Design-build gaining popularity — and profits — for Kansas City engineering firms

A year ago, Midland, Texas, was in critical condition, parched by a prolonged drought that was aggravated by the increased demand of its growing population.

Two of the city’s big reservoirs had dried up, and a third was evaporating fast. A solution had to be found and quickly. Midland officials turned to the Kansas City-based team of Black & Veatch engineering and Garney Construction, and a fast-track approach to projects called design-build.

This summer, 20 million more gallons of water are flowing daily to Midland compared with last year, delivered by a $200 million project that included 44 wells, several pump stations, storage tanks and 67 miles of pipe.

“We delivered that project in under 12 months,” said Dean Oskvig, president and CEO of Black & Veatch Energy. “Done in a traditional design-bid fashion, that would have probably been a two-year undertaking.”

Design-build has been around since as far back as the 1980s, but its use has grown substantially in recent years as businesses and governments try to save money and get projects done faster.

It’s a streamlined approach that allows an owner to choose one entity to handle an entire project from design to execution as opposed to the usual approach of hiring a designer, preparing plans and then seeking bids from contractors.

“They don’t have to talk to multiple parties; they have a single point of responsibility,” said Lisa Washington, executive director of the Design-Build Institute of America in Washington.

“The other key element that’s making it popular is that the early integration of the entire team leads to cost savings, faster completion and higher quality.”

And it’s proving to be a lucrative line of business for local engineering firms.

Oskvig said design-build projects now made up almost $1.7 billion in annual revenue — more than half the revenues at Black & Veatch, the area’s largest engineering firm with 10,000 employees, 3,400 in Kansas City.

At Burns & McDonnell, Kansas City’s second-biggest engineering firm with more than 2,500 local employees, design-build revenues have grown from $50 million a decade ago to $900 million today, a 1,700 percent increase.

“Our clients were looking for someone to be their sole-source person who would be accountable for the success of their project,” said Greg Graves, chairman and CEO. “Burns & McDonnell not only accepts that responsibility, we look for it.”

A recent listing of the country’s top 100 design-build firms prepared by Engineering News-Record, a respected trade publication, listed Black & Veatch at ninth, up from 18th a year ago, and Burns & Mac at 20th, up from 22nd. J.E. Dunn Construction Co. was 64th, up from 76th, with $213.5 million in design-build revenues.

“It has been and continues to be one of the delivery models our clients demand and we offer,” said Dirk Schafer, Midwest region president at J.E. Dunn.

Schafer said some recent projects his firm has completed using the design-build approach are the H&R Block world headquarters in downtown Kansas City, the new Bloch School of Business at UMKC, and J.E. Dunn’s own new offices at 11th and Locust streets.

Oskvig said design-build had been part of Black & Veatch’s business model since the late 1980s, but it wasn’t until 2000 that it began to grow significantly. That’s when independent power companies began a big push to build gas-fired generators.

“They had a different approach than traditional, regulated utilities,” he said. “They were comfortable with turn-key or design-build projects.

“It’s when the same entity, maybe a joint venture, designs the infrastructure, buys the equipment and materials, and then constructs it.”

HNTB, another Kansas City engineering firm, is using the design-build approach on one of the area’s biggest transportation projects, the Johnson County Gateway project that’s overhauling the busy interchange of Interstates 35 and 435, and Kansas 10. The firm was hired by the Kansas Department of Transportation for what will ultimately be a more than $500 million project.

Scott Smith, HNTB director of corporate development, said the design-build approach can shave several years off a major public works project timetable.

“It wouldn’t be unusual for a project to take two or three years to design, and then four to five years of construction,” he said. “Design-build allows a three- to four-year process, easily cutting 50 percent of the total. It also allows the advantage of good prices.”

Missouri and Kansas officials, however, have been relatively cautious when it comes to the design-build approach to projects.

Though its use has been authorized in both states, so far Kansas has applied it only to the Johnson County Gateway project, and Missouri has limited it to three projects: the Kit Bond Bridge in Kansas City, an overhaul of Interstate 64 in St. Louis, and a statewide initiative to repair 554 bridges.

Richard Thomas, the director of state and local government affairs for the Design-Build Institute, said that despite its limited authorization in Missouri, state transportation officials have done significant work. He added that the University of Missouri-Kansas City and the city of Kansas City also have used the approach.

“Local governments in Missouri are starting to use it more,” he said. “Kansas City has used it with street projects, and Lee’s Summit just voted to authorize design-build. The biggest void in Missouri is it’s not authorized for school districts.

Though Kansas technically has broader authority to use design-build, Thomas said the practice had been slow catching on.

“I don’t know if it’s used as much as it could be, but we’re starting to see more,” he said.

Private companies, however, have been increasingly interested in using design-build, especially when faced with a tight deadline. Last week, Freightquote dedicated its new 208,000-square-foot headquarters in south Kansas City near Interstate 435 and State Line Road.

The four-story building, which will accommodate more than 1,200 employees, was designed and built in 290 days.

Oscar Healy, vice president of Opus Design Build, said his company was chosen for the $44 million development in mid-June 2012.

“We kicked off design work at that point, and by mid-July we were at the point of buying steel,” he said.

“We don’t need to know where the offices are going, just the floor plate design. If the CEO wants his office on the fourth floor or the second floor, it doesn’t matter when you’re ordering steel.

“A traditional design-bid-build would have you do all the designs, go to bid, get the bids back and then start construction. That’s where you save time. We scrunched an 18-month process down into 50 weeks.”

Last July, Ceva Biomune began a complete renovation of its research and development facility in Lenexa including a 33,000-square-foot expansion. The design-build project was completed by CRB in May.

“It was an impressive, aggressive timeline,” said Ryan Schroeder, Midwest regional leader for the Kansas City-based engineering firm. “We delivered it to them two months ahead of schedule.”

Schroeder said CRB has had a design-build group since the mid-1990s, but its primary customers in the pharmaceutical and animal health field were slow to warm to the idea.

“Nonetheless, we’ve always felt it was a perfect fit for our industry,” he said. “Every job is time sensitive. Over the last five years, we’ve seen a steady increase as our clients have become more open to it.”

The practice also has been embraced by architects, although with a caveat.

“We fully support design-build as an alternative delivery method. However, it needs to be based on qualifications and not just a monetary consideration,” said Sonya Jury, president of the Kansas City chapter of the American Institute of Architects.

Not every firm, engineering, construction or otherwise, is prepared to jump into the design-build world.

Graves, the chief executive at Burns & Mac, said companies have to be confident they have the expertise and financial backing to accept a project and deliver it profitably.

“It’s important to have a terrific risk-management program,” he said. “There’s certainly a downside to being in the design-build business.

“If you’re not careful, it’s the same things that can hurt any company — ego and greed. You need to be honest about the size and complexity of a project that you can take on.

“Every project goes through our risk management program so we make sure that if Burns & McDonnell is selected for the design-build contract it’s in the best interest of our client and our employees.”