Delegating design raises importance of construction contracts

Build enough buildings and it’s almost guaranteed two things will eventually happen — there will be a significant problem with at least one of the structures, and after the problem is discovered, everyone involved in the project will blame everyone else.

Fueling the finger-pointing is the common practice among architects and engineers of delegating parts of the building’s design to contractors and subcontractors. The pressure to complete designs quickly and save money, along with the increasing complexity of mechanical systems within commercial structures, are prompting more parties in the construction project to take on design responsibilities.

State statutes do not speak to design delegation and very few appellate court opinions provide guidance because many construction disputes are resolved through arbitration rather than a trial. The best way to short- circuit the “I-told-you-so” and “It’s-not-my-fault” arguments is the contract between the owner, the architect, and the contractor.

King

Daniel King, construction and contract lawyer at Frost Brown Todd LLC in Indianapolis, said the design delegation process works best when the contract is written before the building project begins and the details are explicit.

“The document should be clear and concise, and understandable by the contractor as to what design elements he’ll be responsible for,” King said.

Contracts can break down when the parties’ duties are ambiguous. For example, the question of who is responsible could arise in a situation where the contractor is assigned a design task but turns the work over to a subcontractor. Or the contractor submits a design plan to the architect for review, but the architect makes changes.

The search to identify who made the error can come after devastating failures of the structure.

In 1981, two suspended walkways collapsed onto the lobby floor of the Hyatt Regency Hotel in Kansas City, Missouri. One hundred and fourteen people were killed and 216 were injured. The cause was traced to a change in the design of the support mechanism made by the contractor and approved by the engineer who was found to have never reviewed it.

Often lawyers get called to do the contract work after the owner has already bought the real estate or gotten the blueprints from the architect.

Clifford

Brian Clifford, construction law partner at Faegre Baker Daniels LLP in Fort Wayne, prefers to be contacted when the owner is still considering the project. At the beginning, the lawyer can think of the project holistically and present the different options as well as prevent actions that can lead to additional costs and time delays in the future.

Even something as routine as having the land surveyed can cause a misstep. Clifford sketched the scenario where the owner signs the surveyor’s invoice only to discover after the project is completed that the building is in the wrong spot. As a result, the city demands the road near the new development be relocated.

“Attorneys who do a lot of this work, I think, provide value in helping (owners) through what is a scary and complex process,” Clifford said.

AIA boilerplate

At Faegre Baker Daniels’ 2017 Construction Law Summit on Oct. 19 at Bankers Life Fieldhouse in Indianapolis, design delegation was discussed briefly. A panel of in-house counsel representing construction companies agreed that turning over design responsibilities to contractors and subcontractors was standard practice and was going to continue.

Laurin

In fact, design delegation has become so common in the construction industry that it is practically expected. Sam Laurin, chair of the construction law group at Bose McKinney & Evans LLP, noted a recent contract that crossed his desk had seven different design professionals listed, all from different entities.

Contracts should not only point out who has design responsibilities but also require each party carry professional liability insurance sufficient to cover any damage award if an error occurs. Laurin noted the insurance policy in place when the claim is made must provide the coverage even if it is not the same policy that provided liability protection when the project was built.

As a starting point for the contracts between the owners, architects and contractors, many use standard forms offered by the American Institute of Architects. The AIA updates these forms every 10 years and, earlier this year, released the 2017 version.

However, the section of design delegation was virtually unchanged from the 2007 version. It is still just a few sentences and relies on boilerplate language. Basically, it allows the architect to delegate design work and make the contractor responsible for meeting the performance criteria.

Within the contract, the AIA form would be used in the general conditions section but the heart of the document is the drawings and specifications that can number into the thousands of pages. The designs that are delegated can get buried in the blueprints, so Clifford will highlight the more important delegated designs in the written portions of the contracts to be sure the parties know their responsibilities.

Tinkertoys

Although design delegation is not new, changes in construction techniques are requiring attorneys to add new provisions to the contracts between the parties.

Today, construction of a commercial building often involves certain pieces — such as bathrooms for a new hotel or cells for a new jail — manufactured in a facility then brought to the site and inserted or attached to the main structure. Clifford compared this modern-day modular building method to Tinkertoys.

Sections are prefabricated by contractors or subcontractors to form a completed structure. However, not all the different components will interlock as snuggly as Tinkertoy pieces, and this can cause such headaches as leaks or even safety hazards.

Even so, contracts do not always address these issues. Consequently, Clifford said, to match current building techniques, the documents have to identify who is responsible for the integration of the various parts.

Modular construction is just one part of the growing complexity within the construction industry. King noted the materials and installation in addition to the standards for things such as energy efficiency and environmental impact require specialization. No longer can an architect or engineer have all the expertise to design every element of a building.

Delegating the design is a good way to ensure the different elements are made correctly. But, King reiterated, the contracts must be “transparent as to what design is delegated and what the expectations are.”•