Finding Success in Design-Build in the Aftermath of Hurricane Katrina

Vol. 17 No. 3

By

Recover.  Rebuild.  Rebirth.  These three words have become synonymous with the City of New Orleans since Hurricane Katrina made landfall a decade ago.  The commentary regarding the City’s ability to recover has gone from:

We are about to lose New Orleans. Whether it is a conscious plan to let the city rot until no one is willing to move back or honest paralysis over difficult questions, the moment is upon us when a major American city will die, leaving nothing but a few shells for tourists to visit like a museum.[1]

to                                                                                                                   

New Orleans's economy is thriving, a new $1.1 billion hospital has opened with another being constructed, the school system has been overhauled, and the city is now protected against a 100-year storm with a $14.5 billion levee system that is far better than its predecessor.[2]

So, although “Katrina was a horrible nightmare [. . .] the reality is that for the construction industry, it’s been a blessing.”[3] 

An overwhelming percentage of construction projects in and around New Orleans in the past decade have been funded through either state or federal grant programs, including multiple healthcare facilities, schools, police and fire stations, and government office buildings. 

When a public entity and public funds are involved in a construction project in Louisiana, the Louisiana Public Works Act, commonly referred to as the Louisiana Public Bid Law, governs.  Generally, La. Rev. Stat. Ann. §38:2212 provides that public construction work valued above $150,000 (with a few exceptions) must be advertised and let to the “lowest responsible and responsive bidder” who bid according to the contract, plans, and specifications as advertised.[4]  Louisiana jurisprudence concerning the Public Works Act has held that it is “a prohibitory law, founded on public policy, which was enacted in the interest of the taxpaying public.”[5]  The Louisiana Fifth Circuit Court of Appeal has similarly found that this statute “serves the dual purposes of (1) eliminating fraud and favoritism and (2) securing free and unrestricted competition among bidders, thereby avoiding undue or excessive costs.”[6]  Other courts in Louisiana have found that the Public Works Act provision requiring advertising and the obtaining of competitive bids is to protect taxpaying citizens against contracts awarded through favoritism, possibly involving exorbitant and extortionate prices.[7]  As such, “[b]y specifically describing the conditions upon which the legislature will permit public work to be done on its behalf or on behalf of its political subdivisions, Louisiana’s Public Bid Law ensures a level playing field for all bidders.”[8] 

In practice, this means that public construction work is awarded to the lowest bidder who can provide security for the project without regard to actual qualifications.  The result is that public owners are left with projects that run over budget and behind schedule which, ultimately, cost the taxpayers significantly more than if the public owners were permitted to contract under methodologies available to private entities.  New Orleans City Councilman Jared Brossett, an advocate at the state level for the design-build statute that was enacted to address the problems that plagued public construction projects in New Orleans for years, continues to support the design-build methodology, especially with respect to school projects. 

“When we were rebuilding the city, it was imperative that we construct the best quality schools.  The easiest and most sensible way for us to ensure that the schools rebuilt after Hurricane Katrina were to the level the students of New Orleans deserve was to have the construction contract package under one umbrella.  This would allow the RSD and the OPSB to prevent the astronomical change orders that had become commonplace on projects let out through the Public Works Act and which the taxpayers end up of paying for.  Quite simply, the design-build methodology effectively controls change orders better than design-bid-build methodology currently mandated under the Louisiana Public Works Act.”[9]   

As the American Institute of Architects has indicated, “[d]esign-build has gained popularity in recent years in both the private and public sectors. The primary reason for this interest in design-build as a viable project delivery option is the owner’s desire for a single source of responsibility for design and construction.” [10]  Thus, the advantages of design-build include faster construction and delivery, slower cost and schedule growth, and the elimination of potential disputes between the designer and contractor. 

In the aftermath of Hurricane Katrina, the Recovery School District (“RSD”), in particular, was faced with the unenviably task of rebuilding an already disadvantaged public school system literally from the ground up.  After numerous attempts to rebuild the system pursuant to the design-bid-build methodology mandated by the Louisiana Public Bid Laws, the RSD began intense lobbying for the enactment of a special legislation authorizing its use of the design-build procurement method for its projects. 

