In 2007, Barry LePatner published “Broken Buildings, Busted Budgets: How to Fix America’s Trillion-Dollar Construction Industry.” The book represented a sharp critique of construction outcomes in the United States, and asks the question of how a nation “as technologically advanced and business-oriented as [America] can care so little about how it spends upwards of $1 trillion on construction each year?”

While other industries experienced revolutions in delivery methods that boosted productivity throughout the 20th and early 21st centuries, including communications, manufacturing, transportation and energy, construction is frequently characterized as an industry that “remains a bastion of waste and inefficiency.”

The construction industry’s spectacular downturn both during and after the Great Recession may have shifted a certain amount of attention away from productivity. But with nonresidential construction now recovering—and given the nation’s growing demand for modern infrastructure, industrial facilities and other elements of the built environment—broader stakeholder groups will undoubtedly begin to refocus on industry productivity. Individual firms already understand that in an environment characterized by thin, shaky margins, tight financing windows and furious competition, productivity and predictability are more important than ever to business survival.

The need to radically advance productivity at both micro- and macroeconomic levels has led to a number of industry responses, including the rapid diffusion of technologies such as BIM, the spread of production techniques such as prefabrication and modularization, the development of a new generation of construction superintendents and the process shift known as design-build.

However, the recession took a toll on some firms specializing in alternative project delivery. Many owners reverted to hard-bid design-bid-build work, believing it was the best way to get rock-bottom prices for projects.

But as the national economy and construction markets improve, many owners are recognizing that they may have been too quick to ignore the benefits of alternative project delivery—resulting in a resurgence of work delivered by design-build firms. The ENR Top 100 Design-Build Firms recorded combined revenue from design-build projects of a record $108.79 billion in 2013, up nearly 5 percent from the prior year. Domestic revenue was up nearly 8 percent.

A Record of Superior Performance
In 1997, Penn State professors Victor Sanvido and Mark Konchar conducted a study on behalf of the Construction Industry Institute (CII) focused on measuring cost, schedule and quality performance delivered under 351 design-build, at-risk construction management and design-bid-build approaches. Of the facilities studies, 43 percent represented public sector projects, while the balance were in the private sector. The researchers determined that design-build was superior to both at-risk construction management and design-bid-build by providing a lower unit cost, faster construction speeds and accelerated project delivery. The study also demonstrated that at-risk construction management was superior to design-bid-build in each of these areas.

According to FMI, when using the traditional design-bid-build approach, contractors are largely “left out of the design conversation on the front-end. All clarifications and adjustments are made ad hoc, after the bid solicitation.” This process discontinuity can lead to poor outcomes and the need to redo certain project elements, which both drives up costs and produces delays. Also, contractors have an incentive to blame designers for undesirable outcomes and vice versa, which renders it that much more difficult for owners to hold people accountable.

Because of superior performance, design-build has gained market share over time. According to RSMeans, design-build’s market share was 29 percent of projects in 2005. By 2012, this share had risen to 38 percent. During the same period, design-bid-build’s market share declined from 67 percent to 57 percent.

One of the most important factors inducing an owner to select design-build is the merging of design and construction functions into a single point of responsibility. In describing design-build, the CII notes that, “from a historical perspective, the so-called traditional approach is actually a very recent concept, only being in use approximately 150 years. In contrast, the design-build concept—also known as the ‘master builder’ concept—has been reported as being in use for over four millennia.”

Design-build is certainly an important contributor to progress in the construction industry, but it hardly represents the type of revolutionary development that is embodied by the microprocessor, shale oil or robotics. The construction industry’s process and outcome revolution remains in its early stages, but is sure to come eventually.    

 
Anirban Basu is chief economist of Associated Builders and Contractors. For more information, visit www.abc.org.