United States: A New Solution For Public Construction Projects: Sequential Designer-Led Design-Build - Part Two

* Mark C. Friedlander is the Chair of the Construction Law Group of the law firm of Schiff Hardin LLP. He obtained his B.A. from the University of Michigan in 1978 and his J.D. from Harvard Law School in 1981. Since 1985 he has been an adjunct professor at the University of Illinois at Chicago School of Architecture and since 1995 a lecturer at Northwestern University’s Engineering School. Mr. Friedlander is a member of the Design Build Institute of America and the former Chairman of its Professional Practices and Contracts Committee. He is a member of the Board of Governors of the American College of Construction Lawyers and the Chair of its Project Delivery Systems Committee from 2000-2005, and is President of the Society of Illinois Construction Attorneys

** Ruth E. Krugly concentrates her practice in the area of public law, and is a partner at Schiff Hardin LLP. She received her B.A. from Brandeis University, and her J.D. from the University of Chicago Law School. Ms. Krugly has represented diverse local governmental bodies as well as developers in matters involving public law issues. Ms. Krugly was one of the principal attorneys who represented the Chicago Bears in conjunction with the litigation filed attacking the Soldier Field renovation project, and developed the theories which led to a successful outcome in the circuit court, appellate court and Supreme Court of Illinois..

*** Explanation of Table. The "Authority" column reflects whether there is any specific authority in the State statutes allowing use of the design-build procedure as of early 2006. The next two columns ("State" and "Political Subdivisions") indicate whether that authority is conferred at the State level, and/or on other agencies or units of local government in the State. If there is any significant case law in the State, that fact is reflected in the column entitled "Notable Case Law." Finally, States which contain provisions exempting "Construction Managers" from the traditional competitive bidding requirements are reflected in the final column. A very brief description of the authority found in each State for design-build is contained in the end notes. This chart is intended to give a brief overview of design-build authority in the fifty States, and not to describe all of the instances in which design-build is allowed in a particular jurisdiction, or to describe all of the conditions and procedures which must be satisfied in order to utilize the design-build method of procurement. Finally it is critical to note that the law in this area is constantly evolving. While the trend is for more and more States to adopt legislation permitting design-build, a number of statutes currently allowing design-build have sunset provisions and will expire unless renewed by the state legislature. Accordingly, it is vital to check the law in each relevant jurisdiction when considering a design-build project.

1. Alabama does not have any specific authority allowing the use of design-build for public projects.

2. Alaska law provides that when the Commissioner of Transportation and Public Facilities determines that it is advantageous to the State, a procurement officer may issue a request for proposals requesting the submission of offers to provide construction in accordance with the design provided by the offeror. Ak. St. § 36.30.200, et seq. The Alaska Administrative Code provides that a school district may use design-build for the construction of public schools, if the Department of Education approves the method in advance of any solicitation, the proposed method is in the State’s best interest, and the school district concurs in any directives the department makes concerning the type of selection and award of the contract Alaska Admin. Code Tit. 4, § 31.080. In Breck v. Olmer, 745 P.2d 66 (Alaska 1987), the Alaska Supreme Court held that where the municipal corporation was advised by its attorney that the design-build method of contract procurement was defensible under applicable law, the court could not hold that the competitive-bidding procedures constituted clearly established law. The court therefore refused to invalidate the design-build contract.

3. Arizona allows state agencies and units of local government to use design-build. See Ariz. Rev. Stat. § 41-2503, et seq. (state procurement provisions) and Ariz. Rev. Stat. § 34-101, et seq. (procurement provisions for counties, cities, towns, and certain special districts). In general, both statutes provide that the first step in the procurement of design-build services is to request qualifications for contract. The purchasing agency then convenes a selection committee, creates a short list of firms that are most qualified, and enters into negotiations for a contract with the highest qualified firm on the short list (and, if necessary, the next highest qualified firm and so on), until a satisfactory agreement is reached. Both titles 34 and 41 provide for the alternate two-step RFQ/RFP selection process. See Ariz. Rev. Stat. § 41-2578(F); and § 34-603(F). The State Board of Education and local school districts also have authority to use design-build. See Ariz. Rev. Stat. §§ 15-213, 341. The State Department of Transportation has the authority to use design-build pursuant to the two-step RFQ/RFP selection process. See Ariz. Rev. Stat. § 28-7361, et seq.

