The Design and Build Delivery System A Key Driver of Construction

Business Development
Bob Hindle MSc. Pr.CPM, Past President of CIOB Southern Africa Region
Construction Business Development Consultant
Abstract
The construction industry with its many independent role-players is viewed by many of its
major customers as backward or as an industrial delinquent, largely because of its lack of
process leadership and resistance to change. Its conventional systems and procedures
evolved more than two hundred years ago and, whilst its customers systems have advanced
significantly in recent years, construction delivery processes and systems have changed
very little. As a result, many experienced construction customers are now demanding
change and are insisting on innovative procurement systems that they prefer, through which,
they seek improved control, fewer risks and customer focus. The Design Build method of
construction delivery is growing in popularity because it leads to one of the identifiable
business development trajectories.
This paper describes the drivers of change, the critical needs of construction customers and
the required response from construction entities who seek a sustainable future, through the
adoption of new processes and techniques, particularly those needed to participate in
Design and Build delivery.
It describes key steps towards the adoption of the Design and Build delivery system but also
describes the experiences of successful practitioners. Successful Design and Build
constructor organisations have discovered learning a new set of procedures is not sufficient,
it also requires a major mind-set change, towards integration, market focus and the adoption
of proven co-operative business practices. All of which may be alien to many who have
spent their formative years in what the author describes as the fragmented construction
combat zone.
Part 1 Why Even Consider Alternative Building Delivery Systems?
1.1 Introduction
Change in construction delivery processes is quite unusual. After all, the system and its
traditional processes have remained largely unchanged for about two-hundred years.
However, after the two oil crises of the 1970s, when OPEC was formed and the world was
forced to endure significant increases in the price of oil, pressure for change became an
imperative for construction customers and quantity surveyors alike. Some may remember
that the crisis caused hyper-inflation in the economies of most nations as so the time taken
to build exposed customers to significant escalation of costs.
As is always the case, industry found ways of relaxing the barriers to change, in response to
a crisis and innovation flourished, as customers, consultants, property developers and
contractors sought new ways to reduce the time required to deliver buildings. Changes were
seen in the form of fast-tracking and the introduction of alternative delivery systems.
Prior to this time some of the methodologies had been developed and used by a few
innovative construction entities and the procurement departments of experienced customers,
(frequent buyers) but the traditional/conventional procurement system had dominated in
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most countries where the British model of construction delivery had been installed or
adopted. However, the period of innovation and experimentation was not welcomed by the
industry as a whole and the curtain of resistance to change was soon lowered, though the
fast-tracking version of the traditional/conventional system became the norm for most.
1.2 Disruption, Damage and Customer Response
The traditional/conventional (Design, Bid, Build) delivery system worked quite well for more
than one hundred years, though it can now be seen that it may not have been appropriate in
all instances, (Bowley 1966, Masterman 1992). However, with the advent of fast-tracking
applied to the conventional delivery system the resultant stresses placed upon all entities
involved, most often resulted in customer dissatisfaction, whilst disputes, contractual claims,
frequent litigation, poor quality and delays to completion of the final product became the
norm, as shown in Figure 1.

Figure 1 How it got to be this way

Rwelamila (1998) described the problem of resistance to change amongst consultants, who
advise customers about delivery systems, who were reluctant to engage with new
procurement systems. He described how they most often revert to the
traditional/conventional system with which are familiar, even though they know that it is not
being applied properly because of fast-tracking and will not deliver best results for
customers. This is a major example of the resistance to change that Bowley (1966) studied
in depth and reported on, further, it can be said that the situation has changed little since her
seminal work.
As a result of the above, it has been the primary customers of construction that have
promoted improved delivery systems and who insist upon their application for particular
projects. (Kamala & Hindle (2000) described the impact of this phenomenon as experienced
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in the Tanzanian building industry). Industrial customers have seen massive change in
production and delivery systems over the past thirty years and their products and services
have improved massively, (Consider motor vehicles for example). Systems such as:
Supply chain management;
Strategic Partnering and
Lean production
However, construction has changed very little in this same time period and this is the primary
reason why, in most countries, there have been investigations into the construction industry
and initiatives designed to drive the industry towards the adoption of some of these
processes. Latham (1994) In a report commissioned by the British Government described
how the industry with its ancient structure and systems was 25% to 30% off the mark in
terms of offering real value for money. Some four years later a group of construction
customers demanded major improvements in the Egan Report (1998).
The construction industry lacks unity and as a result, leadership. None of the many entities
is interested or capable of driving process change. In effect, it resists change and as a
result it is experienced customers who are driving change because they are not happy with
the traditional service and value obtained through the fragmented and complex system.
1.3 Fragmentation and Disorientation
The industry is said to be fragmented both vertically and horizontally, meaning that there are
very many independent specialists who only work together on a given construction project
and perhaps never meet again on others. Beyond this it is clear that the market orientation
of the various entities differs such that they do not share common objectives, even on a
given construction project. Even their business models differ, one group being risk averse
whilst others are will and do accept varying degrees of project risk. See Figure 2