Originally enacted in 2006, La. Rev. Stat. Ann. §38:2225.2.1 permitted public entities, including the RSD, to utilize the design-build methodology in the construction or repair of any public building or structure destroyed or damaged by Hurricane Katrina.[11]  In July of 2013, the exception created by this statute was set to expire.  At risk were ongoing projects of the RSD and the Orleans Parish School Board.  In particular, three RSD projects valued at approximately $150 million.[12]  What commenced that summer was a blitz campaign to ensure that, at least with respect to public projects to rebuild New Orleans’ schools, the design-build procurement method remained an option.  Alongside the RSD and with the support of the Design Build Institute of America, Councilmember (then state legislator) Brossett was successful in his efforts have La. Rev. Stat. Ann. §38:2225.2.1 amended to extend the time by which the design-build methodology could be utilized. 

At that time, Councilmember Brossett was quoted as saying, “Design-build is an effective procurement tool.  It remains viable to allow our infrastructure improvement to continue on the important recovery path that we have seen in Orleans Parish.”[13]  More recently, Councilmember Brossett added,

“As a city and a state, we needed this design-build statute.  We were behind the eight ball at that time in terms of using only the design-bid-build method for our public projects [. . .] Especially when your city is receiving federal funding from FEMA or other sources, it really is our duty to use the best method to ensure that that project is done on schedule with best quality and for the best price.  That is what design-build brought to New Orleans and Louisiana.”[14]

With the design-build statute as their guide, and after thorough discussion, the RSD issued a competitive Request for Qualifications to obtain a qualified design-builder who could assist it with restoring one of, if not the, most historically recognized learning institutions in New Orleans -- George Washington Carver High School. 

Broadmoor, LLC -- a New Orleans-based construction company with a successful design-build division -- submitted the winning proposal for the George Washington Carver High School project.  When questioned as to the benefits of design-build as a delivery model, Broadmoor’s President, Ryan Mouledous, stated: 

“Design-build is the procurement method that allows us to best serve our client.  Clearly, the most critical component to a successful design-build relationship is programmatic capture.  Once we understand what the client’s needs are, what their budget is and when they need the building, we can provide them with the data from which they can make informed decisions with their building, money and time.”[15]

After being awarded the contract for the George Washington Carver High School project, Broadmoor pinned its seasoned industry veteran, John Manion, as the project executive for this monumental undertaking.  Concerning the design-build methodology, in general, and the George Washington Carver High School project, in particular, Manion stated:

“Carver’s design build procurement model allowed our team to become a “problem solver” in lieu of a “problem finder” as seen in the typical contractor versus architect design-bid-build method.  As the design-build contractor, we have the opportunity to proactively design around constructability issues likely to be encountered by field operations.  This collaborative approach actually expedites design deliverables while enhancing the quality of the work, and ultimately ensures project schedule adherence.”[16]

Joshua Jenkins’ -- Broadmoor’s Senior Superintendent for the George Washington Carver High School project -- echoes Manion’s support for the design-build methodology.  

“Through the design-build procurement we have been able to interface more of the end-users needs with our design team.  In addition, we were able to collaborate with the design team on constructability challenges.  The unity of all of these functions is a tremendous benefit to everyone involved and provides a more pleased client.”[17]

Indeed, as a direct result of the design-build delivery method, Broadmoor and the RSD have been able to virtually eliminate cost overruns generated by owner directed change orders.  George Washington Carver High School is scheduled for substantial completion in the second quarter of 2016 in order for students to enroll and attend classes in the fall of 2016.   

The George Washington Carver High School project is just one example of a public design-build project in Louisiana that has been successfully implemented.  La. R.S. 38:2225.2.1 laid the ground work for other public entities in Louisiana to use design-build as a means to construct public works projects in areas damaged by Hurricane Katrina and Hurricane Rita.  The increasing interest in this methodology can be seen in other recent legislation.  La. Rev. Stat. Ann. §34:3523, originally enacted in June 2012, authorizes Louisiana ports to apply to participate in a pilot program to utilize the design-build methodology for various construction projects involving the transport, production storage or manufacturing of port cargos and where sixty percent or more of the construction cost estimate consists of engineered products and components, and the services, fabrication and installation thereof.[18]  Similarly, La. Rev. Stat. Ann. §48:250.2 authorizes the Louisiana Department of Transportation and Development, to “formulate, develop, and implement a program to combine the design and construction phases of a transportation facility or facilities, including but not limited to highways, interchanges, bridges, ferries on the Mississippi River, or tunnels into a single contract.”[19] 

It is clear that the successes experienced by public entities on post-Katrina public works projects constructed pursuant to the design-build methodology have gained attention.  Along with the City of New Orleans’ and State of Louisiana’s recovery, rebuilding and rebirth, the Louisiana Public Works Act has been, and continues to be, amended to allow for innovative project delivery methods that will best serve the public’s interests.