4. In Arkansas, the State Highway Commission is authorized to use design-build (A.C.A. 25-65-107), as are school districts (A.C.A. 19-11-807) and local sanitation systems (A.C.A. 22-9-203).

5. The California Legislature has numerous statutes authorizing design-build to be utilized by various state and local entities and for various state and local projects. The authority to use design-build is often conferred on a project-by-project basis. In Sierra Club v. Babbitt, 69 F.Supp.2d 1202 (1999) the district court held that even though defendants’ failure to develop a revegetation plan for highway reconstruction payment was clearly attributable to the design-build method of construction and resulted in an impairment of plaintiffs’ ability to assess the environmental impacts of the project, the plaintiffs did not demonstrate irreparable injury in connection with the tardy completion of the revegetation-plan sufficient to support a grant of injunctive relief.

6. In Colorado, the Department of Transportation is authorized to utilize design-build pursuant to a two step RFQ/RFP process. See C.R.S.A. § 43-1-1401, et seq.

7. Connecticut law provides that the Commissioner of Public Works may designate a project as a "designated total cost basis project," and may enter into a single contract with a private developer which may include such project elements as site acquisition, architectural design and construction. Contracts for such projects are based on competitive proposals received by the Commissioner. C.G.S.A. § 4b-24. Connecticut also allows the State Board of Education to establish a limited pilot program using design-build for school construction projects. C.G.S.A. § 10.285f.

8. Although Delaware law does not contain any general grant of authority for design-build, the Secretary of Transportation is designated to utilize design-build for specific transportation projects authorized by the legislature. 2 Del.C. § 2003.

9. The District of Columbia prohibits design-build projects. There is an exception, however, if the design-build entity forms a subsidiary or "affiliate" to perform the construction services, and if approval is received from the Director of Administrative Services. See Design Build Deskbook, 3d Ed., citing D.C. Mun. Reg. Tit. 27.

10. Florida law authorizes the use of design-build by state agencies, counties, municipalities, special districts, and other political subdivisions, including through the use of the two-step RFQ/RFP selection process or the competitive proposal selection process. See F.S.A. §§ 189.441, 225.20, 287.055, 337.107, 337.11, 337.14, and 1013.45.

11. The Georgia Local Government Public Works Construction Law provides that governmental entities (defined as a county, municipal corporation, consolidated government, authority, board of education, or other public board, body, or commission but not any authority, board, department or commission of the state, or a public transportation agency) are authorized to utilize any construction delivery method, provided that all public works contracts (i) place the bidder or offeror at risk for construction, and (ii) require labor or building materials in the execution of the contract. Such contracts can be awarded on the basis of competitive sealed bidding or competitive sealed proposals. Ga. Code § 36-91-20. The Department of Transportation has separate authority to enter into design-build contracts pursuant to an RFQ/RFP selection process. Ga. Code §§ 32-2-61, 81.

12. The Hawaii Public Procurement Code allows for design-build projects through the use of competitive sealed proposals, which may be utilized when it is not practicable or advantageous to the State to procure services through competitive bidding. See HRS § 103D – 303.

13. The State of Idaho allows the design-build method of construction to be used by the State and units of local government for public works projects. See I.C. 67-2309 and 67-5711A. Although it is unclear which competitive selection requirements are applicable to such contracts, it appears likely that they would be subject to the competitive situation provisions for professional service contracts outlined in I.C. 67-2320. See also Dana v. Board of Commissions of Canyon County, 864 P.2d 632 (1993) (discussing the difference between an invitation for bids and a request for proposals for professional services).