Fig 2 Orientation of Professions involved in Project Delivery

1.4 The Evolution of Alternative Delivery Systems
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For all of the reasons described above, experienced customers began experimenting with
alternative construction delivery systems over the past thirty years, in order to find improved
value and more efficient delivery. Masterman (1992) described how the evolution of such
systems developed along three broad trajectories and showed that there are ways to
determine a best-fit for a particular system for a specific client and project. In other words,
no single system is suitable for all projects or clients needs.
Masterman (1992) categorised the systems thus:
1. Separated and co-operative systems (primarily the traditional system)
2. Integrated systems (primarily design & build)
3. Management orientated systems (management contracting & construction
management)
It can be seen from the descriptors that the most important addition in the two new
categories (or trajectories) is management. This is not that which everyone thinks they
can do, simply by learning through experience or osmosis. Management is a science the
needs education and training, just as for architecture or quantity surveying. It is a skill that
causes a disparate group of individuals or firms to align with predetermined project
objectives and work together in an integrated, motivated and productive manner. Integration
is also the objective and advantage found in the second listed set of systems described
above. Design and build though, incorporates both integration and management and is
seen to offer the best value for money.
PART 2 How Do We Begin to Develop Design and Build Capability?
2.1 Why Would a Customer Decide to Use the Design Build Delivery System?
Because:
they are not in the business of construction and wish to place all of the risk with the
delivery organisation,
They dont want to deal with lots of consultants, want to deal with one organisation
only, in the knowledge that they are responsible for all
They understand that by offering a product rather than a service, the constructor
organisation is motivated to ensure that the product works!
Want price certainty
Want reduced total project time
No blame games between the role players and no contractual claims
At the head of this list is risk. It is the developing body of knowledge known as Risk
Management that can be said to have led to the development of a variety of Building
Procurement Systems or Delivery Systems as they are more appropriately known, (Hindle
& Mbuthia 2002). This means that the first step towards the development of new capabilities
(service types that you are able to offer) within your organisation is the acquisition of new
knowledge and skills.
A. The Constructor Organisations Investment - New Knowledge and Skills
Since the lead organisation and its partners will be taking on new risks, it needs to develop
the capabilities to take-on these new risks and this can be done in two ways:
Hire staff who have the requisite experience and skills or,
Become a learning organisation and develop the skills through education, training
and practice (preferably, not those who have spent a lot of time in the industry).
The following list is an indication of the types of new skills needed:
A leader with an entrepreneurial outlook;
Building Procurement System and Delivery Systems theory;
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Risk Management;
Business Practices and Market Orientation;
Co-operative Business Development skills;
Financial Management and Packaging;
Design Management incorporating constructability or Buildability and
Beyond this, to Partnering and Supply Chain Management

B. Market Orientation
This term can best be described as the degree to which the organisations involved
understand the business of business! More simply put, developing an understanding of, and
adopting, the simple concept that has facilitated the development of firms in more modern
industries, such as the automotive industry. You will have heard it described as the need to
deliver, Customer Satisfaction. This is not something you can have as a clip-on phrase
that you and your partners use to describe your individual input, it requires a complete
reorientation of mind-set that incorporates all of the various role players in the delivery
process.
C. Finding Partners
It is possible for a single organisation to contain all of the skills required but such firms would
have taken many years to evolve. Therefore, it is more likely that, at the outset, the lead
organisation would work with others (individuals or companies) who provide input for a
particular project where Design and Build is to be used. However, it is hardly likely that one
would go to the extent of doing this just for one project. In fact, the development of these
skills proves to be so logical and rewarding that the organisation will seek other customers
and projects where this methodology can be applied. The term rewarding here, refers to,
for example:
The sense of accomplishment,
The joy of working in a cooperative environment,
The much improved profitability found,
The likelihood of repeat business from satisfied customers and
Being in control of ones own destiny
However, one needs to select and invite partners carefully, in order to ensure that you are
compatible and that they share a similar organisation culture (for example, your moral
compass and your focus on customer satisfaction). Since, much of the delivery
improvement is found through designers working closely with contractors and understanding
buildability the designers need to focus on design economy and their fees need to be
orientated towards this and the acceptance of some risk. (Such firms are few in number)
D. Who is to Lead?
There has to be an individual who possesses entrepreneurial and leadership skills in the
lead organisation. A person and organisation, with the will to grasp this market opportunity,
drive the development of the organisation and develop partnerships with equally motivated
specialist organisations. Typical expectations are that a design organisation should take the
lead but this is unlikely to work unless the design organisation has a person with the skills
described above. Quite often it is from the project management or contracting or quantity
surveying side where the requisite skills are found and where management education was
part of the first degree and management practice has been accumulated. Indeed, it is
absolutely essential that these artificial and petty jealousies between the various role player
types are dispensed with and that the focus becomes that of customer satisfaction and
business development.

