In general, it tinkers with a low bid system that everyone can agree is a fair way for the state to conduct business, he said.

Nevertheless, the benefits are just as obvious. Design/build encourages innovation from contractors and engineers and almost always results in faster projects, Haverberg said.

There are hovering questions about road construction design/build, and the DOT and road builders have started trying to answer them.

Finding the right project

There's some disagreement about what projects are tailored to design/build, said Scott Peifer, vice president of Waukesha-based Zenith Tech Inc. and project manager for Milwaukee Gateway Partners, the joint venture company overseeing the Sixth Street Viaduct job.

"Originally, design/build came out as something that fits big, complex projects," he said. "Why not put that in the contractor's hands? From a contractor's perspective, the allure of design/build is that you can have much more say about how the project is put together and have more say in the design phase. The more progressive the contractor, the more he'll gravitate toward design/build."

But Peifer said the delivery method could also work well for smaller scale jobs.

"It may be better suited to more simple, cookie-cutter jobs, like small bridges and asphalt overlays," he said.

After listening to state transportation officials around the country, Haverberg said the jury is still out on when design/build charts the best course for a project.

"There are concerns about what kind of projects are the right candidates for design/build," he said. "We heard that it's not good for small bridge projects in other states, like Florida. Florida has decided to use it primarily for rest stops and major bridge projects. On very large, complex projects, other states have found it to be a good method. We have not come to a conclusion on this in Wisconsin."

In many cases, design/build could be most attractive when the largest variable for a project is timing and not innovation, Haverberg said.

"If there is a time concern, in theory this is a way to speedily get the project out there," he said. "You get a parallel rather that sequential project delivery. Keeping people from using a facility because it's taking too long to build it is a big issue."

Finding the right proposal

Under the design/bid/build process, a road contractor bids on completely rendered project specifications, whereas under design/build the contractor bases a bid on a percentage of the final design. Making design/build work depends on the owner's knowing when to turn off the design engine to let the contractor take over, said Dave Kraemer, president of Edward Kraemer and Sons Inc., a construction company in Plain.

"The big difference in design/build is the innovation you can put into a job," he said. "If an owner puts too many restrictions on the design/build proposal, it eliminates a lot of the innovation and cost saving a contractor can bring."

Edward Kraemer & Sons recently teamed up with a national contractor and engineer to work on the $330 million Legacy Parkway design/build project near Salt Lake City. For that job, Kraemer said the team bid on a design proposal that was 30 percent complete.

Although this is Kraemer's first design/build job, he said the minimal design has allowed the team to "innovate a lot on this job."

For proprietary reasons, Kraemer did not elaborate.

In contrast to the Legacy Parkway job, the Wisconsin DOT kept close tabs on the Sixth Street Viaduct's design, limiting contractors' chances to try out new ideas, Peifer said.

"Given where we are in the project down there, I'm not convinced design/build has helped (the DOT) accomplish its goals," Peifer said. "It has definitely cut down on time. We're doing in two years at Sixth Street what would have taken three years. What we're finding, though, is that it has not been good on the innovation side of the equation."

With the Sixth Street Viaduct, Haverberg said the DOT had to spell out the bid process and selection to reassure competing contractors that the DOT acted impartially.

"The criteria has to be set up early, it has to be well defined and it has to be open to everyone," he said. "Contractors are concerned about having objective criteria."

Playing by the rules

Tom Walker, Wisconsin Transportation Builders Association executive director, said defining the rules of the game is the biggest design/build obstacle. Unlike other states, Wisconsin has a project development process that leans on public involvement and minimizing environmental impacts, both of which lead to projects that rely heavily on preconstruction planning and design, he said.

"People need to decide where design/build might be useful in Wisconsin, given the way Wisconsin works," Walker said. "In Wisconsin, we have a very aggressive environmental ethic, which requires the department to look at a variety of alternatives.

Before going to a contract for a design/build project, there needs to be all kinds of front-end work.

"The range of flexibility is narrowed, and the potential benefits of design/build are narrowed because the team has few alternatives to consider," Walked said. "It could be that project development is so process-rich that pure design/build is hard to get to in Wisconsin."

However, the "process-rich" system in place safeguards against risks evident in design/build, Walker said. What if the DOT drafted a design/build project and made an error that the design/builder didn't catch when bidding on the project?

"Who's responsible?" Walker asked. "Should they be asked to assume that risk? I don't think it would be too difficult to come up with a judging process that's fair. The big issue is performance. What level of risk is it reasonable to shift?"

Not so fast...

"I don’t know whether the department is going to be an advocate for this. We’re aware that it’s a trend in the industry, and we want to be aware of that. It’s not a case of contractors saying, ‘Absolutely not. There’s no way this is going to happen here.’" John Haverberg Director State DOT Bureau of Highway Development

Even if the department let the perfect design/build contract, the delivery method is still a double-edged sword with neither edge benefiting smaller contractors, said Brian Mitchell, who owns Brian A. Mitchell Construction Company, a disadvantaged business enterprise in Madison.

"The whole trick to design/build is to be involved as early as possible in the process," he said. "That often means getting involved in a team and being exclusive to that team. But if that team doesn't get the contract, you're out of a job. Right now, I can bid on everything."

The design/build concept, by its very nature, leaves small contractors out in the cold, Mitchell said.

"DBE contracts are typically an end thing done at the last minute," he said. "Design/build jobs are all about speed. I'm afraid everybody's going to say they're way too busy to get the DBE contractors on the job. It removes responsibility for not doing a DBE program."

Mitchell also said smaller contractors don't have the necessary resources to invest the time and money needed to flesh out a design/build job. Under the design/bid/build system, every contractor bids off the same set of plans, he said.

"In design/build, you have to put together hard numbers based on very conceptual designs," Mitchell said. "As a small contractor, I don't have the luxury of putting together the hard numbers. Design/build jobs would come at the expense of small contractors."

Peifer agreed somewhat with Mitchell and said design/build jobs favor larger contractors with more equity and bigger staffs. As a result, the level playing field could tip in favor of a handful of companies.

"You're going to have the larger, more sophisticated contractors capable of doing design/build," he said. "If the DOT starts doing design/build work, you'll see eight to 12 contractors gravitate toward that -- some because they want the work and others because they realize they have to. Smaller contractors won't be able to participate on the front end. For the great majority of contractors, the switch may be from working for the DOT to working for other contractors."

Down the road

Right now, the design/build discussion for road construction is hypothetical. But the state is taking the right approach beginning the debate now, Walker said.

"I believe firmly that you need to know what you're buying before you buy it," he said. "That doesn't mean we need to talk the issue to death. If the Legislature were to pass a design/build law, everybody would have to have a comfort level with what the consequences would be."

In order for design/build to take hold for road construction, the DOT would have to bring the industry along for the ride, Peifer said.

"If the DOT forces the issue, the construction industry will come along," he said. "If the DOT doesn't take the lead, I don't think the industry will push for it."

Until the DOT completes its design/build forums in the coming months, it won't have a position on the issue. In the meantime, Haverberg said the DOT has to know what it's getting the industry into.

"We're preparing ourselves," Haverberg said. "I don't know whether the department is going to be an advocate for this. We're aware that it's a trend in the industry, and we want to be aware of that. It's not a case of contractors saying, 'Absolutely not. There's no way this is going to happen here.'"

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