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S. Carolina Court to Decide Legality of Design-Build Bids

Mon April 25, 2005 - National Edition
Jeff Cronin

The future of public design-build contracts in South Carolina now rests in the hands of the state Supreme Court.

Jim Carpenter, the attorney for Greenville resident Edward Sloan, a government watchdog, argued that state law does not allow for any method of awarding contracts other than taking the lowest bid for a specific project.

Sloan’s lawsuit, which requests a ruling that the South Carolina Department of Transportation (SCDOT) can no longer award design-build contracts, focuses on the Carolina Bays Parkway project, which will link the north and south ends of Horry County, avoiding the congestion of Myrtle Beach.

Carpenter argued not enough emphasis is placed on cost since points are awarded from different aspects of a proposal, including the completeness of a presentation, “so a lot depends on how good your presentation is.”

SCDOT argued the design-build contract for the Carolina Bays Parkway project, as well as the Ravenel Bridge in Charleston and the Cross Island Parkway in Hilton Head Island, saved taxpayers money, since state employees did not have to spend their time wading through the design process.

Kent Hansen, director of engineering for the National Asphalt Pavement Association (NAPA), said state departments of transportation generally reserve design-build bids for only the biggest of projects.

“It’s a way of getting the projects done when states don’t have the resources,” he said.

Hansen was bothered by Carpenter’s assessment.

“The cost is still a big part of it,” he said, as well as innovations proposed for the project and the contractors’ history of quality.

Citing “recent industry publications,” the Design-Build Institute of America’s (DBIA) Web site said the federal government and many state and local governments are beginning to use design-build contracting “for a significant percentage of their building programs.”

The argument in the South Carolina lawsuit, “is one that we’ve heard before and I think it reflects a certain cultural mindset of how things get done,” said Richard A. Belle, DBIA vice president of public affairs and information.

He did not know if the argument has ever been brought before another court.

The Web site also said design-build is used on more than 50 percent of non-residential construction projects in Europe and more than 70 percent in Japan.

SCDOT attorney William Coates said state law does not forbid the design-build method and the contracts all went to the proposals with the lowest cost, anyway.

While the state procurement code allows for both design-build and traditional bidding methods, Chief Justice Jean Toal said the DOT is exempt from the code at its own request.

“The department can’t have it both ways,” she said. “This is a repetitive course of conduct. This is a big, big question on whether this is permitted by the statutes.”

An SCDOT spokesman said the court has given them no indication on when a decision will be made.

Steve Gennett, Carolinas AGC (CAGC) President and CEO, said the organization historically has been a staunch supporter of the competitive bid process.

But times are changing.

In the past five to 10 years, as public entities have followed in the footsteps of the private sector and have ventured into alternative contracting methods, Gennett said the CAGC has become more receptive to design-build and other ways of awarding contracts.

“You cannot remain static. We have come to a position here that there are reasons that can be supported for looking at alternative contracting methods in public works projects,” he said.

Among Gennett’s reasons are the complexity of a project or the need for the design and construction timelines to be overlapped because of time constraints.

All but seven states (Wyoming, Kansas, Iowa, Alabama, Indiana, Michigan and Rhode Island) allow design-build contracts for public projects in some form. Another six states (New Mexico, Nebraska, Louisiana, Mississippi, Vermont, New York) and Washington, D.C., do not permit design-build contracts for transportation projects.

In 14 states, public agencies are allowed to use the process for all types of projects, DBIA said.

According to DBIA’s Web site, government agencies commonly use three ways to award a design-build contract:

• Negotiated selection — a system becoming popular with major federal agencies, candidates are interviewed and a decision is based on reputation, qualifications, past performance, prior association, scheduling commitments and recent comparable costs.

• Cost/design competitions — companies submit a proposal and a firm price. The owner then uses a system they establish to make a selection.

• Cost competitions — a method that closely resembles the low bid process, the Web site said the firms’ role in design “is more of a detailer than a conceptualizer.” The award is made to the lowest bidder from a pre-qualified list of design-builders. DBIA said this process “eliminates two of the most advantageous features of design-build competitions: multiple design solutions and innovations in materials/systems.”

NAPA’s Hansen said the design-build process got its start in bridges and structural work, but has become more prevalent in road projects. In most cases, a partnership of companies, which may include a design firm, a management firm and a contractor, will join to bid on a design-build project.

One of the false concerns, Gennett said, is that design-build projects will only be awarded to big out-of-town conglomerates. However, several CAGC members were hired for portions of the Carolina Bays Parkway, one of the projects mentioned in the suit.

David Herndon, executive director of the South Carolina Asphalt Pavement Association, said design-build bidding has been well-received by contractors in his state, although “it can get expensive.”

His support will remain for design-build as long as it remains limited to landmark projects.

“Otherwise, I think you’ll leave some of your mom-and-pop operations out of the equation,” Herndon said.

Belle of DBIA said design-build procurements don’t have be limited to massive projects. While, “clearly, some of the large firms have taken the lead on this,” the opportunity for small firms to thrive in design-build remains. The DBIA offers workshops to certify firms of all sizes in design-build.

In addition, Gennett said the selection of a contractor for a design-build project needs to be based primarily on quantitative factors.

“There are sometimes subjective elements in the selection process,” he said. “Just because a firm hasn’t done a $20 million project before doesn’t mean they can’t.”

While this way of letting a project has become more prevalent in road projects, Hansen said, “the low bid system will remain, for as long as I can think, the most popular way of contracting by a vast majority.”

Projections by DBIA say otherwise. By 2015, DBIA officials believe half of non-resident construction projects will be design-build projects, compared with 40 percent low-bid projects and 10 percent construction management-at-risk projects.

DBIA said half of all current projects are low bid projects and 40 percent are design-build. That figure was in the signal digits just two decades ago.

Sloan, the man behind the lawsuit, has also filed suits over contracts and purchasing agencies, including the “bobtailing” lawsuit over unrelated items in bills. He won that case.

In the Carolina Bays case, Sloan originally asked for an injunction against the contracts. The district court ruled against Sloan. He appealed, and the state Appeals Court ruled that he did not have standing as a general taxpayer to sue on that issue.

The appeal before the Supreme Court was over whether he had standing, but the justices indicated they think he does, so the question they want to address is whether the agency has the power to make design-build contracts.

(The Associated Press contributed to this report.)

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