Sunday, February 13, 2011

Use of Stipends on Design-Build Projects

Many owners pursuing Design-Build projects will pay a stipend amount to shortlisted responsive proposers as a tool to help compensate design-build teams for the cost of preparing a proposal, and to encourage competition from competitive firms.  But what is the right amount to pay?

DBIA Position on Stipends:  The Design-Build Institute of America (DBIA) has issued a two page Position Statement on the use of stipends noting that "payment of a stipend is a best practice on most design-build projects," but that a stipend "rarely covers the cost of proposal preparation."  Based on industry surveys, DBIA reports that stipends "commonly range between 0.01 percent and 0.25 percent of the project budget."  The Position Statement suggests that:
"An owner should determine stipend amount based on the particular needs and complexities of a project, considering what is required to generate sufficient market interest from the most highly qualified design-build teams and the level of effort involved in proposal preparation."
Washington State Law:  Under RCW 39.10.330 (5), the Washington State Legislature has gone on record with respect to the amount of a stipend (called an honorarium):
"Honorarium payments shall be sufficient to generate meaningful competition among potential proposers on design-build projects. In determining the amount of the honorarium, the public body shall consider the level of effort required to meet the selection criteria."
Mike Purdy's Public Contracting Blog 
© 2011 by Michael E. Purdy Associates, LLC

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