DBIA - Design-Build Institute of America Design-Build Contracting Approaches Questions and Answers — Questions and Answers
Question 1: In a Progressive Design-Build (PDB) delivery model, when is the final contract price, such as a Guaranteed Maximum Price (GMP), typically finalized?
- In the initial proposal submitted in response to the RFP, based on conceptual documents.
- After the design is significantly advanced through collaboration between the owner and the design-builder. (Correct answer)
- Before the selection of the design-builder, as a prerequisite for team qualification.
- Upon reaching 100% construction documents, immediately prior to the start of construction.
Correct answer: After the design is significantly advanced through collaboration between the owner and the design-builder.
Progressive Design-Build is a two-phase process. A design-builder is selected based on qualifications in Phase 1, and then collaborates with the owner in Phase 2 to advance the design. The final contract price (GMP or Lump Sum) is negotiated and finalized during Phase 2, once the scope and design are sufficiently developed to allow for reliable pricing.
Question 2: A design-build project is delivered under a Guaranteed Maximum Price (GMP) contract that includes a shared savings clause. If the final cost of the work is less than the GMP, how are the savings typically handled?
- The savings are returned entirely to the owner as a refund.
- The savings are kept entirely by the design-builder as additional profit.
- The savings are split between the owner and the design-builder according to a pre-negotiated formula. (Correct answer)
- The savings are automatically applied to fund additional scope items not included in the original contract.
Correct answer: The savings are split between the owner and the design-builder according to a pre-negotiated formula.
A shared savings clause is a key feature of many GMP contracts that incentivizes the design-builder to find efficiencies. When the final project cost is below the GMP, the resulting savings are distributed between the owner and the design-builder based on a formula defined in the contract (e.g., 50/50, 70/30).
Question 3: An owner wants to build a standard data center with a very well-defined program and a low tolerance for cost overruns. The owner has developed detailed performance requirements and is confident in the project's scope. Which contracting approach would be most appropriate for this design-build project?
- Progressive Design-Build with a target price.
- Lump Sum (Fixed Price). (Correct answer)
- Cost-Plus with a fixed fee.
- A multi-prime delivery approach.
Correct answer: Lump Sum (Fixed Price).
A Lump Sum (or Fixed Price) contract is ideal when the project scope is clearly defined, allowing the design-builder to accurately price the work and assume the risk for cost overruns. This provides the owner with the cost certainty they desire from the outset.
Question 4: In a design-build contract with a Guaranteed Maximum Price (GMP), what is the primary purpose of the design-builder's contingency?
- To fund owner-directed changes in scope or program.
- To provide a source of additional profit for the design-builder.
- To cover costs from unforeseen conditions or trade contractor buyout risks within the defined scope. (Correct answer)
- To pay for project financing, insurance, and bonding costs, which are typically separate line items.
Correct answer: To cover costs from unforeseen conditions or trade contractor buyout risks within the defined scope.
The design-builder's contingency is a sum included within the GMP to cover risks and costs that the design-builder is responsible for, such as incomplete design details, trade contractor buyout issues, or minor coordination errors. Owner-directed scope changes are typically funded from a separate owner's contingency or reserve.
Question 5: Which of the following statements most accurately describes the primary contractual relationship in a design-build project?
- The owner holds separate prime contracts with the architect-of-record and the general contractor.
- The owner holds a single prime contract with one entity, the design-builder, who is responsible for both design and construction. (Correct answer)
- The lead designer holds the prime contract with the owner and subcontracts with a general contractor.
- The general contractor and lead designer form a joint venture that is managed by the owner under separate contracts.
Correct answer: The owner holds a single prime contract with one entity, the design-builder, who is responsible for both design and construction.
The defining characteristic of the design-build delivery method is the single contract (single point of responsibility) between the owner and the design-build entity. This entity then arranges for the design and construction services, either through in-house staff or subcontracts.
Question 6: Following a major natural disaster, a public agency must immediately begin stabilization and repair work on critical infrastructure. The full extent of the damage is unknown and cannot be assessed until work is underway. In this emergency scenario, which design-build contracting approach would be most suitable to start the work quickly?
- A stipulated Lump Sum contract based on historical data.
- A Progressive Design-Build contract with a 90-day period for GMP development.
- A Cost-Plus (Cost-Reimbursable) contract. (Correct answer)
- A competitive low-bid procurement for a fixed-price contract.
Correct answer: A Cost-Plus (Cost-Reimbursable) contract.
A Cost-Plus contract allows work to begin immediately when the scope is undefined and risks are high. The owner agrees to pay the design-builder for the actual costs of the work plus a fee. This approach provides maximum flexibility to address the unknown conditions inherent in an emergency repair project where speed is the top priority.
DBIA - Design-Build Institute of America Design-Build Contracting Approaches Questions and Answers
In a Progressive Design-Build (PDB) delivery model, when is the final contract price, such as a Guaranteed Maximum Price (GMP), typically finalized?