14. The Illinois General Assembly has recently enacted legislation enabling the State’s capital development board to use the design-build delivery method for public projects if it is shown to be the state’s best interest for that particular project. See Public Act 94-0716 ( the "Design-Build Procurement Act"). The Act provides for a two phase RFQ/RFP procedure for the selection of the successful design-build entity.

15. The State of Indiana recently passed legislation allowing public agencies (defined as state agencies, state educational institutions, units, bodies corporate and politic created by state statute, and school corporations) to use design-build services pursuant to the two step RFQ/RFP process. See IC 5-30-1-1 et seq. In Negley v. Lebanon Community School Corporation, 362 N.E.2d 178 (Ind. App. 1977) the court held that a school building corporation, when constructing a school building for lease to a school corporation, was not required to comply with statutes mandating competitive building and could use the design-build process.

16. Iowa does not have any specific authority allowing the use of design-build procurement services for public projects.

17. Kansas does not have any specific authority allowing the use of design-build procurement services for public projects.

18. The State of Kentucky allows both the state and units of local government to utilize the design-build method of procurement. See KRS §§ 45A.030 et seq. Capital projects to be constructed using the design-build method may include a multiple phase proposal that is based on qualifications, experience, technical requirements, guaranteed maximum price, and other criteria as set forth in the request for proposal.

19. The State of Louisiana allows the design-build method of procurement to be used for certain specific projects and certain specific entities. See LSA – RS § 33:2740.27 (authority to use design-build granted to Algiers Development District) LSA – RS § 48:250.2 (authority granted to Department of Transportation allowing design-build method to be used for pilot program). In the wake of Hurricane Katrina, the legislature enacted legislation allowing the Department of Transportation and Development to utilize the design-build method on any transportation infrastructure project in an area impacted by a hurricane, pursuant to a two step RFQ/RFP procedure. See LSA-RS § 250.4.

20. The State of Maine allows the design-build method of project delivery to be used by the State or its agencies for public improvement projects in accordance with the two step RFQ/RFP process. See 5 M.R.S.A. § 1743. Contracts for the construction, major alteration, or repair of school buildings involving a total cost in excess of $100,000 must be awarded by competitive bids, although they "may be waived in individual cases involving unusual circumstances" with the approval of the Director of the Bureau of Public Improvements and the Commissioner of Education. 5 M.R.S.A. § 1743-A.

21. Maryland allows the use of design-build for the construction of certain county education facilities, for certain suburban sanitary district projects, and for capital projects undertaken by units of state government. See MD Code §§ 4-126, 3-102, and 3-602.

22. Massachusetts allows any "awarding authority" to utilize the design-build procurement method for public works projects estimated to cost not less than $5,000,000 and with the approval of the inspector general pursuant to a two phase RFQ/RFP selection process. The term "awarding authority" is defined as the "commonwealth, or any political subdivision, department, agency, board, commission, authority, or other instrumentality thereof, or any county, city, town, or district." See M.G.L.A. 149A, § 14 et seq.

23. Michigan does not have any specific authority allowing the use of the design-build procurement method of services for public projects.

24. The State of Minnesota authorizes the State and its agencies to use the design-build method of procurement services for public improvements, on the basis of either a qualification based or a design and price based selection process). M.S.A. § 16C.32, et seq. Separate authority exists for the Commissioner of Transportation to utilize design-build for transportation projects pursuant to the two-step RFQ/RFP process. See M.S.A., § 161.3410 et seq.. See also M.S.A., § 383B.158 et seq. authorizing Hennepin County to use design-build for roadway projects pursuant to the two-step process, and M.S.A. § 473.3993 authorizing the use of design-build for transit plans. In W.V. Nelson Construction Co. v. City of Lindstrom, 565 N.W.2d 434 (1997), the Minnesota Court of Appeals held that a mixed design services and building construction contract for a municipal liquor store was a contract subject to competitive bidding statutes. ("The city cannot circumvent the requirements of the competitive bidding statutes simply by including a design component in a contract for the construction of a public building.")

