DBIA DBIA - Design-Build Institute of America Cost Management and Value Engineering Questions and Answers 4 — Questions and Answers
Question 1: In design-build cost management, what is the primary purpose of a Guaranteed Maximum Price (GMP) contract structure?
- To transfer all cost risk to the owner
- To cap the design-builder's total compensation while allowing savings sharing (Correct answer)
- To eliminate the need for contingency budgets
- To fix design scope before pricing begins
Correct answer: To cap the design-builder's total compensation while allowing savings sharing
A GMP caps the design-builder's maximum compensation while often including a shared savings clause if final costs come in below the GMP.
Question 2: Which value engineering technique involves systematically questioning each project function to identify unnecessary costs?
- Life-cycle cost analysis
- Function Analysis System Technique (FAST) (Correct answer)
- Cost-benefit ratio modeling
- Parametric estimating
Correct answer: Function Analysis System Technique (FAST)
FAST diagramming maps project functions hierarchically to identify which functions are necessary versus redundant, enabling targeted cost reduction.
Question 3: During design-build procurement, an owner issues an RFP requiring an Allowance for bidder's design development risk. What does this allowance primarily cover?
- Owner-directed scope changes after award
- Cost uncertainty between bridging documents and final design (Correct answer)
- Inflation escalation over the project duration
- Subcontractor default risk
Correct answer: Cost uncertainty between bridging documents and final design
Design development allowances account for the cost gap that exists because design is incomplete at proposal time, covering refinement risk assumed by the design-builder.
Question 4: A value engineering proposal on a design-build project saves $500,000. The contract specifies a 50/50 VE savings split. How much does the owner receive?
- $500,000
- $250,000 (Correct answer)
- $150,000
- $0, all savings go to the design-builder
Correct answer: $250,000
A 50/50 split means each party receives half of the documented savings, so the owner receives $250,000.
Question 5: In design-build cost management, what distinguishes an 'owner contingency' from a 'design-builder contingency'?
- Owner contingency covers unforeseen site conditions; design-builder contingency covers estimating risk (Correct answer)
- Owner contingency is held by the design-builder; design-builder contingency is held by the owner
- They are interchangeable terms for the same budget reserve
- Owner contingency is never included in GMP proposals
Correct answer: Owner contingency covers unforeseen site conditions; design-builder contingency covers estimating risk
Owner contingency covers scope changes and unforeseen conditions the owner controls, while design-builder contingency covers the design-builder's estimating and execution risks.
Question 6: Which cost estimating method is MOST appropriate during the conceptual phase of a design-build project when minimal design detail exists?
- Detailed quantity takeoff
- Unit price estimating
- Parametric estimating using cost per square foot or similar metrics (Correct answer)
- Assembly-based estimating
Correct answer: Parametric estimating using cost per square foot or similar metrics
Parametric estimating uses historical cost benchmarks per unit of capacity or area, making it suitable when design detail is insufficient for quantity takeoffs.
Question 7: What is the primary risk to an owner when awarding a design-build contract based on a lump-sum fixed price with incomplete bridging documents?
- The design-builder may exceed the GMP
- The owner loses the ability to obtain VE savings
- Scope gaps in bridging documents may lead to disputes or change orders (Correct answer)
- The design-builder will over-design to reduce risk
Correct answer: Scope gaps in bridging documents may lead to disputes or change orders
Incomplete bridging documents create ambiguous scope, which can result in disputes and change order requests as the design-builder encounters undefined requirements.
DBIA DBIA - Design-Build Institute of America Cost Management and Value Engineering Questions and Answers 4
In design-build cost management, what is the primary purpose of a Guaranteed Maximum Price (GMP) contract structure?