by G. William Quatman, FAIA, Esq.
Chair, AIA Design-Build Advisory Group

More than 300 new laws in six years.
Since the start of the decade, the number of bills introduced each year to allow use of design-build as an alternative method of delivery has increased steadily. On average, a remarkable 35 percent of these bills pass each year. As the chart below shows, in the past five years alone, there has been an average of 176 bills introduced, with 60 passing.

This brings the total for the past six years to 331 passed out of 928 introduced. The passage rate of over 35 percent is far more than the average pass rate for legislation introduced in the states annually. To the surprise of many, this legislation is “owner-driven” by government agencies, cities, and school districts—not by the AIA, DBIA, AGC, or any other industry association. Public owners are looking for alternatives to low-bid, multiple contracts and are attracted by the cost and time savings that design-build can offer.

Five states remain without d-b laws.
Not too many years ago, there was very little authority to use design-build in the public sector. The federal government has been using design-build for more than a decade, based largely on authority granted by passage of the Federal Acquisition Streamlining Act of 1994 (FASA) and the National Defense Authorization Act of 1996. These two laws permitted the federal government to procure design-build services using a two-phase selection process. (See Reference 1.)

Under the 1996 act, all federal “executive agencies” are permitted to use design-build if that method is appropriate for the public project. If so, then the first phase of the process involves evaluation of specialized experience and technical competence of the proposers. Cost-related evaluation factors are not permitted in this phase. Then, proposers submit bids for the project. The contract is awarded to the design-build team with the highest overall ranking, based on qualifications and price. (Reference 2.) As a result of passage of the 1996 federal design-build statute, the Federal Acquisition Regulations (FAR) were amended in 1997 to incorporate design-build procedures. (Reference 3.)

Following the lead of the federal government, state legislators passed laws across the nation to enable public agencies to use design-build as an alternative method of delivery. As of the start of 2006, there were only six states left that had no authority to use design-build on public projects. Kansas was one of these holdout states (other than its sunsetted legislation that had permitted two “pilot” projects).

In early 2006, however, the Kansas legislature overwhelmingly adopted a public design-build law, which passed as House 122-2 on February 8, passed as Senate 31-8 on March 22, and was presented to the Governor on March 31. (Reference 4.) The new law allows Kansas state agencies and “state educational institutions” to use:

• Design-Build
• Construction Management-At Risk
• “Best Value” Selection.

Five states remain holdouts
With the passage of the new Kansas law, the list of states without design-build laws on the books is down to just five states: Alabama, Iowa, Michigan, Rhode Island, and Wyoming. Here is an update on the five remaining “holdout” states.

1. Alabama. Even without specific legislation, court cases in Alabama have permitted the use of design-build in limited situations, even over challenges that the process violated state competitive bidding laws. There is one 1999 Alabama Supreme Court case in which an HVAC design-build contract was challenged as violating the public competitive bidding law. (Reference 5.) However, the court found the contract to be exempt as a “service contract” under different state law. There are also some state attorney general opinions that have found certain design-build contracts to be exempt from the state “bid law.” (Reference 6.) No new legislation was introduced in 2006 to permit use of public design-build in Alabama. None is pending yet in 2007 to our knowledge.

2. Iowa. No design-build legislation was introduced in 2006 and no known Iowa court cases permit the use of design-build in the public sector. In a federal case applying Iowa law, a private design-build contract was challenged as “illegal” because the contractor was not a licensed architect or engineer. (Reference 7.) The Court of Appeals ruled that illegal design services can be separated from other services and that a contract to provide architectural and engineering services, as well as other services, was unenforceable only as to the fees for design services where the contractor was not properly licensed under Iowa law. To prevent a windfall to the owner, however, the court ruled that a contract containing both legal and illegal terms could be “severed.” Although the illegal portion relating to design services was not enforceable, the portion of the contract that related to non-architectural services could be enforced. Therefore, the court permitted the design-build contractor to collect for the balance of the contract, other than design fees.

Iowa has not had any design-build legislation proposed in recent years. There may be a crack opening in Iowa’s resistance, however. On January 10, 2007, Senate Study Bill 1008 was introduced, which would permit the armory board to enter into design-build contracts for the construction of certain national guard facilities funded entirely with federal funds.

3. Michigan. Michigan has passed several laws over the years to “study” design-build and report to the legislature, but there has been no progress getting a substantive bill passed actually to “use” design-build. Four bills have been passed since 1999 to encourage the state department of transportation to work with the road construction industry to develop performance criteria and warranties for design-build projects and report to the house and senate appropriations subcommittees on transportation. (Reference 8.)

The state appears ready to move beyond the “study and report” stage. A new highway design-build bill was introduced on January 30, 2007, S.B. 116. The bill provides that starting January 1, 2008, all “federal aid” construction projects and any other project of the Michigan Department of Transportation concerning highways, streets, roads, and bridges over $5 million “shall be performed by design-build contract” by competitive bidding. This would be a major move for Michigan after years of studying the issue.

4. Rhode Island. Even without state legislation, the City of Providence contracted with a private developer for the design-build of its new Public Safety Complex, an award-winning 135,000-square-foot, $43 million project, which was completed on time and $1 million under budget. This project was profiled in DBIA’s Dateline magazine (August 2003). No design-build legislation has been introduced in recent years and none is pending yet in 2007 to our knowledge.

5. Wyoming. In 2004, Wyoming introduced a design-build bill but it did not pass. No bill was introduced in Wyoming in 2005. However, in 2006 a bill was passed to permit broad use of “alternative project delivery” methods including construction manager-agent and construction manager-at risk. (Reference 9.) The new law covers the state and any county, city, town, or any political subdivision thereof. A related statute allows public schools in that state to use these same alternate design and construction delivery methods for provision of design and construction services. (Reference 10.)

A new bill has already been introduced in Wyoming in 2007 to add design-build to the menu of alternative delivery methods that can be used on these public projects. S.F. 148 (2007) was introduced on January 19, 2007, and would essentially allow public bodies and school districts to permit use of design-build. The bill would allow selection on qualifications alone for projects over $500,000.

Keep a close eye on Iowa, Michigan, and Wyoming for possible design-build movement yet this year. It’s down to just 5 states before all 50 states have laws on the books to permit public use of design-build for some projects.