MoDOT grapples with design-build challenges

Design-build can be either designer-led or contractor-led, or it can be a joint venture of contractor and designer, which provides for a single source of responsibility to the owner. Design-build also allows fast-tracking of the project by allowing construction to commence prior to completion of the full design.

In the past 10 years, design-build has become increasingly popular in the private sector and on certain federal government projects, particularly prisons and roads.

The state of Missouri decided to get on the design-build bandwagon in 2002 when legislators passed Missouri Statute 227.107, which allowed the Missouri Department of Transportation to utilize design-build on three highway design-build projects. Two of those contracts have been selected already, and last fall, MoDOT announced its intention for the third project, the Safe and Sound Bridge Improvement Plan.

Unquestionably MoDOT’s most ambitious project ever, the Safe and Sound Bridge Improvement Plan seeks to utilize design-build procurement under a single contract for the repair or replacement of 800 bridges statewide, including five in Greene County and one in Christian County. The plan also requires the design-build team to provide financing for the endeavor and to continue with maintenance of all 800 bridges until 2038. This long-term warranty is intended to assure quality in bridge designs. Five teams initially expressed interest in the project. Of the four pre-qualified teams in January, only two remain involved with bidding of the project – Missouri Bridge Partners and Team United.

Bruised bridges

Missouri has 10,224 bridges in its state highway system, the seventh-largest total out of all 50 states. Of these bridges, 1,046 have been identified as structurally deficient with 350 close to being shut down. The cost to replace or repair, finance and maintain 800 of the worst bridges is estimated between $400 million and $600 million.

This is an innovative approach to addressing bridge needs – awarding a single contract to design, build, finance and maintain more than 800 bridges at 800 different work sites, involving 800 different start dates, 800 different projects and 800 different schedules. Final proposals from the design-build teams were initially due June 20, with the single contract to be awarded in late July. In a July 5 news release, however, MoDOT announced that the project has been delayed until “this fall” but did not announce new dates for bids and awarding of the project.

Performance bonds delays

The delay is due to a concern that state law requires performance bonds in the full amount, and for the full duration, of this 30-year project.

Normally, bonds are only required during construction of a public works project. Since this single design-build contract also requires maintenance of the bridges for at least 25 years, there are very few – if any – contractors in the nation who can tie up $600 million of bonding for several decades.

“Performance bonds in the $400 (million) to $600 million range carried for 30 years are simply not available in the surety market,” Safe and Sound Project Director Ken Warbritton said in the release. “The lenders who will be financing the successful team want clarification of this issue before they make a commitment.”

Performance bonds are designed to protect taxpayers if a contractor abandons a project or defaults after work is started. The bonding company, or surety, is required to step into the shoes of the contractor and complete the work for the contracted amount or pay another contractor to complete the work, even if it costs the surety more money.

One possible solution which would allow this project to go forward would be the passage of legislation specifically for this one bonded contract, which would limit the amount of the bonds to the dollar value of the active bridge construction projects, not the entire contract.

Another possible solution may involve separating the maintenance portion of this contract into a separate contract, thus limiting the duration of the performance bond under the construction phase to five years. There is precedent in other states for awarding separate contracts for design-build and for the warranty, even to different contractors. The state of Missouri and the two remaining design-build teams have undoubtedly spent millions of dollars to this point.

Ten percent of the state’s bridges are in sore need of repair or replacement. The governor will likely call a special session later this year. Expect the legislature to find a way to protect taxpayers with appropriate bonds while still allowing this contract to move forward.

Michael Textor is a shareholder with Shughart, Thomson & Kilroy, PC. He focuses his practice on construction law. He may be contacted at mtextor@stklaw.com.