Trends, Takeaways and the Future of Design-Build: Unpacking the New FMI Study

In this episode of the Design-Build Delivers Podcast, we chat with Emily Beardall from FMI Corporation to explore what she and her team found in the 2024 Design-Build Utilization Study. The latest data highlights design-build’s continued momentum, with projected growth reaching $1.1 trillion in spending by 2028.

Episode highlights include:

• The industries driving design-build’s expansion
• The rising popularity of progressive design-build
• How Owner Advisors are shaping project success
• What contractors look for in Owners when choosing projects
• The role of DBIA certification in building design-build expertise

Whether you're an Owner, industry professional or just design-build curious, this episode delivers insights into the future of project delivery.

Listen now and get the full report at store.dbia.org.

Access all our free design-build resources and learn more about Design-Build Done Right® at dbia.org.

DBIA members are shaping the future, one successful collaboration at a time. 

Transcript

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00:00

Music.

Erin Looney  00:06

When I was planning this episode of the design build delivers podcast, it dawned on me that I have been hosting this show now long enough that I am interviewing Emily beard all from FMI Corporation about the design build utilization study for the second time already, in fact, that 2023 episode with Emily was only the second episode I hosted. Period, and I have to say, interviews like this one and the other conversations on this show have taught me so much about design, build and the AEC industry. I hope you enjoy listening as much as I enjoy working with the team and these expert guests to bring you these viewpoints. And of course, none of these insightful chats would be possible without the support of our sponsor, us, CAD and our cons company. I am Aaron Looney, and I am finished being weird and nostalgic. Well, I'm finished being nostalgic. I don't think I'll ever finish being weird, but in this episode, we are picking through the newest design build utilization study from FMI, the report provides critical data and trends illustrating where design build stands today and where it's headed in the coming years. Joining me, as I said, is Emily beard, all from FMI, who has been closely involved in analyzing the data. We're going to talk about the major takeaways from the study, including market trends, the rise of progressive design build, everyone's favorite topic, the growing impact of owner advisors and how industry shifts are influencing project delivery choices. Plus, we explore how certain sectors like water infrastructure, manufacturing and transportation are seeing significant growth and why design build continues to gain momentum despite economic and regulatory challenges. And if you have questions or thoughts while you're listening, you can text us by clicking the link in the episode description. There is so much in this report, but Emily does a tremendous job of painting a picture and contextualizing these numbers. And I, I promise no more. No, let's start out high level here, big picture in 2023 the FMI mid cycle report projected design build would reach nearly half of construction spending by 2026 and that's with a 22.5% growth in total design build spending. Now, just two years later, in this new study, the total dollar value of design build projects is still growing, but the overall market share is still about the same. The numbers in the update are 47% by 2028 with a 2.9% compound annual growth rate and 1.1 trillion in total spending from the data and interviews you gathered. What does this suggest about design builds position in the broader construction industry? Yeah,

Emily Beardall  02:39

you bring up a really interesting point. Aaron, I think this suggests a few different things about the state of the industry now. Number one, owners and project stakeholders and private owners are really needing to figure out how to do more with less. And what I mean by that is the projects are becoming more complicated. Schedules are becoming more and more compressed, and the hard build model, while it definitely still has its place, the industry is needing to figure out how to be more effective, and one way to do that is through different delivery methods, a big one of which is design, build and so with the rising costs, budgets not necessarily keeping in line with those costs, and needing to continually update from an engineering standpoint, as well as capturing that creativity and ingenuity of the industry, I think owners are realizing it makes sense to pay a little bit more upfront to capture that for what ends up being a much better product down the line. Second, I think the industry is tired of how combative and ineffective the design, bid, build, model of construction can be. The idea to look for a more collaborative solution to help address some of those talent retention challenges and just kind of enjoy the process of building really cool stuff a little bit more. A third point that I think is really driving the use of design build more over the next couple of years is really around cost certainty, particularly with the new administration, we'll continue to see regulatory and potential impacts from tariffs on our construction industry, and so securing prices early will be a key driver for owners, particularly as it relates to use of design build and infrastructure segments have really driven a lot of volume in the design build space, and you pointed to how large the overall volume is over the next few years, 1.1 trillion. While the infrastructure is still a key driver, really, the vertical side has seen a lot of recent growth. And what I mean by that is things like manufacturing, education, water, wastewater, have seen a lot of growth. We. Expect to see in the next few years, growth in those vertical segments as well.

