Friday, May 30, 2014

The Standard of Care in a Design Build World, by Robert C. McCue, PE and E. Mitchell Swann, PE

Is a design-build contractor entitled to 'reasonably rely upon' the materials prepared by its designer...even if the designer works for the design-build contractor?

The article below, The Standard of Care in a Design Build World, from Robert C. McCue, PE and E. Mitchell Swann, PE of MDCSystems® helps frame and provides context for this question.


The Standard of Care in a Design Build World

Design-Build Delivery can create new responsibilities for designers where they would not exist in traditional Design-Bid-Build delivery situations and require new awareness on the part of contractors to the iterative and uncertain world of conceptual design. These new responsibilities require a paradigm shift for both Designers and Contractors as the realities of working together challenge the leadership of the organizations.

For designers the change requires them to abandon their traditionally "client only" focused advice and consent role and adopt a new paradigm of working for, or with, the contractor to deliver an acceptable and profitable product. For the contractor working with and supporting the designer changes the very nature of their previous working relationship. The contractor is now working with and for the people they are all too often at odds with concerning project delivery.

The following situation is illustrative of the evolving nature of construction in the Design Build world.

MDC's client was a building contractor who wanted to bid on a public project being offered as a Design-Build (DB) opportunity. In order to prepare a bid the contractor had to team with a designer and develop the bid from what were advertised as 30% complete preliminary design documents – bridging documents or a "two step" design-build process. In our example the contractor retained a design firm as a sub-contractor. In selecting his design partner, the contractor looked for a firm with significant experience in the region and with the agency soliciting the work. A number of similar DB ventures formed and provided competing bids for the work. The agency soliciting the work provided a bid preparation design fee reimbursement in recognition of the design effort required of the DB teams to prepare the bids. On award the designer was retained to prepare the construction documents as part of the team.

As the contractor/designer team prepared their bid, the contractor looked to his designer to provide technical guidance on interpreting the 30% bid documents and conceptualizing and quantifying bid quantities which formed the basis of the contractor developed unit prices and overall estimate. As the project entered the construction phase, it became evident that there were major features of the project that had not been fully developed in the agency-issued bid documents; but those documents were not defined as being a "100% complete" document set. The requirements and constraints for and on the project were described, if not detailed. To be fair, there were potential risk items identified by the designer in preparing the bid documents and quantities. But the contractor did ask for guidance from his design sub-consultant on these issues and there was an extension of the bid submission deadline which would have ostensibly created an opportunity to make some adjustments.

The wrinkle in this DB instance is that normally if the bid documents showed a scope -- say, 100 linear feet and the final work actually required 150 linear feet then he could make an argument to be paid for the difference. He, the contractor, expects to "reasonably rely upon" the bid documents. It is a risk inherent in the owner declaring that the "instruments of service" are reasonable and complete. The designer however often sees such differences between "as shown" and "as built" as a part of the contractor's risk. A requirement of the installation that is "reasonably inferred from the documents" and part of his obligation to provide a "complete and working system." However in this case the design is contracted (in part) to the contractor via the DB team and the designer is contracted to construct (in part) via the DB team. Who is responsible for making sure the instruments are suitable for the service intended and who is responsible for making sure that reasonable inferences are made and included in the bid?

This scenario raises a number of challenges to the traditional application of Standard of Care. In this situation the designer has the normal Standard of Care responsibilities and also the additional requirements imposed through its contract with its design-build partner, the contractor. A number of unique situations contributed to the challenges posed by the agency receiving the work. The agency was accustomed to letting Design-Bid-Build work. All of its procedures, specifications and approvals were applied to the project compounding any scope challenges. The designer had worked directly for the agency historically and was hesitant to challenge or resist agency requests or preferences. The pacing of the discovery of "challenges," constraints and restrictions in the contractor's originally intended solutions along with the staggered issuing of "revised" drawings during construction prevented the IFC construction documents prevented the contractor from addressing the cost implications at the start of the project and thus reduce or mitigate some of the overruns that occurred.

All parties to the work had plausible denial of responsibility for the cost issues.
  • The agency said, "It is a Design-Build contract and we are not accepting change orders."

  • The designer said, "The changes are minor in nature and within the Standard of Care for any project and we warned of risks."

  • The contractor said, "These cost overruns accumulated and not until the end of the drawing issues did we see the problem and determine the final installed quantities and related costs."

In this instance MDC® had to first determine the applicable Standard of Care in the design effort. Because, hundreds of construction items are aggregated to make a bid pricing submission, relatively minor changes in quantity (considered as acceptable in the normal application of design Standard of Care for DBB) become significant to the final installed contractor cost. Is the contractor entitled to 'reasonably rely upon' the materials prepared by the designer...even if the designer works for him? In this particular case, it was significant that the designer was compensated for its pre-bidwork (along with any work performed after award), nor was there any type of profit/loss sharing agreement as part of the subcontract between designer and contractor.  They received fees for service. 

What became key along with contracted agreement was the trail of correspondence during the bid development period; when the contractor was putting his numbers together in part based on input from the design team. There are some interesting points of view that rattle around like loose pebbles in a hubcap. The designer in this case had worked for the owner on several occasions before but in traditional Design-Bid-Build arrangements. It was the presumed advantage of that prior experience that prompted the contractor to select them. But is it possible that the designer wasn't really enthused about the prospects of Design Build arrangements where there was now an intermediary – the contractor – between him and his traditional client?

The designer certainly wouldn't want the owner to be unsatisfied with the finished project, but would he be really concerned about the financial position of the contractor? MDC® suggests that a brave new world exists to be developed and there are some points worth pondering before your next Design-Build team formation and undertaking.

How precise should you make your bridging documents? Is it possible that you could unwittingly create an 'impossibility' defense if you ask for ...the impossible? Is it possible that you could leave a major gap undefined in what is expected to address it?

If a designer is asked to address issues like quantities and installation sequencing, is that a drift into the traditionally forbidden territory of "means and methods?" What about if the designer is a subconsultant to the contractor?

If a bid package leaves elements open to interpretation, does the contractor have a role (and responsibility) to play in arriving at solutions? If the contractor is the lead of the team, can he truly defer to a sub-consultant if things go awry? (Is it similar to the "linkage" that binds an architect to his or her engineering subconsultant.)

If you go into a "project specific" design-build should you be setting up appropriate incentives (and penalties?) to properly align the team members' interests?

Should DB teams develop specialized language to address the overlaps or bridge between design and construction to avoid stepping on toes or dropping fly balls?

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