In Onvia’s latest study, 10 Hotspots in Government Contracting for 2016, our market analysis team discovered that design-build contracts in the state, local and education (SLED) government market grew 18% in 2015 over 2014. Out of nearly 500 unique industry categories analyzed for the report, design-build bids & RFPs represent the #6 ranked area for growth in the SLED government contracting market.
Contract Consolidation Contributes to Design-Build Contract Growth
In an environment of tight budgets, agencies at all levels of government will seek greater efficiencies. One way that procurement officials find efficiencies that help save time and money is to consolidate the two phrases of infrastructure related projects (i.e. design and construction) into a single procurement. This contracting method is known as design-build.
Consolidation of infrastructure projects into a single procurement through design-build contracting eliminates the need for two different bidding cycles and reduces the risk of potential problems between designers and builders.
Various studies have shown the benefits of design-build procurements. For example, the Construction Industry Institute concluded that design-build projects result in:
- Improved cost performance
- More control of schedules
- Fewer change orders
- Better quality, with reduced work
The Design-Build Institute of America (DBIA) has also noted a shift in design-build contracts moving into the mainstream. They report that the share of major building projects using this method increased from nearly 30% in 2005 to nearly 40% in 2014.
Other research shows that government buyers are comparable to the private sector in terms of their likelihood to choose design-build contracting methods, an important note for firms pursuing both public and private sector infrastructure contracts.
Which Agencies Issue the Most Design-Build Contracts?
Onvia’s analysis shows that the largest share of government design-build opportunities are at the city level. City agencies accounted for 38% share of bids & RFPs analyzed for the report. Contractors shouldn’t ignore state agencies though, which represent at 25% share of design-build contracts.
Also interesting to note is that despite having the largest share of the contracts, city government design-build contract values average at only $11M, while special district design-build contracts average at nearly 5x that value $55M, followed closely by state agency contracts.
Firms can further narrow their pursuits by focusing their efforts on the top 5 states for issuing design-build contracts, highlighted in the heatmap below:\
How to Get Ahead of the Competition and Win More Design-Build Government Contracts
With the overall awarded contract value of SLED design-build contracts averaging $21.1 million, contractors have the opportunity to secure long-term, high-value clients by embedding their services in large agency design-build infrastructure projects for years to come.
Onvia recommends that construction service and supply firms who compete for construction projects, and architecture and engineering firms who compete for design projects, should consider finding qualified teaming partners to be able to diversify their contract outlook towards more lucrative design-build projects.
Furthermore, agencies planning these large infrastructure projects often discuss and secure the project budgets years before issuance of the competitive bid or RFP. The firms who track early mentions design-build in agency budgets and capital improvement plans can greatly increase their chance of winning more design-build contracts years in advance.
Design-Build Contracts isn’t the Only Growing Segment in Government Contracting
Watch the video below to learn about 9 other contracting hotspots that have seen notable growth rates in bids & RFPs over the last two years: