Under the “design-build” construction method, the property owner enters into one contract with a single entity that provides the owner with both design and construction services. The advantages of “design-build” include faster construction and delivery, slower cost and schedule growth, and the elimination of potential disputes between the designer and contractor. Due to these advantages, the design-build method is becoming increasingly more common on private construction projects.
However, with respect to state-owned public construction projects, the design-build construction method is heavily disfavored—if not completely prohibited—under Louisiana state law. Two recent Attorney General opinions serve to reiterate that the Louisiana Public Bid Law continues to be driven instead by the traditional “design-bid-build” project delivery method. “Design-bid-build” is the traditional method of project delivery whereby the public entity/owner enters into two separate contracts, one with the design professional and one with the contractor. (1)
Under the Louisiana Public Bid Law, construction contracts for “public works” (2) are generally awarded to the contractor who is the “lowest responsible and responsive bidder,” (3) while the design professional is selected “on the basis of competence and qualifications for a fair and reasonable price.” (4) The purpose of competitive bidding in the public construction arena is to protect taxpaying citizens “against contracts of public officials entered into because of favoritism and involving exorbitant and extortionate prices.” (5) Contrary to the objective selection process involved in competitive bidding, the “design-build” method of project delivery allows for subjective considerations based on qualifications and/or performance.
The 2014 Louisiana Legislative Session passed a new statute providing for the “construction management at risk” (CMAR) project delivery method. (6) The advantages of CMAR over the traditional “design-bid-build” are that the public entity/owner is able to select the contractor based on more than price and that the design professional and contractor are able to work together during the design phase to minimize design disputes. The benefits of CMAR are limited in nature because La. R.S. 38:2225.2.4 only applies to projects worth $25 million or more. More importantly, CMAR still does not provide all of the advantages of “design-build” because the public entity/owner is still required to enter into separate contracts with the design professional and contractor.
Two recent Louisiana Attorney General Opinions discuss the lack of authority of a public entity to enter a “design-build” contract for a public work under the Louisiana Public Bid Law. Specifically, the two Opinions discuss La. R.S. 38:2225.2, which states:
Neither the state nor any local entity, unless specifically authorized by law, may execute any agreement for the purchase of unimproved property which contains provisions related to the successful design and construction of a construction project prior to the transfer of title to the state or local entity.
In Louisiana Attorney General Opinion No. 13-0182 (Nov. 26, 2013), the Attorney General stated that the Houma-Terrebone Airport Commission (H-TAC) is a public entity subject to the Louisiana Public Bid Law, which requires the “design-bid-build” method for projects exceeding $150,000. The Attorney General interpreted La. R.S. 38:2225.2 as expressly providing that “unless specifically authorized by law, a public entity has no authority to enter into a design-build contract.” Therefore, the Attorney General’s opinion was that the H-TAC could not enter a design-build contract for the construction of its capital improvement project because it had no special statutory authorization.
In Louisiana Attorney General Opinion No. 14-0033 (Mar. 31, 2014), the Attorney General was asked to state his opinion on whether the Orleans Judicial District Court Building Commission (Commission) could enter a design-build contract for the construction of its new courthouse. The Commission, like the judiciary, is a “public entity” subject to the Louisiana Public Bid Law. As in Op. No. 13-0182, the Attorney General interpreted La. R.S. 38:2212 to provide that the Commission could not enter a design-build contract because it had no special statutory authority to do so. In addition, the Attorney General found that the Commission acted contrary to the Louisiana Public Bid Law by hiring a consultant pursuant to a Request for Qualifications, by which the consultant would be expected to provide additional services including architectural design and construction. Therefore, the Attorney General stated that the Commission must contract with separate entities to provide the design and construction services, pursuant to the Public Bid Law.
As interpreted by the Attorney General, La. R.S. 38:2225.2 expressly prohibits the use of “design-build” contracts for the construction of “public works” unless specifically authorized by statute. Currently, Louisiana provides specific statutory authorization for “design-build” contracts to the Department of Transportation and Development pursuant to La. R.S. 250.2, to Port Commissions pursuant to a pilot program established under La. R.S. 34:3523, and to certain New Orleans public entities pursuant to La. R.S. 38:2225.2.1 “in the construction or repair of any public building or structure which has been destroyed or damaged by Hurricane Katrina, Hurricane Rita, or both or any public building or structure to be constructed or repaired to meet a homeland security or criminal justice need pursuant to a hurricane recovery plan.” (7) In conclusion, the majority of projects under the Louisiana Public Bid Law continue to be contracted under the traditional, competitive bidding process of “design-bid-build,” and the possibility of “design-build” seems to be a distant reality.
(1) DBIA: Design-Build Institute of America, What is Design-Build?, available at http://www.dbia.org/about/Pages/What-is-Design-Build.aspx.
(2) La. R.S. 38:2211(A)(12): “‘Public work’ means the erection, construction, alteration, improvement, or repair of any public facility or immovable property owned, used, or leased by a public entity.”
(3) La. R.S. 38:2212(A).
(4) La. R.S. 38:2318.1(A).
(5) La. Atty. Gen. Op. No. 13-0182 (Nov. 26, 2013), 2013 WL 6410534.
(6) La. R.S. 38:2225.2.4.
(7) La. R.S. 38:2225.2.1(A)(1).