This feature is part of “The Dotted Line” series, which takes an in-depth look at the complex legal landscape of the construction industry. To view the entire series, click here.
The bidding environment on public projects in Missouri is changing.
The Missouri legislature passed HR 2474 in May, a bill that expands access to progressive design-build for contractors working with government agencies. Gov. Mike Kehoe signed the bill into law on July 13.
The bill lowers the cash threshold on projects using the delivery method from $7 million to $2.5 million. It also opens PDB to all state agencies through a two-step selection process.
“For many counties and municipalities, this authority opens the door to tools they couldn’t previously use,” said Brett Harding, Owners Council co-chair at the Design-Build Institute of America’s Mid-America chapter and Burns & McDonnell section manager, in a DBIA news release lauding the bill. “We’re looking forward to seeing the positive impact this will have across the state.”
With this move, Missouri joins a host of other states that includes New York, Florida, California and Virginia where design-build, including progressive design-build, is permitted by most agencies, per DBIA.
As progressive design-build becomes more popular across the industry, attorneys told Construction Dive that these types of changes at the state level open a new avenue of collaboration between builders, designers and owners. The pivot can also help prevent issues from cropping up projects.
At the same time, lawyers still warned that contractors need to be aware of key steps and hurdles before shovels hit the ground.
Differences from other delivery methods
The Missouri statute calls for progressive design-build, which makes the bidding process more collaborative, said Bill Thomas, principal with Gausnell, O'Keefe & Thomas in St. Louis and member of the International Association of Defense Counsel.
Instead of picking a bidder based on price, under progressive design-build, the contracting entity will go through a process where it narrows down its bids to groups based on qualifications.
Then, the bidders provide potential solutions for the project. The owner, should it choose one firm, will then work with that design-builder to establish a guaranteed maximum price.
“The benefit of this is that you're not just bidding on incomplete design or narratives,” Thomas said. “You have a fairly developed design that you work with the public owner on and get agreement on, maybe even pushing a design forward as far as 60% or better.”
One example of this method in practice that Thomas cited is the $1.5 billion Kansas City airport terminal and garage project, which opened in 2023 and involved a joint venture of Clark Construction, Weitz and Clarkson Construction.
From a broader perspective, the pairing together of design and construction through a single provider can help prevent disputes, said Carmen Hernandez, general counsel of St. Louis-based builder Clayco. For example, on a traditional design-bid-build project, should an issue arise, there may be conflict between the designer and the builder, who may blame each other for the problem.
This is much less likely to be the case where design and construction fall within the scope of the same entity, Hernandez said.
“It doesn't matter to a design-builder whether the cause is a design issue or a construction issue,” Hernandez said. “It's in the scope of the design-builder to address the problem, fix the problem, and deliver the results to the client that they need to have under the project design specifications or criteria for the project.”
Progressive design-build takes this a step further by soliciting input sooner from more stakeholders in a project.
“To simplify, the owner gets involved earlier in progressive design-builds, and as part of the team that is developing that design and developing that budget to meet that design,” Hernandez added.
This also includes when a lead design-builder subcontracts the design out to a different entity, said Steve Reams, Atlanta-based partner at Smith Currie Oles. Even though that firm is not performing the design itself, it is still responsible for the final product.
“Now, they may subcontract that out to subconsultants and other subcontractors, but when you sign the contract, you are saying, ‘I will deliver this project in all aspects, both design and construction,’” Reams said.
Avoiding issues in progressive design-build
But even within a more collaborative framework, there are still key hurdles that builders should take care to address, attorneys said.
For example, construction teams must clearly establish within the contract which entity is responsible for design of the project, whether it’s a subcontractor or the firm itself.
Hernandez distinguished between delegated design scopes versus full design-build scopes for subcontractors, which could entail whether a subcontractor is merely assisting the design team or if the design has been relegated to it.
At Clayco, construction teams combat this issue with clear contractual language.
“We like to make it easy for everyone and make it very clear in the subcontracts what portion of the subcontract scope involves design and what those design responsibilities specifically are,” Hernandez said.
In the vein of progressive design-build, Thomas also cautioned that builders should be prepared to show where the money is going. Because of the collaborative nature of progressive design-build, Thomas said owners will often push for transparency alongside pricing audits and details of subcontractor buyouts.
“There probably will need to be a lot of contractual terms that deal with, I will call them ‘cost savings sharing,’ between the design-builder and the owner and transparency of pricing,” Thomas said. “So it'll be a more open-book process between the two parties there.”
On the job itself, Reams also noted that performance guarantees could be a thorn in builders’ sides.
For example, Reams said, if he were a client asking a design-builder to create a computer manufacturing facility for him, there could be a guarantee that the facility delivered 10 computers per hour when complete. These provisions, he said, can be present in the final design and construction stages of a progressive design-build contract.
Reams advised that builders push for these additions to be crystal clear.
“So when you draft up a performance guarantee, whatever it is, you want to make sure it's something that is measurable and achievable, not something that's kind of nebulous and reasonable minds could differ over whether that performance guarantee had been met or not,” Reams said.
Missouri’s new progressive design-build legislation goes into effect Friday.