Erin Looney  05:04

So let's, let's stay with those market sectors a little bit here, especially with DBIA is design build for transportation, aviation and water, wastewater conferences, which are coming up the 17th through 21st of March in National Harbor, Maryland. You mentioned a couple big market sectors. How are these different areas contributing to that dollar growth and steady rate

Emily Beardall  05:25

manufacturing? We expect to cover about 20% of forecasts it in the next few years, and that's really driven by support from the federal government in the in the form of the chips act and those multi billion mega, mega projects that we've seen begin in 23 and 24 and really projected through the forecast period. Highway and street is another key driver of growth. It's at about 16% of our forecast in terms of representing 16% of volume. That is really fascinating to me, because it's so local dependent, and it's very, very much driven by the specific agencies and even the specific districts in which you operate in and kind of where that plays out. The industry is trying to be more efficient, you know, owners are trying to be more efficient, but the law takes a little bit to catch up sometimes. And so we've seen some regulatory changes over the last few years, we do anticipate there to be additional pushes from a legal standpoint to further enable the highway industry owners to participate in the design build market. So on the emerging side, the water wastewater segment is what we expect to see, kind of the fastest growing segment for use of design build, and that's really driven by use of progressive design build, the water wastewater segment as it relates to progressive design, build is really ripe for growth in terms of spending and capturing some of the new innovation and engineering techniques available to owners. So

Erin Looney  06:58

in that last update, and you did touch on this already. But just to reiterate, in the 2023 FMI update, highway Street, education and manufacturing were the biggest market shares and transportation. Together with highway Street, we're expected to account for more than a quarter of design build spending by next year. Here as we're talking about transportation, just to keep in mind, it's highway, marine, land, street, aviation, also, as you mentioned, water, wastewater, smallest segment, but growing faster than any other. Compare that to the 2025 report, which also points to significant growth in certain markets, some the same, some not, and highlights some emerging sectors.

Emily Beardall  07:39

The biggest difference in our forecast is really two things. One, the growth in manufacturing was unprecedented. We've seen over, I think, 100% year over year, growth, which is shocking, and frankly, shocks everybody at FMI when we talk about it, at one point, was even larger than the multi family residential construction line, which we've never seen before, and how to deliver those complicated projects really required use of things like design build to get those projects out the door. Now, going back to the infrastructure side, things like EPA consent decrees. Continued demand for renovating lead pipe systems. Continued demand for innovative treatment systems, things like desalination or brackish water improvements, trying to be creative in addressing water supply concerns for both areas that are in drought conditions and also areas that are experiencing really significant population demand and have capacity concerns is really driving some of those water owners to expand their systems quite rapidly. Again, kind of pointing towards use of design build there. We're

Erin Looney  09:00

going to stay in the water. We're not going to stay in the wastewater, though, just the water. You told me in our meeting that nearly every person you spoke to talked about water infrastructure, and you just gave some very compelling and pretty logical reasons why that might be. Why do you think these water projects are becoming such a growing focus beyond what you just said. Moreover, how is design, build position to address these needs? There's

Emily Beardall  09:24

a few different points to that. One, agencies are competing or have the same priorities. So if you're in a big metro area with multiple water agencies, or even a state with multiple water utilities, they're kind of competing for the same available contractors or competing for firms to complete their projects. And so one impetus or one desire for these owners is to get their projects signed faster, to enable faster team signing and begin construction. Direction sooner, in a situation like we experienced last year, which is really quite different than our prior work in 23 and even before that, there was almost more work available to contractors than the other way around. And where it's been historically, where contractors are kind of competing for the work, where owners have more work than contractors are able to do it, owners are competing against themselves, and one way to make owners feel more attractive to the industry is to use things like design build or progressive design build to have attractive contract terms, to have attractive risk management systems in place, to kind of make the projects themselves attractive to the industry.

