NYSSPE June 2015 Position Statement on Design Build Proposal

On May 19th, 2015 legislation was introduced in the Assembly which would, for the first time, vest specified New York City departments, authorities and other entities with authority to utilize design build as a project delivery system. (See A7590 Assemblyman Benedetto.)  Specifically, the bill authorizes the use of design build, by the New York City Department of Design and Construction, the New York City Department of Environmental Protection, the New York City Department of Parks and Authority and the New York City School Construction Authority.

Pursuant to current law construction undertaken by the aforementioned municipal entities must utilize a design-bid-build construction methodology.  In the absence of express quality assurance safeguards as detailed below, NYSSPE opposes A7590.

Design-build is a project delivery system whereby a single entity is contractually responsible for both the design and construction of the project.  It differs from the design-bid-build, which entails the production of a set of plans and specifications, which are offered for bid.  Proponents of traditional design-bid-build argue that the interests of the owner are better protected using the design-bid-build model which emphasizes the role of the design professional as the owner’s expert.  Supporters of design-build cite savings attributable to a faster construction timetable and the ability to provide for one-stop shopping.

In New York, the State Education Law, by its express terms, prohibits the practice of professional engineering by persons who are not licensed or authorized under New York law to offer to provide or provide professional engineering services.  In short, a strict reading of the statute bars general business corporations, limited liability companies and other entities (contractors) from providing professional engineering services.  The principal public policy rationale of the law is to help insure that public health, safety and welfare are not compromised by the undue influence of profit motivated corporate enterprises.  The danger to be guarded against is the potential that corporate financial goals will trump design professional considerations focused upon public health, safety and welfare.

Further, with design-build projects, the full contract price is typically established at the beginning stages of the project. This presents a greater potential for unanticipated design and construction costs arising after the fixed contract price has been established. This, in turn, can lead to eroded contractor profits or, worse, the temptation to cut corners in construction, which creates an increased chance for errors, omissions, claims and lawsuits.  Moreover, design build can be abused by project proponents in the initial phases of site development.  Since complete plans are not required, essential components of the design can be omitted or obscured, and the true cost of the project not accurately presented to the public and governmental bodies.
The New York State Society of Professional Engineers (NYSSPE) urges amendments to the above referenced bill consistent with design build recommendations endorsed by the broader design community in New York including the State Education Department Boards for Engineering and Architecture.  NYSSPE is a professional trade association representing the interests of its members, and more generally the interests of all professional engineers (totaling more than 25,000 licensees in New York State) practicing in all disciplines (civil, structural, mechanical, electrical, geological, environmental, etc.) and practicing in all practice settings (private sector consulting, industry, government, and education.)

The instant bill largely mirrors design build pilot legislation respecting specified state agencies.  (See Governor’s 2011 budget bill (S 50002/A 40002).)  The original statute authorized design-build infrastructure projects for a limited number of state entities including the State Thruway Authority, the Department of Transportation, the Office of Parks, Recreation and Historic Preservation, the Department of Environmental Conservation and the State Bridge Authority. (See also S 4610A Part F 2015 budget legislation renewing the 2011 pilot.)

NYSSPE originally voice concerns over the Governor’s proposals, insofar as they failed to adequately insure that qualifications based selection would be utilized for all professional design services.  In defining “best value” the 2011 law, and the instant proposal, focus upon the general contractor’s qualifications, and, fails to afford sufficient emphasis upon the qualifications of the design firm. A 7590 should be amended to specifically add to the definition of “best value” consideration of the qualifications of all firms providing professional design services and the individual qualifications of licensees providing professional design services.

Moreover, a number of additional quality assurance safeguards are needed to insure that public health, safety and welfare are not compromised in the design build process.  While many of these safeguards were included in the procurement process employed in the wake of the 2011 law at the agency level, the absence of express statutory requirements threatens the potential effectiveness of the design-build process as proposed for NYC.  Reduction in cost, improved speed in project delivery and improved quality are touted as the benefits of design build.  However, the process is subject to abuses, and safeguards must be employed to insure that projects are designed and constructed in a manner consistent with interests of project owners and the general public.

In furtherance of the foregoing objective it is urged that the project owner (NYC entity) employ an “owner’s design professional” (a licensed professional engineer or a registered architect) to act as the owner’s expert.  A statutory requirement respecting the employment of an owner’s design professional would mitigate, to a substantial degree, concerns regarding the ability of the contractor to exert undue influence upon a principal design firm (or team of design firms).  Additionally, consideration should be given to requiring mandatory inspections and testing (by properly credentialed inspectors and testing firms) during the construction process, and requiring that such contracts be independent from the primary design build contract (i.e. such contracts should be executed directly between the project owner and the inspection and testing firms).  Further, an additional quality assurance provision should be included wherein the principal design firm is afforded unrestricted access to the project owner and the owner’s design professional.

The foregoing recommendations, in large measure, are reflected in a proposal co-authored by the State Education Department’s Board for Engineering and Land Surveying and the Board for Architecture a copy of which is attached hereto.  As noted above NYSSPE supports these recommendations.

Finally, the legislation could be improved by incorporating a mandatory indemnification agreement which provides for fair and balanced contractual indemnification between the project owner and the design build firm.  Presently, many governmental contracts place an undue burden upon design consulting firms for both damages and costs (including without limitation attorneys’ fees).  Additionally, in the event the design build entity is comprised of a team of separate entities, incorporation of a mandatory indemnification agreement which insured fair and balanced contractual indemnification between the separate entities is advisable.  For example, a professional design firm should be accountable for design defects insurable under standard professional liability policy and should not be subject to contractual indemnification for wrongful acts and omissions committed by third parties or the project owner.

The statement was prepared by NYSSPE council Mark Kriss, Esq.

Note: NYSSPE facilitates posting on this blog, but the views and accounts expressed herein are those of the author(s) and not the views or accounts of NYSSPE, its officers or directors whose views and accounts may or may not be similar or identical. NYSSPE, its officers and directors do not express any opinion regarding any product or service by virtue of reference to such product or service in this blog.

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