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dkubis

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Hey,

Serious discussion in our office about this. We're a large construction buying office but don't do too many design-build projects. Apparently some COs believe that the 14-day prompt pay for construction projects don't apply to the entire project. Their arguement is that design work should be paid on 30-day prompt pay and when they get to the construction phase it should be 14-day pay.

The majority of the office says it's just a construction contract and that the whole conctract should be paid under 14-day pay.

Is there any documentation that states it should be one way or another?

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Hey,

Serious discussion in our office about this. We're a large construction buying office but don't do too many design-build projects. Apparently some COs believe that the 14-day prompt pay for construction projects don't apply to the entire project. Their arguement is that design work should be paid on 30-day prompt pay and when they get to the construction phase it should be 14-day pay.

The majority of the office says it's just a construction contract and that the whole conctract should be paid under 14-day pay.

Is there any documentation that states it should be one way or another?

Are you asking where it is documented that a design-build contract is either a construction contract that includes design or design-build is some other type of contract plus a construction contract?

The reason I ask is that I'm not at my office to look for the souirces to document that D-B is a construction contract and won't be there till late this afternoon.

I am curious though. Since this is a serious discussion, what documentation or other reason do those have who would say that you treat this as a combination of construction and some other contract type? Do they say it is also an A-E services contract and that A-E contract clauses apply to the design portion? Where do they get that interpretation?

Do they think D-B is performed in distinct and separate phases that can be isolated?

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Are you asking where it is documented that a design-build contract is either a construction contract that includes design or design-build is some other type of contract plus a construction contract?

The reason I ask is that I'm not at my office to look for the souirces to document that D-B is a construction contract and won't be there till late this afternoon.

I am curious though. Since this is a serious discussion, what documentation or other reason do those have who would say that you treat this as a combination of construction and some other contract type? Do they say it is also an A-E services contract and that A-E contract clauses apply to the design portion? Where do they get that interpretation?

Do they think D-B is performed in distinct and separate phases that can be isolated?

D/B is sort of a unique animal and has such a small place in the FAR. As far as I know the AE portion of the DB project does not fall under the Brooks Act. However, there is nothing that precludes you from putting both Prompt Pay FAR clauses in your contract, the AE Prompt Pay Clause and the Construction Prompt Pay Clause.

When you award a DB contract what designates it as a Construction Contract besides what form you choose to use? What stops you from awarding to the AE firm for a DB project? Does that mean the entire contract falls under Brooks? Does that mean the whole project is paid on 30-day pays?

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D/B is sort of a unique animal and has such a small place in the FAR. As far as I know the AE portion of the DB project does not fall under the Brooks Act. However, there is nothing that precludes you from putting both Prompt Pay FAR clauses in your contract, the AE Prompt Pay Clause and the Construction Prompt Pay Clause.

When you award a DB contract what designates it as a Construction Contract besides what form you choose to use? What stops you from awarding to the AE firm for a DB project? Does that mean the entire contract falls under Brooks? Does that mean the whole project is paid on 30-day pays?

dkubis, a design-build contract is a construction contract. It is not a contract for A-E Services, which is covered under FAR Subpart 36.6 and under separate US Code (see, for example, 40 US Code Chapter 11, Sections 1101-1104). Therefore, you'd use the construction contract clauses "Payment Under Fixed-Price Construction Contracts" (52.232-5) and "Prompt Payment for Construction Contracts" (52.232-27) . Nothing authorizes or directs you to include the corresponding A-E contract clauses (52.232-10 and 52.232-26, respectively) because this isn't a contract for A-E services.

You asked " When you award a DB contract what designates it as a Construction Contract besides what form you choose to use?"

The US Code for the current version of the One-Step Turnkey selection procedures that originally authorized Design-Build Construction for the Military Construction (MILCON) Program is found at 10 USC 2862. That Statute specifically says that such contracts are construction contracts.

"TITLE 10 > Subtitle A > PART IV > CHAPTER 169 > SUBCHAPTER III > ? 286

2862 Turn-key selection procedures

(a) Authority to Use.? The Secretary concerned may use one-step turn-key selection procedures for the purpose of entering into contracts for the construction of authorized military construction projects.

(B) Definition.? In this section, the term ?one-step turn-key selection procedures? means procedures used for the selection of a contractor on the basis of price and other evaluation criteria to perform, in accordance with the provisions of a firm fixed-price contract, both the design and construction of a facility using performance specifications supplied by the Secretary concerned."

