Despite the existence of different procurement strategies, such as design-build, engineering-to-order, integrated project delivery and others, design-bid-build (DBB), also called “traditional” or “stage-gate” approach, is still dominating the construction industry all over the world. Why traditional? Because it is the oldest method of procurement. Why stage-gate? Because a construction project is divided into several stages: design, tendering for contractors, construction, and commissioning, with slight differences in different countries. These stages are usually carried out by different companies.

DBB starts with a client hiring an architect to organize the design process and optionally to oversee the construction process afterwards. After clarifying the client’s requirements in a pre-design phase, the architect assembles a design team. The design process goes through different stages, namely schematic design, design development, construction documents. Contractors are not involved in the design process and are hired once the design has been completed, usually by competitive tender based upon a priced bill of quantities, normally on “the lowest bid wins” basis. The competitive tendering process provides the client the cheapest proposal to realize a building, therefore it is seen as most valuable for the client. Comparing the prices based on prepared design is transparent, logical and easy to follow.

Advantages of integrated forms of contracts, where contractors can influence the design decisions and bring their know-how, have been widely discussed, so why do the clients, architects, and consultants still choose DBB? DBB is required by law for public projects in many countries, it is seen as a countermeasure to corruption. There is a strict allocation of responsibilities and risks among the designers and contractors performing the construction activities, it is seen as means to manage the construction projects processes and to solve possible disputes. Construction industry values tradition and familiarity, therefore, “the lowest price wins” mentality remains ingrained. Consultants and architects recommend DBB because they remain remote from the submitting and awarding of tenders down the supply chain [1]. Clients may know about other procurement strategies, but remain understandably cost focused, therefore, the choice of procurement is not always consistent with their wish [2].

Negative Effects of DBB on Construction Environment

Although DBB seems to be well suited for simple and small projects, it has proven to be inefficient in more complex projects [3]. Why?

First, lowering the bids creates low margins in the industry. Contractors then, on one hand, have to protect these margins shifting the risks to their contractual counterparts, on the other hand, they want to increase these margins afterwards. Protectionism creates uncooperative behavior, non-collaboration, and sometimes unethical behavior, well known in the construction industry. Margins can be increased by claims. The culture of the construction industry in Germany, for example, has been described as a “culture of claims” [4]. Opportunistic behaviors have been categorized [1] as either proactive or reactive. Proactive behaviors are pre-tender and intend to make the bid as attractive as possible: bid obfuscation, bid gambling and playing the grey. Reactive behaviors are those used once bids have been submitted, intended to increase the chances of securing the job: price shopping, post-tender negotiation, mirrored immorality.

Second, there are flow interruptions in the DBB process [5]. It includes the fragmentation of the industry (design and build phases are separated), poor constructability (construction companies are not involved in the design process), lack of responsibility for the total project, hindrance of learning (knowledge stays in the silos). It leads to several consequential problems, such as short-term goals (project participants are forced to think about short-term profits rather than long-term strategies), an increasing number of change orders, silo thinking (each party is optimizing its own part, ignoring the whole picture), lack of improvements and innovation (improvements take into account the needs of sub-processes, not the whole project).

The direct and indirect negative effects of DBB on the construction environment are summarized in Figure 1 [6]. The effects presented in this tree diagram are overlapping and because of their feedback loops are both consequences and contributors to the construction environment.



Figure 1: Negative Effects of DBB on Construction

Prisoner’s dilemma

The environment in DBB construction projects could remind us of the Prisoner’s Dilemma, a paradox described in modern game theory, in which two individuals acting in their own self-interest do not produce the optimal outcome [7]. In the typical prisoner’s dilemma situation, both parties tend to protect their own interest at the expense of the other participant. As a result, both participants find themselves in a worse state than if they had cooperated with each other in the decision-making process. Similarly, the decisions of participants in the construction industry are often driven by self-interest and not by the overall success of a project in the eyes of the ultimate customer. One of the reasons for these unwritten rules in construction, “the strongest wins” and “if you don’t beat them, they will beat you”, is DBB.

Conclusion

Long history of DBB, convenience of choosing the cheapest price and reluctance of the construction project participants to accept the new ways of doing business collaboratively, to open cards and to share information with the companies involved in the project procurement (architects, engineers, quantity surveyors, consultants, contractors, subcontractors, clients) in order to reach the common project goal, to minimize waste and to become more productive and efficient, leads to the conclusion that DBB will keep dominating the construction industry in the foreseeable future. DBB leads to silo thinking which derives from the way the contract structure is built. For DBB, it is normal that the parties that start working together have not had the relationships before. In DBB, a lot of time should be spent firstly to create communication structures. Normally, there is no time for it as the processes on the construction site should progress. Without communication channels between them, the parties find themselves in the prisoner’s dilemma, when they are separated and try to protect their own interest instead of collaborating.

References

1. Hinton, M. A., and R. T. Hamilton. 2015. "Competitive tendering and individual behaviour in the construction industry: convenient immorality at work." Construction Management and Economics, 33 (11-12), 880-889.

2. Eriksson, P. E., T. Nilsson, and B. Atkin. 2008. “Client perceptions of barriers to partnering.” Eng. Construct. Architect. Manage., 15 (6), 527-539.

3. Bajari, P., R. McMillan, and S. Tadelis. 2009. “Auctions versus negotiations in procurement: an empirical analysis.” J. Law Econ. Org., 25 (2), 372-399.

4. Schöttle, A., and F. Gehbauer. 2013. “Incentive structure in public design-bid-build tendering and its effects on projects.” In Proc., 21th Conf. of the Intern. Group for Lean Constr., 227-236.Fortaleza, Brazil: International Group for Lean Construction.

5. Koskela, L. 1992. “Application of the new production philosophy to construction.” CIFE Technical Report 72. Stanford, USA: Stanford University.

6. Kortenko, S., Koskela, L., Tzortzopoulos, P. and Haghsheno, S. 2020. “Negative Effects of Design-Bid-Build Procurement on Construction Projects.” In: Tommelein, I.D. and Daniel, E. (eds.). Proc. 28th Annual Conference of the International Group for Lean Construction (IGLC28), Berkeley, California, USA, doi.org/10.24928/2020/0141, online at iglc.net.

7. Powers, R. 2019. Prisoner’s dilemma. London, UK:Atlantic Books.