Endnotes 

[1] “Death of An American City,” New York Times, December 11, 2005.  http://www.nytimes.com/2005/12/11/opinion/death-of-an-american-city.html?_r=0 (last visited August 28, 2015)

[2]   “Obama to Face Reckoning in New Orleans over Katrina Promises,” Gardiner Harris, New York Times, August 26, 2015.  http://www.nytimes.com/2015/08/27/us/politics/obama-to-face-reckoning-in-new-orleans-over-katrina-promises.html (last visited August 28, 2014).

[3]  Defying Economy, New Orleans keeps building.  April 3, 2009, Richard Fausset.  http://articles.latimes.com/2009/apr/03/nation/na-rebuilding-new-orleans3 (last visited August 28, 2015).

[4]  La. Rev. Stat. Ann. §38:2212.A.(1).

[5]  Airline Construction Company, Inc. v. Ascension Parish School Board, 89-2697 (La. 10/22/90), 568 So. 2d 1029, 1032 (citing Haughton Elevator Division v. State of Louisiana through Division of Administration, 367 So. 2d 1161 (La. 1979); Boxwell v. Department of Highways, 203 La. 760, 14 So. 2d 627 (1943)).

[6] Alfredo Apolinar v. Professional Construction Services, 95-0746, p. 4 (La. 11/27/95), 663 So. 2d 17, 19 (citing Louisiana Associated General Contractors, Inc. et al. v. Calcasieu Parish School Board, 91-0106, 91-0109 (La. 6/21/1991), 586 So. 2d 1354, 1362.

[7]  A.M.E. Disaster Recovery Servs., Inc. v. St. John Baptist Parish Sch. Bd., 10-500, p. 6 (La.App. 5 Cir. 11/23/10), 54 So. 3d 719, 722, writ denied sub nom., A.M.E. Disaster Recovery Servs., Inc. v. St. John the Baptist Parish Sch. Bd., 2010-2831 (La. 2/11/11), 56 So. 3d 1005 (citing Haughton Elevator Division v. State, Through Division of Administration., 367 So. 2d 1161 (La. 1979); J.W. Rombach v. Parish of Jefferson, 95–829 (La.App. 5 Cir. 2/14/96), 670 So. 2d 1305, 1308–1309).

[8] Broadmoor v. Ernest N. Morial New Orleans Exhibition Hall Authority:  Misapplying the concept of waiver and disregarding the role of a court in judicial review of a public entity’s decision to award a public works contract,  51 Loy. L. Rev. 329, Kurt D. Duncan.  Summer 2005.

[9]  September 11, 2015, New Orleans City Councilman Jared Brossett conversation with Tamara J. Lindsay.

[10] See http://www.aia.org/aiaucmp/groups/aia/documents/pdf/aiab093116.pdf (lasted visited September 11, 2015).

[11]  La. Rev. Stat. Ann. 38:2225.2.1.A.(1).

[12]  Lawmakers delay vote on design-build extension, Robin Shannon, http://neworleanscitybusiness.com/blog/2013/05/16/lawmakers-delay-vote-on-design-build-extension/ (last visited September 11, 2015).

[13] New Orleans education projects could be hurt by failure of construction bill, lawmaker says, Lauren McGauhey, http://www.nola.com/politics/index.ssf/2013/04/rsd_new_orleans_design-build.htm l (last visited September 11, 2015).

[14] September 11, 2015, conversation with Tamara J. Lindsay.

[15] September 9, 2015, correspondence from Ryan Mouledous to Brian D. Grubb.

[16] September 9, 2015, correspondence from John Manion to Brian D. Grubb.

[17] September 9, 2015, correspondence from Joshua Jenkins to Brian D. Grubb.

[18] La. Rev. Stat. Ann. §34:3523.A.(1).

[19] La. Rev. Stat. Ann. §48:250.2.A. 


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