The Notice of Final Rule in the Federal Register that implemented the 2 Phase Design-Build process into the Federal Acquisition Regulations is found at Federal Register Volume 62, Number 1 (Thursday, January 2, 1997)], Pages 271-273. [www.gpo.gov] [FR Doc No: 96-33217].

It says in applicable part:

"SUMMARY: The Civilian Agency Acquisition Council and the Defense

Acquisition Regulations Council have agreed on a final rule to amend

the Federal Acquisition Regulation (FAR) to implement Section 4105 of

the Clinger-Cohen Act of 1996 (Public Law 104-106), which authorizes

the use of two-phase design-build procedures for construction

contracting."

A now deceased friend of mine, Laura Meeker, was an attorney in HQ US Army Corps of Engineers Office of Counsel. Laura was the chairperson for the DAR Council Committee for Part 36 at one time. She was involved in both the drafting of the Legislation and the FAR 36.3 coverage of the 2 Phase D-B method. She sent me a copy of a report which summarized the public comments for the FAR Case 96-305. I cant find it in my home office. To the best of my recollection, one public

comment was that the FAR ought to include contract clauses specifically applicable to the unique roles and responsibilities of design-build contracts. The Council's or Committee's response was to the effect that no additional coverage is necessary, as design-build is a construction contract. Well, they were way off the mark there concerning the need for additional clauses. But my point is that I think they specifically identified D-B as a construction contract. If I find it, I will let you know what it said. I think it is filed away on my computer somewhere.

At any rate, we know that design-build contracts under the One-Step Turnkey authorization and the 2 Phase D-B method were identified as construction contracts. The 2 Phase Legislation does refer to D-B as "a contract for the design and construction of a public building, facility, or work", as does the wording in FAR 36.3.

You asked "What stops you from awarding to the AE firm for a DB project? "

Did you mean "What stops you from awarding to an AE firm for a DB project? "

Nothing legally prevents award of a D-B contract to an A-E firm. We have awarded D-B contracts to such firms as Parsons and Black and Veatch, who demonstrated adequate performance capability to assure us that they had a high probability to successfully complete the contracts.

You asked "Does that mean the entire contract falls under Brooks?"

No. Hiring an A-E firm doesnt convert a construction contract into a contract for A-E services.

Finally, you asked "Does that mean the whole project is paid on 30-day pays?"

No, see above. The "Prompt Payment for Construction Contracts" Clause applies to progress payments. The payment period for progress payments is generally 14 days, not 30.

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D/B is sort of a unique animal and has such a small place in the FAR. As far as I know the AE portion of the DB project does not fall under the Brooks Act. However, there is nothing that precludes you from putting both Prompt Pay FAR clauses in your contract, the AE Prompt Pay Clause and the Construction Prompt Pay Clause.

When you award a DB contract what designates it as a Construction Contract besides what form you choose to use? What stops you from awarding to the AE firm for a DB project? Does that mean the entire contract falls under Brooks? Does that mean the whole project is paid on 30-day pays?

dkubis, Design-Build is an integrated delivery method for construction. I'm really curious why your organization would want to or would think it necessary to single out the design cost for a longer period to pay the Contractor for performance. Can you explain the rationale involved?

The design-build method can offer certain advantages/benefits related to things such as construcaibility, single-source responsibility, total project delivery time, design/construct to meet performance requirements within budget. Performance-based design criteria offer the owner and contractor the ability to agree on a design and price proposal within the requirements to meet the challenges of changing labor, subcontractor, and materials availability and pricing. In order to take advantage of these possibilities, the design and construction team must work together throughout the D-B process, beginning with the proposal stage and extending through commissioning, turnover and the closeout documentation. The Design and construction processes overlap and are put on a fast-track schedule. The designer should be involved during construction and the constructor is involved during design. The costs for each role player should be distributed across many of the contract activities.

The design industry has been reluctantly dragged into the D-B approach. The American Institute of Architects as an organization really would prefer that D-B just go away. Actually, up until the early part of the last Century, D-B was the primary delivery method used for building construction in the US. The design industry doesn't have deep enough pockets to bear substantial technical proposal development costs, on a competitive (risky) basis . That is one reason that the AIA is not enthusiastic about D-B. Another reason is familiarity with their role in an A-E services contract. Those type contracts are comfortable - they know that the chance of design liability being an issue is low due to the high bar to establishing A-E liability. They like working directly for the owner with often close working relationships.