Erin Looney  10:49

So you've dropped this term a few times. Progressive design build still the homecoming queen of the design build world. No matter how much we talk about it, it never seems to lose popularity. No one ever seems to get tired of it, or if they do, they don't admit it. And the FMI report supported that too. PDB, I mean, it even has a nickname, is certainly gaining momentum, especially in sectors like water, wastewater that you just talked about, but also education. So in these conversations with industry professionals, what reasons did they give for choosing PDB and how's that being implemented in these sectors and others that stood out? One key

Emily Beardall  11:27

reason that I briefly mentioned is really that cost certainty, so owners wanting to make sure they're able to build the project that meets their needs, but ensure that it costs what they either need it to cost from a budgetary standpoint or stays within some idea or some target budget is really critical, and using progressive design build allows them to lock in the price, in addition to locking in their specific engineering or constructability needs, locking in the price earlier from a cost certainty standpoint, will help mitigate the potential impacts from any new tariffs that may come on, but also inflationary pressures, as we're still in a highly inflationary environment, another reason we've seen this be successful, particularly in education or water wastewater, is utilizing crystal clear RFPs while maintaining flexibility. So if an owner has tight requirements on a project or really specific characteristics that it needs progressive design, build might become a little difficult to utilize in that sense. And so folks going in within kind of open slate, or open to ideas and open to the innovation from the industry. Really do benefit from progressive design, build and water wastewater. Owners really are a layup for that. Another strategy we've seen owners use to implement progressive design build is really streamlined program management. We spoke with several in the industry who mentioned in competitive best value or traditional design build there are still sometimes separate teams for program management, and that can become a little bit burdensome to coordinate across the different stakeholders. And we heard that with progressive design build owners and project teams have found more streamlined management to be a success, where two teams are not necessarily working against each other.

Erin Looney  13:28

So the report also notes growth in construction management cm alongside design build, and someone actually asked you about this in the design build delivers webinar you presented in recently, so it's certainly a thought worth considering and revisiting here based on your research, how do these two methods compare cm and DB, and what factors should owners consider when choosing between them? That's a

Emily Beardall  13:52

great question, and I'm excited to have that question in the webinar. What's interesting is, in cm, the AE team can work with the owners through conceptual design and give them rough cost estimates before going to market for a contractor, and that might be really attractive to an owner, if they have preferred relationships in the AE community, or if you know the exact kind of team that you're looking for, and you don't want to rely on the market to self select their team, so picking your own engineer and your own contractor, as opposed to being stuck with whatever team stakeholders in the industry decide to team up themselves with, using cm, understanding the cost of the project before selecting the contractor can be a really critical characteristic. So in some cases, we've seen owners get a 60 to 70% guaranteed Max price before selecting the contractor, and that can be really helpful in shaping the direction of the project. But. Also is helpful if there is not too many project complexities from a constructability standpoint, so things that are not necessarily overly complex might lend themselves well to the ZM space with design build, going through conceptual design and that pre construction phase with the contractor and designer on board together, this helps facilitate incredibly complicated projects, projects that are not necessarily time sensitive are also considered to be good candidates for cm and where schedule is a pressure. We did hear a little bit of a favor towards design build because of both sides of the teams getting brought on early.

Erin Looney  15:42

Are you interested in sustainable design and construction practices, but concerned about profitability? Us, CAD and our cons company helps forward thinking. ENR, top ranked AEC firms in mitigating risk and driving profit through digitalization, using Autodesk AEC technology to learn more. Contact us, cad.com/dbia for a free 30 minute consultation. That's us, cad.com/dbia another interesting finding is that contractors are becoming more selective, and you hinted to this a little bit about which owners they work with. Did your research reveal why this shift is happening and how it might impact owners, particularly those who are newer to design build.

Emily Beardall  16:30

This was a really interesting result of our study this past year, something we hadn't experienced before. I've been involved in this research since 2018 and I I haven't seen this kind of shift in Dynamics before we heard about this phenomenon in the infrastructure space. So if private folks are listening, I'm not sure how much this phenomenon might apply to your world. But as projects continue to escalate in complexity, other risk factors, how owners compensate for the risk has become incredibly important for industry stakeholders, and we found that owners who took a more equitable approach to risk, maybe not equal distribution, but equitable in terms of compensation, those characteristics, were much more attractive to industry stakeholders who were pursuing projects. There were multiple examples of contractors who had enough work in their backlog and had enough project opportunities presented to them that they were able to be selective in what projects they were pursuing based on the risk profile of that specific project. And they were very, very selective about the risk that they were undertaking and who they were willing to work for if the owner has an unfavorable contract that is written or is unable to negotiate that risk in a good faith manner that can turn stakeholders away, particularly the best in class firms who are known for tackling really complicated or really high landmark potential design build projects. So what this means for owners who are newer to the design build space, it becomes incredibly important for owners with less experience to be incredibly intentional with their contracts and understanding the risk of their specific project and how that risk is distributed among project stakeholders, getting the General Counsel involved early on projects, getting their buy in. And also we had folks suggest having Industry Days where you kind of present the project characteristics and have folks in the industry give you feedback on how to pursue that project owners who, top to bottom, embrace the idea and spirit of collaboration as it relates to risk and risk mitigation often end up becoming owners of choice considered by industry stakeholders. That's certainly one key area that's causing some of this new shift in the market. Another piece that we spoke with just about the owners who maybe have less experience with design build, those who are trying potentially new delivery methods, making sure that the understanding of not only the project process itself, which DBIA has a lot of resources available for, but making sure that the understanding matches the process and the contractual obligations, and really understanding that risk transfer is critical.