25. The State of Mississippi allows the design-build method of procurement to be used as a pilot program for a handful of capital development projects. See Miss. Code Ann., §§ 31-11-3 and 65-1-85.

26. Missouri law grants authority to the State Highways and Transportation Commission to enter into a total of three design-build project contracts for highway construction projects pursuant to the RFQ/RFP selection process. See V.A.M.S. § 227.107. In the recent case of Murphy Company Mechanical Contractors and Engineers v. Director of Revenue, 156 S.W.3d 339 (Sup. Ct. of Mo. 2005) the court held that a design-build contractor was an "engineering firm" within the meaning of the sales tax exemption statute because it provided professional engineering services.

27. Montana has enacted legislation authorizing the State Transportation Commission to utilize a design-build contracting pilot program for highway construction pursuant to the two step RFQ/RFP selection process. See M.C.A. § 60-2-134, et seq.

28. Nebraska law authorizes school districts to utilize the design-build method project delivery for certain school projects, pursuant to the two step RFQ/RFP selection process. See Neb. Rev. St., § 79-2002, et seq.

29. Nevada allows a public body to contract with a design-build team for the design and construction of a public work that is a discrete project if the public body has approved the use of a design-build team for that purpose and the public work (a) is the construction of a park and appurtenances thereto, the rehabilitation or remodeling of a public building, or the construction of an addition to a public building or (b) has an estimated cost which exceeds ten million dollars. See N.R.S. § 338.1711 et seq. A public body means the state, county, city, town, school district or any public agency of the state or its political subdivisions sponsoring or financing a public work. See N.R.S. § 338.010. The selection process is based on an RFQ/RFP two step process. There is also specific design-build authority for the Department of Transportation for the construction, reconstruction, or improvement of a highway. See N.R.S. § 408.3876 et seq.

30. New Hampshire allows the state commissioner of administrative services to use design-build for any buildings that are part of capital projects. See N.H. Rev. Stat. § 21-I:80. It also allows statewide transportation improvement program projects with a cost not to exceed five million dollars to be developed and constructed utilizing the design-build concept. See N.H. Rev. Stat. § 228:4.

31. New Jersey allows design-build to be used for projects awarded by the New Jersey Transit Corporation in accordance with applicable regulations promulgated by the corporation. See N.J.S.A. § 27:25-11.

32. In New Mexico, except for road and highway construction or reconstruction projects, a design-build project delivery system may be authorized when the state purchasing agent or central purchasing office makes the determination in writing that it is appropriate and in the best interest of the state or local public body to use the system on a specific project with a maximum allowable construction cost of more than ten million dollars and in accordance with certain criteria set forth in the statute. New Mexico provides for a two phase RFQ/RFP procedure to be used for awarding design and build contracts. See N.M.S.A. § 13-1-119.1.

33. New York provides specific authority for the state university to award design-build contracts for approved university-related economic development facilities. McKinney’s Education Law, § 376.

34. In North Carolina, the State Department of Transportation has authority to use design-build for the construction of a limited number of contracts if it finds it is not in the public interest to comply with normal design and construction contracting procedures. See N.C.G.S.A. § 136-28.11. Further, the State, or a county, municipality, or other public body may under certain circumstances utilize "alternative contracting methods" (which are defined in the administrative code to include design-build) to erect, construct, alter, or repair buildings. See N.C.G.S.A. § 143-128.

35. North Dakota does not have any specific authority allowing the use of design-build on public projects.

36. Although Ohio does not have any general authority allowing design-build for a public project, the legislature has, in the past, authorized department of transportation to use design-build for specific pilot projects. In Zeveski v. Ohio Board of Examiners of Architects, 2002 WL 1938251 (Oh. Ct. App. 2002), the court held that the phrase "experienced and registered architect’s office" in a statute which permitted an applicant for registration as an architect to substitute two years of practical or equivalent experience in a registered architect’s office for each year of professional education did not exclude experience in a so-called "design-build firm" where the applicant was at all times working under the supervision of a registered architect. In Greater Cincinnati Plumbing Contractors’ Association v. City of Blue Ash, 666 N.E.2d 654 (Oh. Ct. App. 1995) the court held that a city’s use of design-build bidding for public improvements was a proper exercise of its home rule power under its charter, even though it differed from the bidding process contained in the Ohio Revised Code.