A D-B contract is absolutely not a contract for A-E Services. The designer works for the prime contractor. The designer can't get rated for past performance as an A-E contractor in that system. The standard of care for design is generally higher in our D-B contracts. The designer may bear more risk for design liability, possibly more for errors and omissions and usually gets less credit for the end product. Experienced design firms have discovered that a good design-builder/designer relationship actually may reduce the chance for liability due to the collaberative design process. The D-B prime may request retainage from monthly progress payments to the design subcontractor(s) in addition to other retainage by the Government.

So, I don't see any reason to single the design activities of the contract out for extended payment terms If anything, quicker cash flow is critical and an important advantage to the designer. In our Model RFP for Army design-build, we actually offer an interim monthly progress payment as a bonus for maintaining scheduled progress.

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dkubis, Design-Build is an integrated delivery method for construction. I'm really curious why your organization would want to or would think it necessary to single out the design cost for a longer period to pay the Contractor for performance. Can you explain the rationale involved?

The design-build method can offer certain advantages/benefits related to things such as construcaibility, single-source responsibility, total project delivery time, design/construct to meet performance requirements within budget. Performance-based design criteria offer the owner and contractor the ability to agree on a design and price proposal within the requirements to meet the challenges of changing labor, subcontractor, and materials availability and pricing. In order to take advantage of these possibilities, the design and construction team must work together throughout the D-B process, beginning with the proposal stage and extending through commissioning, turnover and the closeout documentation. The Design and construction processes overlap and are put on a fast-track schedule. The designer should be involved during construction and the constructor is involved during design. The costs for each role player should be distributed across many of the contract activities.

The design industry has been reluctantly dragged into the D-B approach. The American Institute of Architects as an organization really would prefer that D-B just go away. Actually, up until the early part of the last Century, D-B was the primary delivery method used for building construction in the US. The design industry doesn't have deep enough pockets to bear substantial technical proposal development costs, on a competitive (risky) basis . That is one reason that the AIA is not enthusiastic about D-B. Another reason is familiarity with their role in an A-E services contract. Those type contracts are comfortable - they know that the chance of design liability being an issue is low due to the high bar to establishing A-E liability. They like working directly for the owner with often close working relationships.

A D-B contract is absolutely not a contract for A-E Services. The designer works for the prime contractor. The designer can't get rated for past performance as an A-E contractor in that system. The standard of care for design is generally higher in our D-B contracts. The designer may bear more risk for design liability, possibly more for errors and omissions and usually gets less credit for the end product. Experienced design firms have discovered that a good design-builder/designer relationship actually may reduce the chance for liability due to the collaberative design process. The D-B prime may request retainage from monthly progress payments to the design subcontractor(s) in addition to other retainage by the Government.

So, I don't see any reason to single the design activities of the contract out for extended payment terms If anything, quicker cash flow is critical and an important advantage to the designer. In our Model RFP for Army design-build, we actually offer an interim monthly progress payment as a bonus for maintaining scheduled progress.

Joel,

I see your point. it really is just one CO in the office who belives it that way. She managed to convince the division chief of this. I like your examples but we are a non-DoD agency so they don't like DoD references. It clearly states in the Corp of Engineers manual and NAVFAC guidance that DB is construction. For some reason though that's not enough to convince this person.

As far as having AE clauses in a construction contract, that does not make any sense. If you can find a better reference that DB is a construction contract that would be great.

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Joel,

I see your point. it really is just one CO in the office who belives it that way. She managed to convince the division chief of this. I like your examples but we are a non-DoD agency so they don't like DoD references. It clearly states in the Corp of Engineers manual and NAVFAC guidance that DB is construction. For some reason though that's not enough to convince this person.

As far as having AE clauses in a construction contract, that does not make any sense. If you can find a better reference that DB is a construction contract that would be great.

Dkubis

I just provided you the reference to the Notice of final Rule in the Federal Register that implemented FAR 36.3.

This is the only authority a non-DOD agency has to perform design-build construction contracts.

What else do you need?

What evidence can this contracting officer provide to show that the design activities in a design-build contract are covered by the A-E contract Prompt Pay and Payment clauses?

Last year, we awarded $12 billion in Army construction contracts alone. The greatest share of those contracts and task orders were Design-Build. All of those were awarded as construction contracts.

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