Public agencies in California now have broad authority to utilize the progressive design-build contracting method, as a result of four bills adopted over the last two years. SB 706, along with SB 617, are the latest expansion of progressive design-build ("PDB") contracting authority for public agencies in California, after SB 991 and AB 1845 were adopted in 2022. Collectively, these bills now authorize PDB for a truly wide range of agencies and projects.

Effective January 1, 2024, SB 706 authorized cities, counties, cities and counties, and special districts to use the PDB process for up to 10 public works projects in excess of $5 million each, excluding projects on state-owned or state-operated facilities. SB 617, also effective January 1, 2024, provided the same authorization to transit agencies, including joint powers authorities and regional transportation agencies. These bills mirror SB 991 and AB 1845, which went into effect on January 1, 2023 and provided similar authorization to water agencies.

The wording of the statutes offers agencies flexibility in how the procurement process and contract terms are structured. However, agencies should be aware of the significant differences between traditional design-build and PDB.

PDB is a variation of the traditional design-build delivery method which differs in three primary ways:

1. A PDB contract is awarded at the earliest feasible stage of the project, usually immediately after a conceptual design is available, while a traditional design-build contract is awarded later – after a 30 percent bridge design is complete.
2. A PDB contract award does not include a construction price at the time of award, while a traditional design-build contract includes a lump sum price at the time of award.
3. A PDB contract requires that the parties negotiate the construction price on an "open book" basis over the initial phase of the project with contractual "off-ramp" provisions in the event that the parties don't come to agreement, while a traditional design-build contract has none of these features.

In short, PDB is one of the most collaborative forms of contracting available to California public agencies. It creates significant flexibility for an agency, but also significant challenges in negotiating the construction price, schedule, and final design.

Agencies should educate their internal and external stakeholders that the construction price will not be known at the time of contract award. Furthermore, the design and preconstruction phase will require significant management efforts by the agency. Moreover, the negotiation of the construction price can be very challenging due to the fact that the agency has limited leverage in that negotiation.

In our experience, there are several approaches that maximize an agency’s chances for a successful outcome on a PDB project. We recommend including a robust off-ramp clause that provides the agency with the right to require the design-builder to complete the 100 percent construction documents when the agency takes the off-ramp. In addition, the agreement should include a clear agency budget for the project and an obligation for the design-builder to design to that budget. Finally, we suggest ensuring that the agency has a project team open to collaborative contracting, implementing practical and creative solutions, and working with the design-builder to focus on the best outcome for the project.

PDB can be a beneficial project delivery method for some projects if implemented in a thoughtful manner. We recommend that agencies carefully evaluate whether PDB is the best approach for their project by comparing it to other available delivery methods.