Public Procurement Using the Design & Build Method

From Cathedrals to Infrastructure: A Return to Comprehensive Responsibility

Historically, this concept reflects the model used, for example, in the construction of cathedrals, where a central figure (the architect or master builder) bore complete responsibility for the entire process, including handling organizational issues, defects, and any potential delays.

The key mechanism of the D&B method is the combination of engineering, design, and construction work into a single contract. This unification is of strategic importance: it allows the planning and construction phases to overlap, thereby significantly reducing the overall project completion time. 

Moreover, it aligns the incentives of suppliers—designers and construction companies—who work within a single consortium or for a single contractor. This minimizes the traditional room for disputes where, in the DBB model, responsibility is shifted back and forth between the designer and the construction company.

In the Czech Republic, the D&B method is becoming increasingly discussed, especially in connection with large transport infrastructure projects. The State Fund for Transport Infrastructure (SFDI) has even commissioned a specific methodology for this form of procurement, which underscores the growing relevance of this model under Act No. 134/2016 Coll., on Public Procurement (PPA).

Strategic Reasons for Choosing D&B

For public contracting authorities, D&B is attractive primarily due to the transfer of responsibility and risk management. The subject of the work in D&B contracts is defined mainly by functional and performance requirements linked to the purpose of the contract, rather than by strict bills of quantities. This approach reduces the need to address every minor project change with a contract amendment.

D&B also allows the contracting authority to consider factors related to the entire life cycle of the subject of performance when evaluating bids. In addition to the purchase price, other operating costs and environmental impacts can be taken into account, leading to more economically advantageous performance overall. This method is particularly suitable for complex projects because it allows for an ideal degree of innovation. 

The contracting authority gives the Design-Builder freedom in the design to optimize construction methods and materials, in exchange for the Design-Builder bearing the risk of design errors. Legal support is crucial here for correctly setting functional objectives and evaluation criteria that effectively reflect these innovations.

Another important topic in public procurement is the modification of obligations during their performance. Watch our video where we explain what is permitted in this area and what risks can arise from incorrect procedures.

A fundamental shift in project management brought by D&B lies in the relocation of legal disputes. While in the traditional DBB model, legal disputes often revolve around the joint and several liability of the contractor and the designer (whether the contractor should have detected a defect in the documentation with due care under Section 2630 of the Civil Code), in D&B, the contractor is fully responsible for the design. 

The focus of the legal battle thus shifts to the correct allocation of risks (e.g., geology, permitting) in the tender documentation and their management through contractual mechanisms (claims). You can learn more about the issue of permitting processes in the article when it is necessary to obtain a building permit before drawing down a loan. Legal support therefore focuses on proactive risk management in the preparatory phase, rather than on reactive attribution of defects.

Legal Regulation and the Limits of the PPA: Constant Supervision by the ÚOHS

Public procurement in the Czech Republic is a strictly formalized process, regulated primarily by Act No. 134/2016 Coll., on Public Procurement (PPA). The procedure of the contracting authority, whether for an above-the-limit D&B construction contract or a small-scale contract, must always adhere to the fundamental principles of transparency, proportionality, equal treatment, and non-discrimination.

Fundamental Principles and the Role of the ÚOHS in the D&B Concept

Supervision of compliance with the PPA is carried out by the Office for the Protection of Competition (ÚOHS). The possibility of the ÚOHS imposing an administrative penalty or annulling the entire procurement procedure represents the greatest legal risk for both contracting authorities and suppliers. It is precisely in the complex environment of D&B contracts that adherence to transparency is critical.

If a contracting authority decides to exclude a participant from the procurement procedure (e.g., for failing to meet sophisticated qualifications specific to D&B), the reasons for the exclusion must be demonstrably established and recorded in specific documents that form part of the procurement procedure documentation. A failure in documentation and transparency in this case is a direct trigger for the risk of contract cancellation and financial loss.

The Critical Phase: Correctly Setting Up the Tender Documentation

D&B projects require exceptionally precise preparation of the tender documentation (ZD). Since this method is less common than the traditional DBB, it is crucial not only to define functional objectives but also to clearly communicate the fundamental differences and specify the contracting authority's expectations to the market.

To achieve legal soundness and prevent challenges from suppliers or the ÚOHS, the effective use of the preliminary market consultation (PMC) instrument is recommended. PMC allows the contracting authority to get market feedback and refine expectations before formally announcing the tender. 

This active communication and legal analysis of the tender documentation is necessary to defend the requirements in subsequent proceedings, as the ÚOHS actively ensures that qualification requirements are not discriminatory and do not contradict market reality. Thus, legal analysis becomes a safeguard against ÚOHS sanctions, ensuring that technical qualifications are defensible in relation to the actual complexity of the D&B project.