37. Oklahoma allows a state agency to use design-build delivery methods, subject to approval of the Director of Central Services. Municipalities, counties, public trusts, and other political subdivisions in the State are not required to obtain the approval of any other State agency in order to use the design-build delivery method, although they are subject to other statutory requirements. See 61 Okl. St. Ann. §§ 202 and 202.1.

38. Oregon allows state and local governments to exempt public improvement contracts from competitive bidding requirements subject to findings of the contracting agency that it is unlikely the exemption will encourage favoritism in the awarding of public improvement contracts or substantially diminish competition for public improvement contracts, and that the awarding of public improvement contracts under the exemption will result in substantial cost savings to the contracting agency. In granting an exemption, the governmental entity must, "when appropriate, direct the use of alternate contracting methods that take account of market realities and modern practices and are consistent with the public policy of encouraging competition." In the event a contract qualifies for the exemption, the contract can be awarded through a system of "competitive proposals," and thereby avoid some of the requirements applicable to competitive bidding. See O.R.S. § 279C.335 and § 279C.400. In Associated Builders and Contractors, Inc. v. Tri-County Metropolitan Transportation District of Oregon, 12 P.3d 62 (Or. Ct. App. 2000) it was held that the findings of the Board of Directors of the Metropolitan Transportation District in exempting, from competitive bidding, a contract to construct a light rail extension to an airport, were sufficient under the statute then in effect.

39. Pennsylvania allows certain county economic development authorities to use an "alternative contracting procedure" for selected public purpose facilities if it is determined that such procedure is the "most efficient, economical and timely method to proceed with the project." See 16 P.S. § 5517. The Department of General Services of the Commonwealth may also use design-build under certain circumstances for public projects. See 62 Pa. C.S.A. § 322. In Mechanical Contractors Association of Eastern Pennsylvania, Inc. v. Southeastern Pennsylvania Transportation Authority, 654 A.2d 119 (Comm. Ct. Pa. 1995), the court held that the "separation acts" requirement of separate contracts for plumbing, heating, ventilating, and electrical work on public construction contracts was intended to protect subcontractors from unscrupulous general contractors and that the Southeastern Pennsylvania Transportation Authority was therefore obligated to contract directly with the subcontractors for work on a bus maintenance facility and could not solicit bids for the award of a single design-build contract.

40. Although there is no specific authority in Rhode Island allowing the use of design-build, there is a provision in the State Purchasing Act which allows a purchasing agent to avoid a contract by competitive negotiation where competitive sealed bidding is "not practicable." See R.I. St. §§ 37-2-18 and 37-2-19.

41. Under South Carolina law, when a state purchasing agency determines in writing that the use of competitive sealed bidding is either not practicable or advantageous to the State, a contract may be entered into by competitive sealed proposals utilizing the two-step RFQ/RFP process. See SC St. §§ 11-35-1510, 1530, and 11-35-3020. The Department of Transportation may also award highway construction contracts using a design-build procedure. See SC St. § 57-5-1625. Political subdivisions such as counties and municipalities are governed by their own procurement code for construction services. See SC St. § 11-35-50.

42. South Dakota permits public corporations (the State and all counties, municipalities, and public school corporations) to enter into design-build contracts pursuant to a two-step RFQ/RFP procedure, and subject to certain conditions. See SDCl. § 5-18-1 et seq.

43. In Tennessee, public building authorities are authorized to contract for design-build services pursuant to an RFQ/RFP process (with some exceptions). In Shankle v. Bedford County Board of Education, 1997 WL 83662 *5 (Tenn. Ct. App. 1997), the court construed § 12-10-124 of the Tennessee Statutes noting that "in some circumstances, the General Assembly has recognized the appropriateness of the use of competitive bidding. In other cases, such as with the public building authorities, the Assembly has recognized the appropriateness of other methods."

