DBB, DB or DBM?

Performance of Road Project Delivery Methods

Tiina Koppinen
VTT –Technical Research Centre of Finland (email: Tiina.Koppinen@vtt.fi)
Pertti Lahdenperä
VTT –Technical Research Centre of Finland (email: Perttti.Lahdenpera@vtt.fi)

Abstract

Internationally, road procurement is moving towards more integrated services. At the same time,
the number of alternative project delivery methods has increased making selection of the best one
difficult. The client must understand the features of the methods in order to select the most
effective ones. That is why the presented study compared the performance of Design-Bid-Build
(DBB), Construction Management (CM), Design-Build (DB) and Design-Build-Maintain
(DBM). Based on the analysis of road procurement, more integrated services give better value for
money and are of more help to the client in attaining his goals than more traditional methods. Yet,
one should realise that each method has its typical applications, and all methods are not suitable
for all purposes.

Keywords: Road procurement, project delivery, performance, comparison, life-cycle

1. Client's Changing Needs as Starting Point

Project delivery methods where the implementer offers more integrated service packages are
increasingly used in infrastructure projects worldwide. The client no longer splits up the project
to procure different types of services by different contracts. Besides construction, at least
technical design and maintenance for a certain time period, often also financing, are covered by a
single contract. The change in the modus operandi is the result of clients wanting to focus on their
core businesses as managers of infrastructure networks as well as the overall aim of generating
added value.

Generally, broader service packages have been assumed to allow optimising the product and
implementation as a whole as well as to actuate sector development. Yet, contrary views in
favour of traditional methods are also voiced: splitting up the project into small components is
believed to increase competition in the markets and ensure the client's decision-making power
concerning the details of the project. This together with other presented critique raises the issue of
the usability and actual effectiveness of various delivery methods.

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 2. Performance Assessments as the Goal

The presented study charted the performance of different delivery methods in road procurement
from the international viewpoint focussing especially on three areas:

- Examination of the operating principles and present performance level of various methods in
actualized road projects.
- Assessment of the development means and potential of delivery methods and their resulting
future performance.
- Anticipation of changes in the operating environment, and evaluation of their impact on the
usability of different delivery methods.
Since there is special interest towards Design-Bid-Build (DBB), Design-Build (DB) and Design-
Build-Maintain (DBM) in Finland, the study was to analyse the performance of these delivery
methods and their applicability. As the municipal sector uses Construction Management (CM) it
was also included in the comparison to some extent. Different financing solutions and costs as
well as (indirect) social impacts were excluded from the study.

3. Charting of International Experiences

The study looked at the experiences gained from different project delivery methods in England,
Australia, New Zealand and the United States in addition to Finland. An earlier study [3] found
these countries the most innovative, which was presumed to mean that they were best poised to
answer questions about new methods. Data were collected by interviewing over 60 persons
representing different project parties in these countries and by charting and making use of studies
conducted there and in other countries [1]. In the assessment of the merits of the delivery
methods, the client's viewpoint was emphasised. The viewpoints of the contractor, designer and
end user were also considered in order to ensure the support of all parties for the methods. Only
that ascertains the positive future development of the sector.

In the studied countries there is a clear trend towards more integrated services and more risk
borne by service providers. DB has gained ground on DBB and even replaced it completely in
some countries. It is considered effective in procuring roads since it shortens project duration
thereby improving cost certainty. Just about the only problem seen with it is the cooperation
between the parties (especially designer/contractor) which various joint enterprise models seem to
be able to address.

Various applications of DBM have also been used alongside DB since the 1990s to improve the
life-cycle economy of roads. The applications have ranged from fully client-financed roads to
pure toll roads. With the former, the enlarged responsibility of the private sector covers only 10-
year maintenance whereas in the case of toll roads the project company collects revenue in the
form of user fees over a contract period of 30-40 years. DBM has led to effective operation in

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terms of quality, schedules and costs. Yet, for instance, the used payment bases have also been
criticised.

CM has been used hardly at all in road procurement. Finnish experiences of CM indicate some
benefits from it although, at the same time, the fact that buying small work packages does not
allow the industry to develop drew criticism.

4. Cost Savings through Integrated Services

Each phase of a project (procurement, design, construction and maintenance) involves a certain
cost and duration. Costs may be incurred by the client's organisation (procurement, supervision)
or industry (tender preparation, design, construction, maintenance, consulting). In the study, the
interviewees indicated the actual phase-level, party-specific cost changes of various delivery
methods compared to traditional procurement based on projects they have carried out. The costs
for comparing different delivery methods were calculated on the basis of relative costs where the
starting point was the cost structure of two reference projects. The chosen study period was 30
years, and delivery methods were compared on the basis of the present values of their costs.

