Joint Hearing of the Committee on Homeland Security and Governmental Affairs of the U.S. Senate and the Committee on Veterans’ Affairs of the U.S. House of Representatives at 1:00 p.m. CDT.
Submission For The Record of Modular Building Institute
Dear Chairman Miller:
On behalf of the Modular Building Institute, I want to thank you for holding a Hearing on the Department of Veterans Affairs Fiscal Year 2013 budget request. The Modular Building Institute (MBI) is a not-for-profit trade association established in 1983 that serves to represent companies involved in the manufacturing and distribution of commercial factory-built structures.
Last year, the Modular Building Institute had the opportunity to testify in front of the House Veterans’ Affairs Committee to discuss construction practices within the Department of Veterans’ Affairs. We believe that the Department of Veterans’ Affairs could greatly increase efficiency and reduce construction cost by adopting changes to their construction practices.
Throughout the construction industry there has been concern with the Department of Veterans Affairs as to the solicitation of construction projects that call for a delivery system referred to as “Design-Bid-Build.” This project delivery method is often more costly and less efficient than other delivery methods and its restrictive nature prohibits alternate forms of construction such as permanent modular, tilt-wall and pre-engineered steel construction from being able to participate in the bidding process.
As is explained in greater detail throughout this letter, the Department of Veterans’ Affairs could greatly improve the way it procures construction projects if it utilized an alternate project delivery system known as “Design-Build.” Over the past decade, the use of Design-Build has greatly increased in the United States, making it one of the most significant changes in the construction industry.
The Design-Build method, which has been embraced by several government agencies, including the United States Army Corps of Engineers (USACE), streamlines project delivery through a single contract between the government agency and the contractor. This simple but fundamental difference not only saves money and time, improves communication between stakeholders, and delivers a project more consistent with the agency’s needs, it also allows for all sectors of the construction industry to participate.
I. The Increased Use of a Design-Build Delivery System – How would it benefit the Department of Veterans’ Affairs?
The Design-Build project delivery system offers the Department of Veterans Affairs a variety of advantages that other project delivery systems cannot. Typically, under the Design-Build approach, an agency will contract with one entity to both design and construct the project. This is in contrast with Design-Bid-Build, where an agency has to contract with multiple entities for various design and construction scopes during the construction project.
By greater utilization of the Design-Build delivery system, the Department of Veterans Affairs can achieve these goals:
- Faster Delivery — collaborative project management means work is completed faster with fewer problems;
- Cost Savings — an integrated team is geared toward efficiency and innovation. Furthermore, with Design Build, construction costs are often known far earlier than in other delivery methods. Because one entity is typically responsible for the entire project, they are able to predict costs more accurately than when a Design-Bid-Build system is utilized. The contracting for Design-Build services allows the agency several decision points during design. The decision to proceed with the project is made before substantial design expenditure and with knowledge of final project costs;
- Quality — Design-Builders meet performance needs, not minimum design requirements, often developing innovations to deliver a better project than initially foreseen;
- Single Entity Responsibility — one entity is held accountable for cost, schedule and performance. With both design and construction in the hands of a single entity, there is a single point of responsibility for quality, cost, and schedule adherence. The firm is motivated to deliver a successful project by fulfilling multiple objectives, such as with the budget and schedule for completion. With Design-Build, the owner is able to focus on timely decision making, rather than on coordination between designer and builder;
- Reduction in Administrative Burden — owners can focus on the project rather than managing separate contracts;
- Reduced Risk — the Design-Build team assumes additional risk. Performance aspects of cost, schedule and quality are clearly defined and responsibilities balanced. Change orders due to errors are virtually eliminated, because the design-builder had responsibility for developing drawings and specifications as well as constructing a fully-functioning facility.
Just to underscore the benefits of a Design-Build project delivery system, the Construction Industry Institute, in collaboration with Pennsylvania State University performed a study examining the various construction methods and found that:
- Unit Cost: Design-Build was typically 6% less costly than a Design-Bid-Build system;
- Delivery Speed: Design-Build was 33% faster than Design-Bid-Build;
- Quality: Design-Build met and exceeded quality expectations at all levels
Unfortunately, the Department of Veterans’ Affairs has been unwilling to embrace the Design-Build construction method as much as other Federal Agencies. According to Department of Veterans Affairs personnel, only 20% of VA solicitations call for a Design-Build delivery system, while the rest rely on a Design-Bid-Build delivery method.
As our nation prepares for an influx of returning warriors, it is imperative that we are able to provide them with the services that will help them assimilate into civilian life. Medical clinics, dental facilities, physical rehabilitation facilities, mental health treatment facilities as well as interim veteran housing will need to be provided in an efficient and cost effective manner. By adopting the Design-Build approach, the VA could provide these facilities in a compressed timeframe while ensuring that the product delivered is top quality.
