Five years ago, design-build project delivery was poised to take over the world. Or at least that is what some proponents seemed to think. But with an industry recession, particularly in some of design-build's critical private-sector markets, the delivery system seemed more likely to roll up than rule.
Despite budget cuts and other economic woes among owners, revenue for ENR's Top 100 Design-Build firms still managed a slight gain of 0.3% in 2002, to $55.3 billion. That follows a big slide in 2001 for this niche from its high point in 2000, when firms reported $58.2 billion in total revenue.
Surprisingly, domestic revenue for design-builders still managed to rise just under 1% to $41.2 billion from $40.8 billion last year. But the down market has taken its toll, since that increase follows a 2.4% hike from 2000 to 2001. A closer look at the figures also reveals the impact of a less active international market, generally a fall in the number of huge, engineer-procure-construct jobs in a stagnating world economy.
"We aren't seeing the dramatic gains in market share that we experienced in the 1990s, but design-build is still tracking upward," says Jeffrey Beard, CEO of the Design-Build Institute of America, Washington, D.C. He stresses that the delivery system's market share rose from only about 5% in the mid 1980s to about 25% by 1999. "Design-build is still ticking upward, although now it's only by a point or two a year," he says. "I think [the slowdown in growth] is a reflection of the market and the political hurdles for public-sector design-build."
Some of those political hurdles are falling. "Just this past year, Kentucky approved the use of design-build on public projects," notes C.C. Howard Gray, CEO of James N. Gray Co. He is pleased that his home state finally has taken the plunge. "But we're not the last" state to maintain legal roadblocks to public-sector design-build, he says.
It is not just design-build contractors who are chafing under legislative restrictions. "More states, such as New York, are using program management on their transportation programs," says Eric Keen, senior vice president of HDR. "But New York doesn't allow design-build."
Keen believes that having design-build in the tool box is a major advantage for program managers on transportation projects. "We are working on a big expansion of Trunk Highway 52 in Minnesota," he says. "Normally, we would let four or five different contracts and the whole job would take seven to eight years." But Keen notes that HDR has bundled the various projects together in a single design-build package. "The whole program is scheduled to be completed in 40 months," he says.
DBIA is working hard to expand the availability of design-build in the public sector. In March, the group hired as vice president for government affairs Craig H. Unger, a former top construction official at the federal Bureau of Prisons. "He was instrumental in introducing design-build to that construction program," says Gray, who is a DBIA director and believes Unger will be critical in advancing state legislation authorizing design-build. "He knows the benefits from the owners' perspective and can speak their language," Gray says.
Proponents believe that design-build will continue to maintain its strength through the tough times. "What it really comes down to is that it improves efficiencies through effective communication between the parties," says Andy Ball, CEO of Webcor Builders. He notes that, in tough economic times, owners value any process that leads to efficiencies and cost savings. "They don't want to hear about the difficulties in getting shop drawings distributed and reviewed," he says.
Beard agrees. "Owners who have used design-build are talking to other owners," he says. "They are some of design-build's best salespeople."