The analysis [2] showed that DBB is the slowest and generally leads to the highest total costs in
road procurement as shown by Fig. 1. CM speeds up project implementation, but costs about as
much as DBB. The duration of a DB project may be slightly longer than in CM due to the longer
procurement phase, but shorter than with DBB. On the other hand, the costs are clearly lower
than with the CM and DBB. However, DBM is the one that yields the largest savings. In DBM
the project takes a little longer than in DB and especially CM.

100
Millions

90
80 DBB
70 CM
60 DB
Present cost

50 DBM
40 Poly. (DBB)
30 Poly. (CM)
20 Poly. (DB)
10 Poly. (DBM)
0
0% 2% 4% 6% 8% 10 %

Interest rate

Figure 1. Costs of reference project by different delivery methods and at different discount
rates.

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The savings from DB and DBM depend on many factors; the most significant one appears to be
savings in construction costs. Moreover, the methods also lower a project's supervision, project
management and design costs. On the other hand, the savings in maintenance costs appear to have
little effect on the present value of total project costs. The present cost is also affected by the
discount rate, but –with the exception of relative position of DBB and CM –changes in it do not
alter the ranking of the delivery methods. Subsequent assessments were made using relative costs
based on a discount rate of 6 per cent.

5. Added Value through Integrated Services

Not only does the cost behaviour of procurement methods vary, their ability to generate value for
the client and the other parties also varies. The value criteria generally used were grouped in the
study into the value factors of Fig. 2: cost certainty, time certainty, short cycle times, good
quality (aesthetics, travelling comfort, minor need of maintenance), safe and environment-friendly
implementation, flexibility (ease by which client can effect changes), smooth delivery (effective
communication, no disputes or claims), public inconvenience (road availability, minimum user
disturbances). The interviewees assessed how well these goals were attained by different delivery
methods compared to DBB. The viewpoint was mainly that of the client.

In general, the interviewees found that methods where the contractor is responsible for design
(DB and DBM) generate more value. The broader the service package, the better the perceived
value generation on average. DBB and CM, on the other hand, were believed to lead to an
increased number of interfaces between the parties and possibly to problems, inefficiency and
lower value generation. CM was, however, considered superior to DBB in some areas.

Different clients and projects may emphasise value factors quite differently. If flexibility becomes
the determining criterion, DBB and CM are the best methods. On the other hand, if the weight of
quality and flexibility trebles, the value generation of DBB exceeds that of DB. If again, the
weights of flexibility and time certainty increase 2.5-fold, CM generates more value than DB.
Yet, as the study focussed on a so-called average project, various value factors were assigned
equal weight in drawing conclusions and the illustration of results.

When value generation was studied from the viewpoints of other project parties, contractors and
designers were found to have noticed some problems also with the more integrated methods.
Contractors perceived high tender costs and cooperation with the designer the biggest problems.
Risk allocation and increasing project sizes also provoked discussion. Typically contractors did,
however, find that broader service packages lead to efficiency and better possibilities of
developing operations. Designers saw problems especially in the implementation of DB where
they are often subordinated to the contractor as the limited economic resources of designers
seldom give them an equal footing.

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Figure 2. Value generation capacity of different procurement methods compared to DBB.

6. Economic Efficiency is the Key

There is a continuous demand on public clients to get more value for tax money. The accrual of
costs or value generation in themselves do not prove the excellence of a delivery method in that
context. The significant factor is the amount of value the method can generate in relation to its
costs. That is why the concept of economic efficiency (EE) was introduced into the study. It
indicates the normative ratio of generated value to costs in comparison to DBB.

The conducted analysis and Fig. 3 in the next chapter show that CM’s economic efficiency is on a
par with DBB. DB improves EE significantly: it generally allows generating more value for the
client at lower costs. DBM as much as doubles the benefits of DB and thus gives the best value
for money. The total differences are so large that moderate changes in the weights of value
factors play no role in the ranking of delivery methods. The overall assessments requested of
interviewees concerning the "value for money" of various methods were also in line with the
above analysis. The general reasons perceived to contribute to the superiority of DB and DBM

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included transfer of risk to the private sector, the optimised delivery process and quality as well
as utilisation of the management skills of the private sector.