Contractual Architecture: The Role of FIDIC and Claims Management

In international and Czech construction practice, the conditions of the International Federation of Consulting Engineers (FIDIC) form the backbone of contractual relationships in D&B projects. Knowledge of these standards is essential for the success of a D&B project and, as confirmed by the decision-making practice of the ÚOHS, it is also becoming a relevant qualification criterion.

The FIDIC Yellow Book as a De Facto Standard

For awarding contracts using the Design & Build method, the so-called FIDIC Yellow Book is primarily used, which is designed for contracts where the contractor provides both the design and the build. There are other FIDIC standards (e.g., the Red Book for measured contracts, the White Book for regulating relationships with designers and consultants).

Claims and Variations: Measuring Qualification and Risks

In its decision-making practice, the ÚOHS has confirmed that the requirement to demonstrate the experience of key personnel in project management according to the FIDIC standard is relevant and consistent with the goal of preventing delays. This particularly applies to knowledge of the instruments of so-called claims and variations (changes), which are specific mechanisms for resolving unforeseen events, financial compensation, and changes in the scope of work.

The Office agreed that these instruments are so specific in the context of Czech contract law that experience with them cannot be replaced by any other contract for work, even if it were another D&B project that does not apply FIDIC standards. Knowledge of the claims mechanism thus demonstrates the Design-Builder's ability to manage the contractual relationship and minimize the risk of dispute escalation. 

This makes FIDIC a de facto specific body of contract law within the Czech construction sector. Moreover, the ÚOHS has shown flexibility by recognizing experience with the FIDIC Red Book as proof of knowledge of claims and variations, as these general instruments appear across the contractual standards.

Risk of Contract Modification: Particular Conditions

A major legal risk in D&B projects often arises not from the FIDIC standard itself, but from its modifications, implemented through the so-called Particular Conditions. These modifications often attempt to transfer all risks that would otherwise be borne by the contracting authority (e.g., unforeseeable geology, errors in the tender specifications) back to the Design-Builder. 

Applicants in proceedings before the ÚOHS repeatedly point out that the Particular Conditions can lead to a complete negation of the fundamental FIDIC instruments. Furthermore, contracting authorities often stipulate high contractual penalties for delays in completing the work (e.g., ranging from CZK 50,000 to CZK 200,000 for each day of delay). 

A legal analysis of the Particular Conditions is therefore critical for contractors to avoid signing a contract with toxic clauses that unreasonably increase their liability beyond the normal allocation of risks. Knowledge of FIDIC standards is thus just a starting point; expertise in detecting and eliminating hidden risks in the Particular Conditions is key.

Contractual Risks and FIDIC Standards

Concentration of Responsibility: The Biggest D&B Risk for Suppliers

While for the contracting authority, the D&B method represents a transfer of comprehensive risk to a single contractor, for the Design-Builder, it means an extreme concentration of legal and financial responsibility.

Full Responsibility for Design and Execution

In D&B, the contractor is responsible for preparing the project documentation and for the execution itself. This automatically eliminates the possibility, which exists in DBB, of arguing that a defect in the work was caused by faulty project documentation supplied by the contracting authority. 

The contractor loses the ability to defend themselves with the case law of the Supreme Court, which in the traditional model requires the contractor to act with due care and detect only discoverable defects in the project documentation. In D&B, responsibility for the design is full and irrevocable.

Risk Transfer and Pricing

D&B practice brings specific and potentially costly risks that require close attention, such as problems related to subsoil conditions or lengthy permitting processes.

Incorrect legal allocation of risks has a direct financial impact. If the contracting authority allocates risks that the Design-Builder cannot control, there is a high probability that the contractor will factor these risks into the total price for the work in the form of a financial reserve, thus making the project more expensive. 

Legal expertise that helps the contracting authority to correctly and proportionately allocate risks (e.g., by setting precise limits of responsibility for geological surveys) thus serves as a mechanism for optimizing the overall project costs, as it reduces the Design-Builder's uncertainty and leads to lower bid prices.

Critical Phases of the Procurement Procedure and ÚOHS Case Studies

Besides risk allocation in the preparatory phase, the subsequent phases of the procurement procedure and contract performance are also key, where the risk of contract cancellation and financial penalties looms.Managing Obligation Changes: Additional Works and Legislative Limits

The greatest risk after concluding the contract is the need for a change in obligation (variation) that would exceed the statutory limits set by the PPA and be classified as a substantial modification of the obligation. The ÚOHS has a strict practice in this area, especially regarding additional construction works. 