Erin Looney  19:41

Last year, you mentioned our resources. One of the things that I say, This counts as a resource. We updated our certification exam, and we also saw a lot more project and team award submissions emphasizing DBIA certification. Quick note, project and team award submissions for 2020, Five or open dbia.org for more information. Back to the real question. We also revisited some of the 2024, award winners in a design build delivers podcast bonus episode earlier this month. Now back to you, though, Emily, and back to certification during your interviews, did anyone discuss the role of DBIA certification in helping professionals or firms succeed in the growing design, build market, and if they did, what insights did they share?

Emily Beardall  20:24

We found that it was critical, really, to have somebody who is looking to enter this space understand all of the fundamentals. I spoke with a large owner who actually took all of their functional teams from General Counsel to procurement to project execution, really, every phase of a construction project took their entire team to take a course together, getting the design built certification. And what that did as a team is it helped them align on their standards and expectations for design build delivery as it relates to that organization, which was entirely new to the agency at the time. And so that idea of getting your team aligned across functional teams, on the processes, but also the culture and the way in which you approach design build is critical, and a great way to do that is through some of these DBIA certification programs. The same can be said for industry professionals. If it's something your firm is considering doing, it's absolutely worth considering something that FMI, when we work with clients on strategy in the collaborative delivery space, we always recommend having an in house expert or a team of experts to help coach the organization through the pursuit and pre con and execution phases,

Erin Looney  21:51

another key area of interest and another resource we can plug for a lot of DBIA members, it's been that the role of an owner advisor. In fact, last year, October, just very recently, we released the role of the owner advisor in design, build and an owner readiness assessment, and that provides some guidance for owners and teams. Now, the FMI report indicates Some mixed opinions about the role of owner advisors. From the feedback you gathered, how can owners better define and leverage the role to benefit projects without causing friction?

Emily Beardall  22:25

I think that's a great question, and it really was the point in the report that had the most mixed views from FM my side as we were looking at the feedback. It was really interesting to dig into where the value is, and so I think that's where I would start in answering your question is owners leaning into where the value they need from the owners advisors. Role is determining the guardrails early in terms of what the communication expectations are, determining the expectations as far as compliance and minding overall costs are truly critical clarity up front in those role expectations was hands down. The biggest impact that we heard, we heard from the industry that the most benefit or the most value owners advisors can bring is when they are viewed as an extension of the staff from the owner standpoint, and where those guardrails are clearly understood up front. So to really leverage an owner's in house expertise, but also leverage the expertise that owner's advisor is bringing you, consider how to streamline decision checkpoints. Consider how the owner advisor is bringing you a holistic perspective and kind of facilitate that accountability across project stakeholders. So you

Erin Looney  23:47

kind of pinged this earlier, and I was actually glad you front loaded it, because you and I and most of our listeners are probably no strangers to the ongoing quest to retain talent in the industry. In fact, on January 29 four construction pros put out an article outlining strategies for attracting and retaining the best candidates and building out of the UK and construct connect in British Columbia. Also recently wrote pieces about the issue of finding and keeping people in the industry. So it's not a far cry to say this is worldwide and to assume, you know, come back to the United States, you interviewed AEC professionals with concerns about the same thing. The study did highlight how design builds collaborative approach supports talent retention. So what examples or feedback did you hear about how early team integration and engagement helps firms address ongoing workforce challenges? This

Emily Beardall  24:36

was something we started asking about two reports ago, and continue to see interest in so culturally, projects that are collaborative do see benefits such as reduced turnover, particularly on the project's management and project leadership staff, early team engagement, particularly when it's effectively addressed up. Run can reduce that friction that we had just talked about, particularly as it relates to risk or unforeseen changes in project scope, the enhanced team collaboration, things like sharing lunch rooms, things like sharing trailers or having off site team meetings, building a team culture as it relates to the project culture and kind of leaving your company name when you walk onto site behind you. I think that is really critical when you're on these multi year or incredibly complicated projects. We don't have statistics yet to quite determine how retention is different, but that's definitely something FMI is looking at working with the DBIA in the next year or two to see if we can track that. We hear a lot of talk about it, but I think it's time that we really try to understand those key metrics in terms of how it is truly impacting it.

