DBIA DBIA - Design-Build Institute of America Cost Management and Value Engineering Questions and Answers 5 — Questions and Answers
Question 1: In the DBIA design-build process, at what project phase is value engineering MOST cost-effective to implement?
- During construction closeout
- During design development and schematic design phases (Correct answer)
- After the certificate of substantial completion
- During commissioning
Correct answer: During design development and schematic design phases
VE applied during early design phases has the highest leverage because design changes cost exponentially less than changes made during construction.
Question 2: A design-build team's cost model shows the mechanical system is 22% over the target cost. Which value engineering approach addresses this FIRST?
- Reduce the building footprint by 22%
- Perform function analysis to identify essential versus non-essential mechanical functions (Correct answer)
- Switch the project delivery method to CM at-Risk
- Request additional owner contingency funds
Correct answer: Perform function analysis to identify essential versus non-essential mechanical functions
Function analysis identifies which mechanical functions are truly required, allowing the team to eliminate or simplify unnecessary elements before redesigning.
Question 3: What does the term 'cost of quality' mean in the context of design-build value engineering?
- The premium paid for high-specification materials
- The total cost of conformance plus non-conformance, including rework and warranty claims (Correct answer)
- The design fee portion of the total project cost
- The cost to achieve LEED certification
Correct answer: The total cost of conformance plus non-conformance, including rework and warranty claims
Cost of quality encompasses both prevention and appraisal costs (conformance) and failure costs including rework and warranty (non-conformance).
Question 4: Under a design-build contract, who typically bears the risk of cost escalation due to inflation between proposal submission and construction completion?
- The owner always bears escalation risk
- The design-builder, unless the contract contains a specific escalation clause (Correct answer)
- The surety bond provider
- The prime subcontractors
Correct answer: The design-builder, unless the contract contains a specific escalation clause
In a fixed-price design-build contract, the design-builder assumes inflation risk unless the contract explicitly includes escalation provisions or allowances.
Question 5: Which financial metric is MOST useful for comparing two design-build alternatives with different first costs but different operating cost profiles over a 30-year facility life?
- Return on equity
- Net present value of life-cycle costs (Correct answer)
- Gross margin percentage
- Internal rate of return on construction cost
Correct answer: Net present value of life-cycle costs
Net present value of life-cycle costs accounts for both initial capital cost and future operating costs discounted to today's value, enabling a true apples-to-apples comparison.
Question 6: In a design-build GMP contract, what typically happens to documented cost savings that remain when a project is completed under the GMP?
- All savings are automatically returned to the owner
- Savings are shared according to a pre-agreed split defined in the contract (Correct answer)
- The design-builder retains 100% of all savings as profit
- Savings are applied to a future project contingency fund
Correct answer: Savings are shared according to a pre-agreed split defined in the contract
GMP contracts typically include a shared savings clause specifying the percentage split of any underrun between the owner and design-builder as an incentive for cost efficiency.
Question 7: What is 'scope creep' in design-build cost management, and what is the BEST contractual tool to control it?
- Scope creep is design errors; best controlled by design insurance
- Scope creep is unauthorized additions to project scope; best controlled by a formal change order process with clear scope baselines (Correct answer)
- Scope creep is contractor-driven cost inflation; best controlled by open-book accounting
- Scope creep is owner-requested acceleration; best controlled by liquidated damages clauses
Correct answer: Scope creep is unauthorized additions to project scope; best controlled by a formal change order process with clear scope baselines
Scope creep is the gradual, often informal expansion of project scope; a rigorous change order process tied to a defined scope baseline is the primary contractual defense.
DBIA DBIA - Design-Build Institute of America Cost Management and Value Engineering Questions and Answers 5
In the DBIA design-build process, at what project phase is value engineering MOST cost-effective to implement?