Sept. 24, 2003
As government agencies are forced to do "more
with less," one local architectural firm sees privatization
playing a bigger role in the public development process -- a
direction that can enhance public benefit while helping
agencies keep costs in check.
"Historically, public sector
projects have been driven by a contract process focused on
the lowest responsible bidder," said James Robbins, design
principal of Robbins Jorgensen Christopher, a San
Diego architectural firm which has served both public and
private sector clients. "However, as the private sector has
recognized for some time, the lowest bid doesn't necessarily
assure value or quality. Ultimately, this type of bid-driven
process can end up costing more in the long run."
Fortunately, Robbins notes that times are changing.
"Budget crises and tougher economic times challenge everyone
to work smarter and think more creatively," he said. "The
bottom line is that developers are looking for tenants, and
government agencies are looking for capital facilities
investment dollars. Whereas in the past, these two entities
engaged in their own version of the 'Hatfields and McCoys,'
today they are learning to love each other. Government
agencies at every level are reviewing the manner in which
they develop, design and construct capital facilities."
The traditional design/bid model involves appropriations
of tax revenues or public bond financing to pay for the
project. An architect is hired and, when the design is
complete, it is issued for competitive bidding among general
contractors. The construction contract is then awarded to
the low responsible bidder.
"This model was adopted primarily to ensure fairness in
contract award practices and to prevent cronyism, kickbacks
and 'Tammany Hall' style corruption," Robbins said. "The
architect develops plans that detail every shift in plane
and every change in material, and they do this largely
without the benefit of advice from the contractors and
subcontractors that will actually perform the work.
Estimates are made without the benefit of real-world bids
since the designers and builders have little interaction
prior to the time when decisions are made. This not only
results in construction cost over-runs, but often pits
architects and contractors against each other with the
agency owner left to sort out contract disputes."
The delivery time of these projects is longer than that
of private projects since design must by completed before
construction begins. Additionally, annual budget shortfalls
often result in the delay of needed facilities (or the need
to adopt cumbersome bond programs to pay for them).
Finally, because design/bid contracts are always awarded
to the lowest responsible bidder, this breeds a process that
is cost driven rather than quality driven.
This public sector process is in sharp contrast to the
private sector. Private sector owners typically hire
architects and contractors to work together as a team to
maximize value within a specific budget limit. Value is
further enhanced by fast track decision-making that allows
design and construction phases to overlap. For example,
grading and foundation plans can often be constructed while
detailed architectural plans are still being developed.
"These plans are usually better coordinated since
architects and engineers can work directly with builders who
are more familiar with the local availability and relative
cost of various building products and assemblies," Robbins
Battle-fatigued owners, architects and contractors have
all concluded that there must be a better way. In this case,
"reinventing government" has meant adopting public
procurement processes that more nearly approximate private
enterprise. While struggling to maintain assurances that
selection procedures will be transparent and fair, public
owners are increasingly adopting procedures that pre-qualify
bidders, reward good performance and encourage architects
and contractors to work together as a design-build team.
"Increasingly, contracts are being awarded based upon the
best value within a specified budget limitation rather than
lowest cost," Robbins said. "The determination of best value
necessarily requires a subjective assessment of various
offers, but that assessment is structured and formal,
usually awarding design points according to written
In recent years, the U.S. Navy has used design-build
strategies to reduce its risk and speed up project delivery.
At the Marine Combat Center in Twenty Nine Palms, the Navy
staged a design-build competition and selected a team based
on the concept of "best value" rather than lower cost.
Architects Robbins Jorgensen Christopher, along with
Soltek Pacific, a general contractor, designed and built
a $14.7 million bachelor quarters in 12 months, with no
change orders, cutting the normal delivery schedule in half.
The $14.7 million Bachelor Quarters, P-495,
at the Twenty Nine Palms Marine Corps Base was designed and
built in a year by the design-build team of Robbins
Jorgensen Christopher and Soltek Pacific.
The Navy has further leveraged the advantages of
design-build processes by limiting competition to
pre-qualified teams based upon evaluations of prior
performance. Construction projects are often bundled
together into Multiple Award Construction Contracts (MACC),
and only those contractors that consistently earn
outstanding performance evaluations are allowed to
"MACC contracts provide a strong incentive for customer
satisfaction, since they can range as high as $500 million,"
Robbins said. "The MACC concept allows the Navy to award
outstanding performance with future commissions and to
exclude teams that perform poorly."
Robbins Jorgensen Christopher and Soltek Pacific were
subsequently awarded two more projects worth about $38
million at Twenty Nine Palms.
In an even bolder move, the Navy has begun to hire
design-build teams based solely on an evaluation of
qualifications. These teams are directed to work
shoulder-to-shoulder with their customers to design to a
specific, pre-determined budget. Utilizing open book
accounting practices, the Navy's customers are enlisted as
full partners in the design process, prioritizing their
needs on the basis of project component costs.
Robbins reports that many public agency/owners are
retreating from the facility development business
altogether, concentrating more on their core service mission
and outsourcing development to private sector entities. At
local, state and federal levels, public agencies are
developing public/private partnerships to develop new
These partnerships can take the form of build-to-suit
projects for public agencies, or they may involve
ground-leases to private entities in exchange for
non-traditional revenue sources. These partnerships may
involve private development financing as well. Governments
can frequently provide a revenue stream over time, and they
recognize that private enterprise can do the rest.
John Turpit, director of corporate and developer services
at Robbins Jorgensen Christopher, sees a growing role for
private enterprise in public facilities. Turpit cited the
example of the San Diego County Water Authority headquarters
in Kearny Mesa, a 66,000-square-foot facility that was
recently developed by Lennar for $135 per square
foot. Working with Turpit and Lennar, the Water Authority
designed, built and ultimately purchased the building,
taking possession when the project was completed.
"By letting the private sector carry the ball, we were
able to get the building we wanted at a pre-negotiated
price, on the date we requested," said Maureen Stapleton,
general manager with the San Diego County Water Authority.
"This allowed us to maximize the public benefit while
minimizing the Water Authority's risk."
Robbins Jorgensen Christopher believes that the trend
toward privatization through public/private partnerships is
the wave of the future. "Governmental agencies everywhere
are under pressure to do more with less," he said. "The
increasing use of private financing and development
expertise is inevitable. The good news is, that in addition
to speeding the delivery of much needed public facilities,
the end product is of even higher quality and better meets
the public need for the long-term."
Grove is president of The Grove Agency Inc.