New Design-Build Law for School Construction Projects

For almost the last 90 years, the construction of school buildings in the state of Michigan has been subject to Public Act 306 of 1937 (the “School Building Construction Act”), which generally requires a school district to engage an independent licensed architect or professional engineer to prepare the plans and specifications for school buildings. Except for limited energy conservation improvement projects, the design-build construction delivery method – where the architect/engineer and construction contractor partner together to design and build the project under a single contractual arrangement with the owner – has not been allowed for any school building construction projects.

However, school districts will soon be afforded the option to utilize the design-build construction method for school-building construction projects when specific requirements are met. In July, the Michigan Legislature passed House Bill 4603, which will become effective  91 days after the final adjournment of the Michigan Legislature’s 2024 regular session (estimated to be March 2025).

House Bill 4603 will amend the School Building Construction Act to add the option, but not the requirement, to use a design-build construction delivery method for school building construction projects. If a design-build construction delivery method is not utilized, school districts must still follow the current independent design and construction process under the School Building Construction Act.

In order to utilize a design-build construction delivery method for school building construction under the amended School Building Construction Act, a school district must adhere to a defined process:

• Design-criteria Developer: A school district must first engage an independent design-criteria developer, which must be a Michigan-licensed architect or professional engineer not employed by the design-builder, to prepare the appropriate design-criteria package to be used by a school district to obtain proposals from design-builders for the desired construction project. The design-criteria package may contemplate either a sequential or a concurrent design/construction process.
• Design-Build Team: A school district must then seek proposals from design-builders and design-build teams to furnish the design and construction services for the construction project within the parameters of the design-criteria package.  A design-builder will typically be a construction manager who manages the work and subcontracts the majority of the construction to trade contractors. Unless the construction manager is also a licensed architectural or engineering firm, the construction manager will subcontract the design to an architectural or engineering firm, which is referred to as the design-build team.
• Lump Sum vs GMP: With the assistance of a school district’s design-criteria developer, a school district will need to decide whether to initially seek proposals from the design-builder/design-build team for an “all in” lump price for the entire project (“Lump Sum”), or a lump sum proposal for only the design fee plus a construction management fee based on a percent of cost method (“Cost Plus Fee”). Under the latter approach, once the design is sufficiently complete, the design-builder would seek competitive bids from contractors, and provide a guaranteed maximum price (“GMP”) proposal. To keep the project within budget before receiving a GMP, the construction manager should provide cost estimates at specific intervals of the design.
• Competitive Bidding: Whether seeking proposals on a Lump Sum or Cost Plus Fee with GMP basis (design-build delivery method) or under a traditional construction delivery method, competitive bidding requirements under Section 1267 of the Revised School Code, MCL 380.1267 need to be followed.
• Single-Phase Selection. Utilizing a single-phase selection process, and with the assistance of a school district’s design-criteria developer, a school district will need to award the project to a design-builder/design-build team based on price and qualification to determine the best value in a single procurement process.
• Oversight. A school district may continue to engage its independent design-criteria developer throughout the construction project to assist a school district with oversight of the design-build project, as well as provide construction inspection services for a school district.

While the design-build construction delivery method may not be suitable for all projects, for suitable projects it can be advantageous to increase the speed of the overall project timeline. If authorized by a school district, the design-builder can commence construction before the entire design is completed, which should result in a shorter overall time for design and construction. Another advantage in the design-build construction delivery method includes providing for a single source of responsibility. If a dispute arises on the project, the risk of both the design and construction defects falls on the design-builder, thereby removing the finger-pointing that can occur between the design professional and contractor(s).

It is extremely important that the design-criteria package contains specific details regarding the design criteria, standards, expectations, and outcomes that must be met by the design-builder. Failure to do so will likely result in proposals that cannot be evaluated on an “apples to apples” basis and a school district having difficulty determining which design-builder is best qualified to design the project in compliance with the myriad of laws applicable to school building construction, as well as which design-build proposal provides the best value to a school district based upon its overall project expectations and deliverables. Deficient design-criteria packages will also likely result in school districts having difficulty understanding the fees it will be charged and holding the selected design-builder to a school district’s design and quality expectations which may lead to cost increases and change orders.

As school districts consider this design-build construction method, they need to pay particular attention to many nuances and details that are required to ensure compliance with the law and a project with the desired finished product. Due to the nature in which school construction projects are funded and the laws that govern the design and construction process, the design-build process is not for all school construction projects and may result in a more uncertain and costly process. Engaging a well-qualified design-criteria developer will be imperative for success. For many school construction projects, continuing to adhere to the current process of engaging an independent licensed architect or professional engineer to prepare the plans and specifications for school buildings will likely be the most efficient and cost-effective process.

If you have any questions about the design-build construction method or other issues in connection with school construction, contact a member of Clark Hill’s Education Law or Construction Law teams.

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