II. Design-Build Utilized by Other Federal Agencies
Over ten years ago, the Federal Acquisition Regulation (FAR) was changed to accommodate the Design-Build project delivery method. Since then, the Design-Build delivery method used by numerous Federal Agencies, including the United States Army Corps of Engineers has been utilized to bring thousands of facilities to completion on time and on budget, thus creating savings for the agencies and the taxpayer.
Most Agencies have adopted the Design-Build method as their primary means of project delivery. While figures vary slightly, most Agencies estimate the overwhelming majority of their projects are solicited with a Design-Build delivery method:
1. United States Army Corps of Engineers (USACE): 83-85% Design-Build. According to Paul M. Parsoneault, construction management team leader, U.S. Army Engineers Military Programs Branch, when Congress approved the 2005 Base Realignment and Closure (BRAC) recommendations, the agency had to respond faster than ever before. “There was no way possible to execute a historically large mission using the traditional delivery system,” he said. “We determined that, in terms of the Army, the default delivery system is design-build. We can deliver more quickly, and we can leverage the innovation of industry to provide us with the most cost-effective solutions to our requirements.”
2. Navy Facilities Engineering Command (NAVFAC): 75% Design-Build. According to Joseph Gott, Director, NAVFAC, “The largest reason we select a project for the design-build delivery vehicle is the single point of accountability and responsibility. We have an architect-engineer and a design-build constructor on the same team and have a contract with one company.”
3. Air Force Center for Engineering & Environment (AFCEE)70% Design Build. This number comes from a report done by Mr. Terry G. Edwards (AFCEE).
4. Federal Bureau of Prisons: The Federal Bureau of Prisons has relied exclusively on design-build project delivery. “Design-build shortens the delivery period because it eliminates the procurement phase between the design and the construction phase,” Pete Swift, deputy chief, Design and Construction Branch.
By greater utilizing the Design-Build delivery system the Department of Veterans’ Affairs would experience several time and cost benefits. With a Design-Build delivery method there are fewer unforeseen problems and when problems do arise, they are resolved more quickly. Projects delivered on or before deadline are the rule rather than the exception with the Design-Build delivery method.
III. A Design-Build System Opens Opportunities for Alternative Design Offerings
By utilizing a Design-Build philosophy, the Department of Veterans Affairs could allow for sectors of the construction industry, such as modular construction, tilt-wall and pre-engineered steel to offer products as well as project means and methods that are currently not exercised due to the restrictive nature of Design-Bid-Build project delivery methods.
Numerous permanent modular contractors have performed services for the Department of Veterans Affairs but because of the limited amount of Design-Build solicitations, the opportunities are severely limited.
Recently, the National Institute of Standards and Technology (NIST) released a report identifying modular construction as an underutilized resource and a breakthrough for the U.S. construction industry to advance its competitiveness and efficiency. One of the findings in the NIST report was “Greater use of prefabrication, preassembly, modularization, and off-site fabrication techniques and processes.
For those who specialize in alternative construction such as permanent modular, this report simply validated what has been known for a long time: Construction methods such as permanent modular leads to improved efficiency and productivity.
By greater utilizing the Design-Build delivery system into the Department of Veterans’ Affairs construction policies, the Department of Veterans Affairs could greatly increase the amount of projects that contractors utilizing alternative forms of construction could participate in and therefore experience the benefits as outlined in the NIST report.
It should be noted that alternative construction methods such as permanent modular are not always the solution. There is no one perfect building system for every application. However, by expanding opportunities for them to be part of the process the Federal Government can be assured that it gets the ‘best value’ by seeing all the options before awarding a contract.
Contractors that rely on a Design-Build delivery system have, and continue to overcome obstacles when it comes to working with the Department of Veterans Affairs. Moreover, in an era where the government is looking to trim costs wherever possible, the Department of Veterans’ Affairs would be able to reduce construction costs, increase efficiency and provide our veterans with the quality facilities they deserve.
The construction industry has seen great advances over the past ten years, and one of those is the Design-Build delivery system. More and more contractors are beginning to utilize Design-Build because of the advantages that are offered. However, until agencies such as the Department of Veterans Affairs decide to solicit more projects using a Design-Build method, these companies will be unable to participate. The members of MBI ask that the Veterans’ Affairs Committee look into the issues discussed in the hopes of improving the way the VA procures facilities.
On behalf of the Modular Building Institute I thank you for your time and attention to these matters. It is our hope the Committee can continue to rely on MBI as a valuable resource when it comes to issues relating to the construction industry.
Modular Building Institute