7. Development is the Basis of Future Performance

The study also attempts to provide answers for the long term instead of just evaluating the
"historical performance" of delivery methods. Therefore, the interviewees were asked to assess
the development potential of different methods. Development potential was divided into more
easily assessable sub-factors by main categories as follows: 1) adaptability/regeneration of
process, 2) generation/utilisation of information, 3) project team coherence/capacity for
cooperation, and 4) means and possibilities of improving workability of delivery method. The
first three categories represent general preconditions for development of the activity over the long
term. The fourth one covers the concrete means for improving the efficiency of delivery methods
presented by interviewees and literature. Based on the assessments of the interviewees and on the
critical analysis, it became evident that DBB and CM have little development potential whereas
the potential of DB and DBM is significant. The relative development potentials of different
delivery methods are indicated by the lengths of the arrows in Fig. 3. However, here the lengths of
the arrows are meaningful only in relation to each other, not as exact numeric values.

Future performance is the sum of present performance and development potential. Thus, there are
good grounds to assume that the performance gap between DBB and CM on the one hand, and
the more integrated DB and DBM on the other, will only widen in the future.

Figure 3. Current economic efficiency of delivery methods and its future development.

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Attainment of the full performance capacity of delivery methods naturally requires elimination of
the existing factors that limit efficiency. The research report [2] specified the improvement
proposals already considered as development potential above. Their aim is to optimise the
performance of delivery methods from the viewpoint of all parties (see [1]). In DBB, for instance,
the constructability of designs and cost certainty can be improved. In CM, the overlapping of
operations can be reduced thereby making project management more effective. In DB, tender
costs can be cut, cooperation between suppliers improved, risk allocation optimised, opportunities
to innovate increased and quality improved. In DBM, tender costs can be reduced, risk allocation
optimised, innovation promoted and flexibility increased.

8. The Future Operating Environment

The future will bring changes also to the operating environment where roads are procured and
built. Changes will affect factors guiding procurement (rules, financing, changing traffic
environment) as well as the production process –even the end product. In light of the anticipated
changes it would appear that more integrated delivery methods will allow us to adapt better to
changes than more traditional methods. Yet, there would appear to be no serious hindrances to the
use of any of the methods in the future.

9. Application Areas of Different Delivery Methods

The study would seem to indicate that more integrated delivery methods provide better value for
money than traditional ones. Each delivery method does, however, have its distinct best
applications outside of which its advantages cannot be realised in full. According to Fig. 4, DBB
is still suitable for small and simple projects, which offer little room for innovation, or which
involve many factors of uncertainty due to parties or issues external to the project. CM, again, is
well suited for large and/or tight-scheduled projects involving many constraining factors where
the client also must effect changes during implementation or the life cycle.

As project size and degree of freedom increase, DB and DBM become more preferable. Since
DBM is suited for larger-than-average projects, DB can be considered appropriate for average
projects. DB and DBM projects must not, however, involve factors of uncertainty due to third
parties.

10. More Integrated Service Packages for Future Roads

The study clearly indicated that more integrated service packages can provide concrete benefits to
all parties compared to DBB. Thus, further development of DB and its adoption as the standard
alternative to DBB is recommended. The benefits of DBM are also apparent; it is generally the
best solution for large projects.

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 Small Project size Huge

DBB CM

DBM
DB

Point of
Comparison

Figure 4. Optimal application areas of various delivery methods.

Changes in procurement must yet occur in steps in order to give industry time to adapt and to
allow time for contract standardisation and development of appropriate specifications. Selected
delivery methods must also be used continuously to motivate people to acquire the know-how
required by new methods which will also make them better. The private sector must at the same
time focus on relationship-building and developing cooperation models. Thereby road
procurement and implementation can be raised to a new level which furthers the attainment of the
client's goals, increases industry's productivity and profitability, and gives society the best
possible value for tax money.

It should be kept in mind that the study targeted only road projects. Thus, the results cannot be
assumed to be directly applicable to vertical, or even other infrastructure construction, since these
often differ from road construction in many ways.

References

[1] Koppinen, T. & Lahdenperä, P.(2004) Road Sector Experiences on Project Delivery
Methods. VTT Research Notes 2260, Espoo 2004. 216 p. + app. 32 p.

(Available online at: http://www.vtt.fi/inf/pdf/tiedotteet/2004/T2260.pdf)

[2] Koppinen, T. & Lahdenperä, P. (2004) The Current and Future Performance of Road Project
Delivery Methods. VTT Publications 549, Espoo 2004. 115 p.

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(Available online at:http://www.vtt.fi/inf/pdf/publications/2004/P549.pdf)

[3] Pakkala, P. (2002) Innovative Project Delivery Methods for Infrastructure. An International
Perspective. Tieliikelaitos, Helsinki 2002. 120 p.
(Available online at: http://alk.tiehallinto.fi/julkaisut/pdf/pakkalae5.pdf)

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