44. The State of Texas has enacted a variety of statutes allowing design-build services to be used on both the state and local levels pursuant to a two-step RFQ/RFP process. See, e.g., V.T.C.A., Educational Code, §§ 44.031, .036, 51.780, Government Code § 2166.2531, Local Government Code §§ 271.111, 113, 119, Transportation Code § 223.203 and Water Code §§ 60.451, .454, and .460.

45. Utah allows the State to utilize design-build for State building construction projects. See U.C.A. § 63-56-501. The State Department of Transportation and certain units of local government are also authorized to use design-build for transportation projects that have an estimated cost of at least fifty million dollars, pursuant to a two-step RFQ/RFP selection process. See U.C.A. 63-56-502.

46. Vermont allows the Commissioner of Buildings and General Services to use the design-build construction delivery process, by advertising or inviting three or more bids, and awarding the contract on the basis of evaluation criteria established by the Commissioner, which may include physical plant characteristics proposed, program response to space needs, ability of the design-build team, anticipated development schedule and overall cost consideration. See 29 V.S.A. § 161.

47. In Virginia, both the Commonwealth and other public bodies may enter into contracts on a design-build basis pursuant to the requirements set forth in the statutes, and in accordance with the two-step RFQ/RFP selection process. See Va. Code Ann. §§ 2.2-2404, et seq., 2.2-4303, 2.2-4306, 2.2-4308, 23-38.88, 33.1-12, 33.1-221.8:8, 53.1-95.18, and 66-25.7.

48. The State of Washington allows a variety of state agencies and municipalities to utilize design-build procedures under certain circumstances through a two-step competitive process. It should be noted, however, that the statutes providing for "alternative public works contracting procedures" are only effective until July 1, 2007. See R.C.W.A. §§ 39.10.020, .051, .065 and .120. The Department of Transportation may use design-build for certain miscellaneous public works projects. See R.C.W.A. 47-20.780, 785, 47.60.810, et seq. In State ex rel. Citizens Against Tolls v. Murphy, 88 P.3d 375 (Sup. Ct. Wash. 2004), the Washington Supreme Court upheld a design-build agreement entered into pursuant to the Public-Private Transportation Initiatives Act.

49. In West Virginia, the Design-Build Procurement Act, W. Va. Code, § 5-22A-1, et seq., allows agencies (meaning all state departments, agencies, authorities, quasi-public corporations and all political subdivisions, including cities, counties, boards of education and public service districts) to use design-build procedures for the design, construction or alteration of a building, together with incidental structures and facilities. Design-build may not be used for any other construction projects, such as highway, water or sewer projects. The statutes sets forth the criteria for design-build projects, including the two-step RFQ/RFP selection process.

50. Wisconsin allows the use of design-build procedures for certain specific projects, such as the construction of a sheriff’s department training academy in Milwaukee County (W.S.A. § 59.79) and local bridge construction projects (W.S.A. §§ 84.11 and 84.115). Wisconsin also allows the State Building Commission to waive its competitive projects bidding statute whenever the Building Commission determines that the use of innovative types of design and construction processes will make better use of the resources and technology available in the building industry. W.S.A. § 13.48(19). In J.F. Ahern Co. v. Wisconsin State Building Commission, 336 N.W.2d 679 (Wis. Ct. App. 1983), the Court of Appeals held that this statute did not constitute an unlawful delegation of legislative power to the Building Commission. In so holding, the Court considered the Commission’s general purpose under the statute; i.e. to promote "the interest of economy, efficiency and the public welfare . . . by means of a long-range public building program", as that purpose applied to determinations as to whether it was in the State’s best interest to waive its competitive bidding requirements and the fact that "alternatives [to the competitive bidding requirements] must be innovative processes which make better use of the resources and technology of the building industry."

51. Wyoming does not have any specific authority allowing the use of design-build procedures.