At the recent AGC conference, one of the concerns that stood out is the design liability faced by construction companies. It is one of the most important risk management issues faced by general contractors today. Design liability concerns are not limited to just design-build projects. It is a hot-button issue for builders because the line between an architect’s responsibility to create sufficient design documents and a builder’s responsibility to execute the means, methods, and techniques is increasingly blurry. Problems arise when owners, design professionals, and builders point fingers, rather than truly collaborate, and communicate. While construction technologies used to assemble complex systems within buildings are increasingly sophisticated, such sophistication is unfortunately not matched with increased information sharing and effective communication.
Another reason for growing design liability is unclear and inadequate specifications. Too often projects rush as well as shortchange design budgets. And some projects use hybrid prescriptive and performance specifications. This hybrid approach often confuses and obfuscates rather than clarifies design requirements.
Mitigating Design Liability Risk
Identifying design obligations contractually required as well as those that owners may implicitly expect, is the first step to evaluate strategies to mitigate design liability risk. An important but underappreciated way to mitigate risk is identifying, referencing, and attaching well-thought-out contract documents as part of the prime agreement that clearly lays out responsibilities and work scopes. One example of a good Contract Documents definition and a structure to identify existing contract documents is in the ConsensusDocs 200 in articles 2 and 14 respectively.
Another important solution to mitigate design risk is in the design professional agreement. Including a fair standard of care that requires design documents to be sufficient to bid and build will go a long way for builders and owners to mitigate their design risk. Receiving more complete and accurate design documents is critical. ConsensusDocs offers both a long-form agreement for design services between an owner and a design professional, the ConsensusDocs 240, as well as a short-form, the ConsensusDocs 245. The ConsensusDocs 240 provides the following at Section 2.1:
STANDARD OF CARE Design Professional shall furnish or provide the architectural and engineering Services necessary to design the Project in accordance with Owner’s requirements, as outlined in Owner’s Program and other relevant data defining the Project, which are attached as Exhibit A. The Services shall include Basic Services plus any Additional Services as may be authorized by Owner. Services shall be performed in accordance with the standard of professional skill and care required for a project of similar size, location, scope, and complexity, during the time in which the Services are provided (emphasis added).
The American Institute of Architects (AIA) also publishes standard contract documents. The AIA B101 also lays out a standard of care for architects to provide design services. However, the AIA language does not include the “necessary to design the Project” language. An owner may ask themselves if I only receive design plans that manifest a design intent, are my design documents buildable? For design-bid-build projects, which is still the most prevalent project delivery method, there is an implied warranty of constructability under the Spearin Doctrine. So, an owner is responsible to give the general contractor a set of buildable design documents, even if its design agreement with its architect doesn’t provide such a warranty to them.
In conclusion, owners should start with standard design professional agreements that are written to protect the interests of the overall project. Starting with the standard of care language that requires buildable design documents is an important step, in addition to good supporting contract documents in the prime agreement.
Related Resources
AGC houses helpful white papers that help general contractors have easy access to state-of-the-art thinking on risk management best practices. These resources can be found HERE. Two papers that are particularly relevant to mitigating design risk are:
Design Delegation: Legal Definitions, Practical Considerations, and the Need for Clarity (Jan. 2019)
If a general contractor is involved in early in a project to provide design-assist services, ConsensusDocs offers the industry’s first standard document to address this issue – ConsensusDocs 541 Design-Assist Addendum.