Erin Looney  25:53

So you teased this too. As with any change in administration here in DC, you know, and affecting the rest of the country, there is a period of shifting priorities, questions, opportunities. We're not going to get into the weeds here, but it's still important to contextualize this question, regardless of how initiatives are changing, or what the future of diversity looks like, in the report, equity and inclusion are emphasized, especially when it comes to engagement with ubes, did your research uncover any particularly effective strategies for integrating ubes into design, build projects? That's

Emily Beardall  26:25

a great question, and thank you for contextualizing it. What we heard was really about understanding the intent of using underutilized businesses or bringing them into the fold more. We heard multiple advantages about using underutilized businesses. A lot of the advantages we heard about using ubes revolve around diversity of thought and innovation, but also encouraging local community involvement. Ubes were also considered to be incredibly adaptable and flexible, and that was a really key statement to make as it relates to design build and how important adaptability is in executing projects effectively through design build, being adaptable, being flexible, is part of what makes the process so attractive to owners. So using ubes in that environment and having them involved in the team early is is absolutely critical. Where we found some of these initiatives were challenged is really, I think, as a going back to the intent behind the initiative. So what we found were some challenges with getting ubes greater involvement, is late involvement in the process, as well as kind of a perception or an idea that this is a check the box exercise, and what we found is really having that mentorship aspects be a focal point for bringing these underutilized businesses up to get them that experience on greater or more complicated projects is incredibly critical. Experience on smaller projects or less complicated projects can provide you bees familiarity with the process and help grow their reputation in design build in kind of that controlled manner, owners, project stakeholders, really prioritizing those target projects and being intentional about those really does lend itself to success.

Erin Looney  28:22

Finally, usually this question is, let's speculate wildly, but because we're actually basing our speculations on data, we're not really going to do that. We're going to talk about the report itself. DBIA and FMI release this utilization study every few years. I've been here since February 2023, and it's come out twice since I've been here. So from your perspective, why is this continued research important, and how do you hope industry leaders will apply these latest findings? I

Emily Beardall  28:54

get so excited when you propose this question. I think this research is so exciting and so important because it tracks not only where the industry has been, but it tracks where it's headed, and it's important to consistently get a gut check on how all of this is changing. I mean, we have record breaking volumes of construction being delivered, record breaking projects in water wastewater, record breaking projects in transit, aviation, highway. There's so many exciting things happening, and I think this report is a really good way to pause and celebrate some of the innovation that is happening and the innovation in delivering these complicated, crazy record breaking projects successfully. I hope industry leaders, as you kind of review this report, consider a few questions to ask yourselves, such as, how can my organization continue to improve? Or what other best in class companies are doing, and that might not be in your area. I think one of the. Benefits about this report is it is nationwide. So you might say, oh, there's a great project example, or an owner in one part of the country that's doing a really cool thing that you might want to try and having that kind of national view is a really cool way to celebrate all the different pockets that are doing things a little bit differently, but all really advancing in a cool and meaningful way.

Erin Looney  30:24

See, I told you there'd be no more nostalgia, just good, hard evidence that design build continues to reshape how we build. To get the full design build utilization study from FMI, visit our bookstore@store.dbia.org, and it's worth mentioning here again, DBIA is design build for transportation, aviation and water, wastewater. Conferences are coming up really soon, March 17 through 21st in National Harbor. It's the perfect opportunity to connect with industry leaders and get a first hand look at the trends shaping these critical sectors. See what you just heard today in action. Head to dbia.org, and quick conferences. If you enjoyed this episode, be sure to subscribe, rate review the show. It helps others find the design build delivers podcast. And if you want to share your thoughts or ask a question, text us at the link in the episode description. I love hearing from you. A huge thank you to Emily beard all for joining us and sharing FMIS latest research on design builds trajectory. Props to Freddy for making the show come to life, to you for listening and to us, CAD and Archons company for their continued support. Learn more at us. Cad.com/dbia you.