MM Design, Build & Maintain contracts

construction contract adminstration

Design, Build, Maintain (& Operate) (DBM (O)) is an integrated contract form where the design, construction, maintenance, and in case of an O, also the operation (for example facility services) are performed by one contractor.

Contracts based on Engineering & Construct (E&C) and Design & Construct (D&C) optimize the design and realization of a project. Separate contracts are then concluded for maintenance. The client is therefore not always best off. The savings on construction costs can be lost through increased maintenance costs. This can be prevented by using DBM (O).

 

Investment consideration

Chain integration in the form of a DBM (O) contract enables the contractor to make a (financial) life cycle assessment and act accordingly. Construction, management, and maintenance costs are included in the investment consideration. The ultimate goal is to come up with an integrated and sustainable solution that fits in well with the needs of the end user. For example, construction costs may be higher, for example, because a more sustainable (more expensive) material is used, while maintenance costs may be lower because the material used requires less maintenance or is less energy. An important element in the consideration is the calculation of the total cost of life (life cycle costs) of the work or the Total Cost of Ownership (TCO).

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Advantages and disadvantages of the DBM (O) contract

Advantages for the client are:

  • Focus and control on the life of the infrastructure or building;
  • One point of contact, no unnecessary coordination and coordination, so that interface risks are limited;
  • The contractor is given scope to implement optimizations throughout the chain, resulting in a possibly better solution for the end user;
  • Clear risk distribution between client and contractor;
  • A fixed fee for maintenance for the duration of the contract, in any case for the operating period;
  • This type of contract is less complex and relatively easier to set up and organize than a DBFM (O) contract;
  • A possible additional advantage of a long-term contract is that the maintenance budget is no longer subject to politics, which means that there is price security.
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However, a DBM (O) also has disadvantages:

  • Limited flexibility to implement scope changes;
  • Higher transaction costs when tendering than when tendering more traditional contracts. This is partly due to the limited availability of procurement and contract documents as standard;
  • Guiding the client to combine investment and operation requires a different way of working, from testing partial products to directing the process; Continuity of performance/services cannot be taken for granted, it requires attention;
  • Merging the investment and the long-term maintenance budget is sometimes difficult, despite the fact that the added value in the realization costs offered by the contractor pays for itself in lower maintenance costs in the future.
  • Compared to DBFM (O), the banks’ performance incentive in terms of financing is lacking.
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Application DBM (O)

Taking into account the advantages and disadvantages, the application of a DBM or a DB MO is obvious when one or more of the following preconditions apply:

  • The public client wants and can manage life cycle costs;
  • The public client is able to define sustainability ambitions;
  • The client cannot control on life cycle costs, but wants to reveal implementation errors within the contract duration of a DBM contract;
  • The client can and wants to enter into a relatively stable long-term maintenance and operation contract with price certainty;
  • The client wants to use the creativity and knowledge of the market for better-integrated solutions for the user;
  • When a project is complex and the client wants a risk distribution and risk transfer appropriate to the expertise and responsibilities of the intended contractor;
  • The added value of the private financier (financial incentives from the bank) does not outweigh the higher financing costs for the client.