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Mbuthia and Hindle (2003) described how, having the knowledge and ability to offer a range
of delivery systems, leads to that business having a significant competitive advantage.
Hence, it is likely that the lead firm will be that which is led by a chief executive who
understands this or who is tired of the perpetual failure and excuses used to defend the
traditional system in a fast-track environment.
2.2 Time Needed to Implement
It is highly unlikely that Design and Build Delivery could be successfully applied to a given
project unless many months of preparation were in place. Organisations or individuals with
the desire to lead and deliver projects in this way need to find partners and proceed with
knowledge acquisition months in advance of the proposed venture.
2.3 Professional Indemnity
Because of the degree of risk that the lead organisation will assume the acquisition of a
Professional Indemnity Insurance policy is necessary and it may be that firms who offer such
joint cover may be hard to find. Probably the achievement of agreement in principle is
needed and then policies drawn up, project by project
2.4 The Project Office (integration tool)
Until such time as the team has experienced a few projects together and if the project is
large, a project office needs to be used. That is to say, a working space where, each of the
key partners sit in close proximity whilst working on the project. This includes customers
representative, designers, project manager and each of the specialist inputs required,
including key specialist contractors. Why:
To ensure good communication between all parties
To achieve a speedy response to any and all questions formed by anyone in the
project team
To allow bonding to occur (friends do not waste time in negative criticism and
arguments)
To keep everyone focussed on the agreed objectives and rules of engagement
(Culture)
To prevent people from falling into the default mind-set and carelessness found in the
traditional delivery method
2.5 The Contracts
The typical and varied forms of contract that are in use construction are designed for and
describe the rules of engagement in the traditional delivery battle and, are detrimental to
the customer focussed and integrative aims of Design/Build delivery. Essentially they are
based on a lack of trust at the outset, (Latham 1994). In Design/Build, constructor/customer
contracts entail a high degree of trust and need to be much simpler to reflect this and the
fact that there is no third party decision maker involved. There are examples of such
contracts available on the internet. However, customers may show some resistance to
contracts designed by the constructor organisation and if an existing type of contract is
requested, the writer would suggest the use of the NEC (New Engineering Contract) as this
is closer to the ideal.
There needs to be a form of agreement between the partners on the constructor side of the
equation at the outset. However, this need not be a typical contract document. It is often
embedded in Memorandum of Agreement in which the principles of Partnering and
objectives of the venture are set out.
2.6 Key performance Indicators

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Having set out on the Design/Build, partnering venture there is a constant need to check on
your performance and to provide your customer with the assurances that best suit their
needs. Experienced customers may well stipulate the type of information and assurances
that they need, periodically. However they are compiled they need to be constantly
measured, discussed at meetings and prominently displayed.
In Best Practice terms Key Performance Indicators (KPAs) are periodic measurements of
progress towards the project objectives and clients needs. Examples are available at
http://www.constructingexcellence.org.uk/ and some are listed here - the first one must be?
The achievement of customer satisfaction both for product and service and typically
would be followed by:
Tenant satisfaction product & service
Quality defect results of weekly/monthly inspections
Predictability of costs
Predictability of time
Safety
Co-contractor (partners) performance & satisfaction with lead organisation
Constructor innovation
Environmental
It is essential to instil a culture of continuous improvement in all involved and if this is
achieved, staff will be eager to see monthly KPI reports and are challenged to do even
better.
2.7 A Design Build Market?
All individuals who have been involved in Design/Build projects that were successful and
embodied the partnering principles prefer this type of organisation and are able to do this
only if there are constructor organisations that choose to specialise in this form of delivery.
However; it is demand for Design/Build amongst customers that will determine if there is
scope for this. In part 1 of this paper, the phenomenon of resistance to change works was
described. In particular it acts to minimise such demand through the advice that
procurement advisers give to inexperienced clients. Advisors who are comfortable with the
traditional system or who are just ignorant about alternatives and their advantages to
customers. Designers and other consultants may be afraid of Design/Build as they see it as
a competitor; however, they are wrong as all the services that they have to offer are still
required but under a different arrangement.
To counter this phenomenon Design/Build constructor firm have found it necessary to market
the system in order to educate potential customers and to let them know of this, otherwise
unknown, alternative delivery system.
2.8 Why is it postulated that Design/Build is a critical step towards business
development?
This delivery method, when successfully adopted and practiced will, quite naturally lead to
the adoption of a number of linked but more advanced delivery concepts (best business
practices) that are used by the most successful companies, such as:
Partnering
Supply Chain Management
Continuous Learning Organisations
Best Practice
Repeat Business without tendering
All in all, the creation of working environment that is much less stressful, personally
rewarding and sustainable for all involved.
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It will lead to more profitability for all (including customers) and with this money, investment
in research and development, particularly in the form of more education and training can be
achieved. This is clearly developmental.

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