These can be awarded in a negotiated procedure without publication only if cumulative conditions are met, primarily not exceeding 20% of the price of the original public contract (for construction works). A critical finding by the ÚOHS is the strict prohibition of any "deductions" of the financial value of omitted works from the financial value of additional works for the purpose of reducing the total volume of the change. 

Only the total material scope and the total financial value of the increase are monitored. In a case where the total volume of additional works exceeded 20% of the price of the original contract, the procedure was found to be in violation of the law. Although D&B is intended to reduce the risk of unexpected additional expenses, the strict interpretation of the limits by the ÚOHS means that any necessary change must be handled with maximum legal prudence to avoid jeopardizing the entire contract.

 Risks During Execution and Contract Changes

Qualification and Defense of an Abnormally Low Tender Price (ALTP)

For suppliers in D&B contracts, the bid preparation phase is critical; the bid must be flawless and fully compliant with the contracting authority's requirements. The qualification criteria must be set proportionately and be directly related to the subject of the public contract, as inappropriate settings are the most common means of discrimination.

It is important to strategically prepare a defense of the tender price, especially if it is assessed as abnormally low. In D&B, where the contractor assumes more risks, the defense of an ALTP must be robust and convincing to prevent unjustified exclusion.

Legal support is essential here for a detailed review of the bid and analysis of the tender documentation before submission, including the timely filing of objections against discriminatory conditions.

ARROWS: Your Strategic Partner for Design & Build Projects

The complexity and high concentration of legal risks in the Design & Build method require a partnership with a law firm that can strategically connect construction law, the regulatory law of public procurement, and the specifics of FIDIC contractual standards.

Ensuring the Legal Soundness of the Process and Documentation

The ARROWS law firm provides comprehensive legal services for both contracting authorities and suppliers. For public contracting authorities, preventing challenges is paramount. ARROWS assists with the preparation of complete and legally sound tender documentation, setting reasonable and defensible qualification criteria, and defining functional requirements. This minimizes the risk of fines from the ÚOHS and contract cancellation.

For suppliers, preparing a flawless bid is key. ARROWS conducts a detailed analysis of the tender documentation, identifies risky clauses in the FIDIC Particular Conditions, and helps prepare a bid with minimal formal errors. We also ensure the preparation of a robust justification for an ALTP that will withstand the strict scrutiny of the contracting authority and the ÚOHS.

Strategic Management of Contractual Disputes and Changes

During the execution of a D&B project, expert support is critical in managing claims. ARROWS provides advice on asserting and defending claims for time and money, thereby effectively managing operational and strategic risks.

Legal support is also crucial when dealing with variations and additional works, where the strict limits of the PPA (20%) require a precise assessment of contract amendments. The law firm ensures that any changes to the obligation comply with the rules for substantial modifications of the obligation under Section 222 of the PPA, thus minimizing the risk of the entire contract being challenged and cancelled.

In the event of disputes, ARROWS provides comprehensive representation in objection proceedings before the contracting authority and in subsequent proceedings before the ÚOHS and administrative courts.

Global Dimension: ARROWS International for Complex Projects

Given that large infrastructure D&B projects often involve international consortia, foreign subcontractors, or are financed by EU funds, an international reach is key. The ARROWS law firm provides legal services in the Czech Republic, the EU, Asia, Africa, and the Americas.

This global network is important for clients involved in cross-border public procurement. Considering that the regulation of public procurement in the Czech Republic is based on the requirements of EU directives, ARROWS provides support that is consistent with international standards and is capable of resolving legal issues in relation to foreign partners and jurisdictions.

Collaboration is an Investment in Predictability

The Design & Build method offers public contracting authorities and suppliers speed, efficiency, and a comprehensive transfer of responsibility, which is essential in 21st-century projects. However, this efficiency comes at the cost of a high concentration of legal risks and constant supervision by the ÚOHS.

The success of a D&B project depends not only on engineering prowess but primarily on first-class legal preparation and strategic risk management. Incorrect risk allocation (geology, permits) leads to overpriced bids, and a formal error in setting qualifications or managing obligation changes (additional works) can lead to the cancellation of an entire billion-crown contract.

The ARROWS law firm offers expertise that connects technical specifications with the rigid legal framework of the PPA and FIDIC contractual standards. Thanks to its deep knowledge, ARROWS can turn complex regulatory rules into a strategic advantage for its clients. 

Professional legal support at every stage of a D&B project—from the precise preparation of Tender Documentation and defining risk allocation, through the defense of qualifications and ALTP, to the management of claims and variations during performance—is an investment in predictability and the minimization of costly disputes for both contracting authorities and suppliers.