ABA Forum on Construction Division 4 Literature Review: The Impacts of Design-Build On the Public Workforce Authored by: Douglas D. Gransberg, PhD, PE Keith R. Molenaar, PhD April, 2007 Presentation By: Joel Rhiner Stein Ray LLP Chicago, Illinois 1

Research Paper Test Case: – California has very few Design-Build (“DB”) public infrastructure projects because of concerns that doing so could result in staff cutbacks within public agencies (but CA does use DB on public buildings) – Other jurisdictions use DB on state infrastructure projects (DB transportation projects constructed in over 35 states) Purpose of Study – Determine impact on the CA Department of Transportation professional workforce if DB used to deliver infrastructure projects. 2

Growth of Non-Residential DB Projects $18 $40 $75 $180 $250 $300 $250 $200 $150 $100 $50 $ By 1994, the Federal Highway Administration had approved over 300 DB transportation projects in 32 states worth almost 14 billion -Over $3 billion worth of water/wastewater projects done using DB 3 20-Year Change in Design-Build Project Volume ($ Billion)

Proven Benefits of Using DB on Public Projects – Likely to reduce duration of project by eliminating 2 nd procurement process, and allowing concurrent design and construction activities. e.g. user costs of CA freeway from congestion, increased toxic omissions and etc. = $10,000 per lane – mile/day x 8 lanes x 5 miles = $400,000 / day. e.g. typical 30 day period to bid traditional Design Bid Build would result in user costs of $12 MM. – Increased certainty of project costs Less change orders Better ability to manage capital improvements budget thus resulting in award of more projects. 4

Common Concerns of Using DB on Public Projects – Quality of design possibly compromised because of influence by team members other than the designer (e.g. to maximize profit) – Quality of construction management compromised (“fox guarding the hen house”) – Shifting of professional engineering jobs from public to the private sector – Significantly reduces the use of the traditional design-bid build method. 5

Benefits/Concerns of Outsourcing Engineering Work to Private Sector Potential Benefits of Outsourcing 1.DOTs can provide projects for general public within growing resource constraints. 2.Costs are incurred only when services used. 3.A smaller workforce would be required with peak demands handled by outsourcing. 4.Potential for cost savings to DOT. 5.Access to special private sector skills on as-needed basis. Potential Concerns for Outsourcing 1.DOTs may have less control on the quality, time and cost of its primary functions 2.DOTs may lose the skills and expertise to conduct essential functions in-house, or to effectively check, evaluate or approve the work of external sources. 3.Conflict with DOT workforce and possible legal restrictions. 4.DOTs would need new employees with different expertise and management skills. 5.DOTs would have less capacity to serve a traditional role for hiring entry-level engineers to gain competent experience in the road building industry. 6

Evaluation of Outsourcing Concerns DOTs may have less control on the quality, time and cost of its primary functions? False: Research has shown that DB reduces project delivery time, controls cost growth after bid award, and furnishes a product of equal quality to projects using traditional project delivery methods. 7

Evaluation of Outsourcing Concerns DOTs may lose the skill and expertise to conduct essential functions in-house, or to effectively check, evaluate or approve the work of external sources? False: – attrition to private sector already exists because of salary differential (working at DOT often a “stepping stone”) – Outsourcing of engineering work a necessity for most DOTs because of less experienced workforce and increased workload. e.g. Arizona DOT outsourcing 90% of its design work because of loss in staff to private industry e.g. Maryland generally unable to retain staff beyond 5 years 8

Evaluation of Outsourcing Concerns Conflict with DOT workforce and possible legal restrictions? True: – No legal authority in CA that would allow DOT to utilize DB project delivery California Public Contract §10120 states, “Before entering into any contract for a project, the department shall prepare full, complete, and accurate plans and specifications and estimates of cost, giving such directions as will enable any competent mechanic or other builder to carry them out.” – But not an obstacle if legislature acts 9

Evaluation of Outsourcing Concerns DOTs would need new employees with different expertise and management skills? True: Many states report assigning their most experienced engineers to administer DB projects; still need robust traditional design-bid- build program to balance the workload between entry level and most experienced staff. – e.g. Oregon limits number of DB projects necessary to maintain core staff – e.g. South Carolina has initiated a program of technology transfer from DB teams to DOT staff – e.g. Washington has found that use of DB has enhanced technical and judgment skills of DOT staff 10

Evaluation of Outsourcing Concerns DOTs would have less capacity to serve a traditional role for hiring entry-level engineers to gain competent experience in the road building industry? False: Research has shown no impact on hiring of entry level engineers. 11

The California Problem California needs to expedite delivery of much needed transportation infrastructure projects DB might be the solution but not being used because of concerns that it will result in loss of jobs to private sector Myth or Reality? 12

Myth 13

Survey - Impact of DB on State DOT Workforces 14

Survey – Impact of DB on State DOT Workforces Myth 1: Use of DB on State DOT projects will result in abolishment of traditional Design-Bid-Build projects Reality: False – 93% of states reported that DB projects make up less than 10% of their total program – 92% of states reported that DB projects make up less than 25% of construction budget – 73% of states reported that DB projects make up less than 10% of construction budget 15

Survey – Impact of DB on State DOT Workforces Myth 2: Use of DB on DOT projects will result in reduction of State DOT Workforces Reality: False. No states reported reducing size of DOT workforce because of DB – 5 states reported an increase in professional engineering workforce since implementing DB (e.g. Texas added 178 new engineers in 4 year period) – 3 states reported a drop in professional engineering workforce but for reasons not related to DB (e.g. Florida cited to legislative change that forced them to reduce size of workforce) – All other states reported no change to DOT workforce 16

Survey – Impact of DB on State DOT Workforces Myth 3: Use of DB on DOT Projects will change the role of DOT Workforce Reality: Partly True – DOTs must still advance design enough to identify right of way requirements and environmental clearances – Survey shows that DOTs becoming more involved in developing design criteria to reduce performance risk (design often advanced to 10% - 30%) – DOTs still must review and approve DB’s design deliverables – DOTs still responsible for QA/QC – Survey shows that “DB changed the roles agency engineers play without changing their workload” – Survey shows that “DB changed the roles and increased the workload” 17

Conclusions DB is proven project delivery tool that promises faster project delivery, increased cost certainty and comparable quality The concern that DB will eliminate jobs for public engineers appears unfounded (just the opposite) Implementing DB does not mean DOTs will stop using the traditional design-bid-build method DB requires a well qualified public staff and requires them to exercise even more engineering judgment The use of DB does not reduce workload but will likely increase roles for overseeing, revising and approving Perceptions die hard but DB should take its place along side DBB as another tool DOTs can use to deliver much needed infrastructure projects 18