Commentary: N.Y. State Budget Omits P3s and Design-Build Procurement

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New York's recently passed budget legislation failed to reauthorize the state's successful "design-build" procurement process or to authorize the use of public-private partnerships, or P3s.

The initial budget proposed by Gov. Andrew Cuomo had included a reauthorization of design-build for a further three years.

Many in the public works sector had also hoped that New York's pending P3 enabling bill would also have made it into the final Budget legislation.

New York approved the limited use of design-build procurement as part of the Infrastructure Investment Act of 2011, but that authorization is due to expire in December 2014.

The state's Department of Transportation, the Thruway Authority and certain other specified state agencies were permitted to use this procurement method.

Design-build allows an agency to award a single contract to a private-sector team covering the design and construction phases of the project.

Prior to the authorization of design-build, such agencies were required to use a "design-bid-build" process, whereby a design contract was awarded to one company and, once completed, the construction phase of the project was bid out to be constructed by a separate entity under a separate contract.

Proponents of design-build argue that, by placing the entire project under one contract, engineers, architects and contractors are encouraged to collaborate to deliver more innovative and less costly projects on a faster schedule, as opposed to the frequent, time-consuming and costly change orders, cost overruns and schedule delays common under the traditional "design-bid-build" approach.

Notwithstanding the benefits of "design-build," this procurement method was only authorized for an initial three-year period in New York.

Since 2011, the design-build method has been widely and successfully used in New York. As of March 2014, $171.2 million of projects in the state have been completed using "design-build" procurement, with many more in process. The completed projects include 32 bridges throughout the state and the acceleration, by 42 months, of repairs to the Kosciuszko Bridge.

The new Tappan Zee Bridge was also procured on a design-build basis. The initial costs of this project were estimated by the state to be in excess of $5 billion. The winning design-build bidder, however, is obligated to deliver the project on-schedule for $3.4 billion.

The state DOT has estimated that "design-build" projects are 27% less costly than those procured using traditional methods.

The proposed design-build reauthorization bill that failed to pass the New York State Senate would have extended current program for another three years, through December 2017.

An earlier version of the bill permitted "design-build" to be used on a permanent basis.

In the hope of garnering support for the design-build reauthorization from organized labor, on Feb. 20 Gov. Cuomo modified the measure to require the use of a Project Labor Agreement, or PLA, for design-build projects in excess of $10 million.

PLAs are collective bargaining agreements that establish terms and conditions of employment for a specific construction project through one or more labor organizations or unions.

Such terms and conditions generally apply to all contractors and subcontractors on the project.

Cuomo's proposal for a P3, using a design, build, finance, operate and maintain — DBFOM — structure, with respect to a new $600 million public-health laboratory on the Harriman State Office Campus also failed to make it into the final budget legislation.

 

Since the use of the design-build procurement was authorized in 2011, the relevant New York State agencies have used design-build to realize significant cost savings and to accelerate the timetables of several important construction projects.

Many in the public works sector had pushed for the reauthorization of design-build procurement as part of the 2014-15 budget, citing the successful use of this procurement method since 2011.

While many were disappointed by the reauthorization's failure, the relevant measure may still be enacted before the current legislative session ends in late June. If it is not, New York will become one of only five states that do not allow the use of design-build procurement to deliver public infrastructure projects.

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