Design Risk in Design/Build
by Robert J. Erikson, AIA

There are two ways an architect can be involved in design/build. One is to lead the design/build team. The other is to be part of such a team led by a nonarchitect.

With a love for taking risk, a solid source of capital, and a high level of construction knowledge, any architecture firm can be a design/builder. Indeed, the AIA encourages a designer-led design/build process, whereby the architect hires the contractor. If an architect has chosen to be a design/builder, though, he or she is probably aware of the many risks involved with design/build. Thus, this article is not aimed at such a firm. It is aimed instead at the architect who is working as a consultant for a design/build contractor. Not intended as an exhaustive legal discussion, this article is meant mainly to alert the reader to some important issues he or she will encounter when working for a design/build contractor.

Get your loyalties straight
When working for a contractor, the first thing the architect realizes is that his or her loyalties may become divided between the owner and the contractor. In the more traditional design/bid/build delivery approach, the architect's loyalty is to the owner. When working for the design/builder, however, the architect's legal responsibility (beyond the necessity of adhering to codes and regulations) is to the contractor. Nevertheless, the owner might pull the architect aside and say, "Surely you realize that we wanted very nice wall fabrics for our president." The wise architect in this situation immediately consults with the contractor. It is very likely that the contractor didn't allow for such fabrics in its guaranteed maximum price. The fun begins when the architect mistakenly believes his or her role is to satisfy the owner, despite the fact that the architect has neither the contractual authority nor the obligation to do so. Such authority lies solely with the contractor.

The issue becomes even more complicated when it involves the functionality of the space. "We have to get from this office to that conference room and lock off the research area," says the owner. "Hmm," thinks the architect. "Another corridor, more space and over-allowance hardware." So, the architect answers, "I'm afraid we can't do that," knowing that the design/builder's guaranteed maximum price cannot be increased to allow the additional square feet of construction that would be necessary to accomplish this goal. The owner might answer indignantly, "But you [your team] promised!" Indeed! Do you know all of the promises that were made by the contractor in soliciting the project?

Define your expectations
The conscientious contractor will be present at all meetings with the owner. But suppose he or she is busy one day and asks the architect to fill in and work out details with the client. Sensing an opportunity, the client lobbies for more scope. Once again, the architect is in the middle of an uncomfortable situation. To put one's self beyond such problems, it is best to make sure up front that the architect's role is documented and understood by all parties.

So that the architect's eyes are wide open when working for a design/build contractor there are three points in particular to consider before agreeing to work with a design/build contractor: project selection, agreement review, and role awareness.

1. Project selection
The first risk management tool architects have is the selection of projects. Since the early 1900s, design/build has been used successfully with simple, noncustom project types such as storage buildings. The beauty of design/build is that the owner can know early on in the process what its exact (guaranteed) financial obligation will be. "I want something like that," the owner might say, pointing to the design/builder's last spec office building. At a preliminary stage, with subsequent control over decisions relating to cost, the design/build contractor can promise a not-to-exceed price. So promises with regard to cost can be made before the design is complete. This can be quite a benefit to an owner who carefully plans cash flow.

However, such is both the beauty and the problem with the design/build process. While solid assumptions can certainly be made about simple projects, more complex projects tend to be less predictable. What if the owner is a client with complex needs and there are many variables? Can all such variables be known at the time the owner prepares a request for proposal so they can be explained in the design criteria? Often they cannot. Often such variables can be discovered only after the design phase is well along and feedback from a variety of users has been received. As an example, what if the owner is upgrading a hospital, and only after interviews with the staff from a variety of departments can the design team develop major options or subsequent suboptions for presentation to the decision makers? The ability for the owner to provide input and to have that input incorporated into the design is limited in the design/build process. After all, to use the process to its advantage, the contractor has already promised to deliver something (presumably a known thing) for a maximum guaranteed price. Unless the quality is reduced, the scope has already been set.

2. Agreement review
The second key risk-management tool for the architect is the careful review of the agreement with the design/builder. Risk is inherent in any business endeavor. It should be shared equitably, however. So it behooves the architect to have counsel look through the agreement for potential landmines, such as guarantees, warranties, and certifications that are likely not to be covered by the architect's professional liability insurance. (Such guarantees, for instance, include designing a project that "meets the budget," without recognition of future instructions or variations in the marketplace.) Some design/builder-architect agreements even include language that would enhance the architect's normal standard of care. An experienced lawyer will be able to explain the full implications of the architect-design/builder contract, where-unlike design/bid/build-there is a guaranteed maximum price the design/builder must adhere to and the architect is responsible directly to the design/builder.

3. Role awareness
The architect's third key risk-management consideration has to do with an awareness of roles. How and by whom will engineering consultants be hired? Will the architect's responsibilities include coordinating the engineers' efforts? As the prime designer, the architect is often requested to prepare performance specs for mechanical and electrical design/builders to use in bidding on a project. Where do the architect's responsibilities leave off and the subcontract design/builder's responsibilities begin?

Finally, the architect may have fewer responsibilities during the construction of design/build projects than he or she would like. What becomes of the architecture firm's ability to control its own risk—the risk of minor errors or omissions becoming large and costly problems—if the contractor says, "Don't call me, I'll call you," upon starting construction?

The architect must also recognize potential conflicts of interest if it is reviewing requests for substitution submitted by the contractor. The contractor may believe it is in his or her best interest (and therefore the architect's interest) to make the least demanding, least expensive interpretation of a code clause, ADA provision, or promise of quality. But such an interpretation may not be in the best interest of the owner or public, or even in the best long-term interest of the contractor. What then?

AIA standard-form agreements
Design/build is a useful delivery method for today's fast paced world, but every architect who works for a design/build contractor should be mindful of the strengths and weaknesses of the process. Architects should, with the assistance of legal counsel, insist on agreements that allocate risks to them only in those areas for which they control and influence the decisions and outcomes. They should talk with their professional liability insurance brokers to ascertain whether additional coverage should be considered for a specific project. In this manner, risk may be assumed and compensated in an informed way, with clear communication among all the parties involved in the process.

Some excellent tools for giving structure to the considerations outlined above are the AIA contract documents, even when the design/build contractor is going to be using his or her own document. B901, Standard Form of Agreements Between Design/Builder and Architect is a handy guideline for what the industry consensus is on basic services as opposed to additional services, the design/builder's responsibilities, ownership of documents, scheduling, payments, reimbursables, and dispute resolution.

The AIA contract documents are written to work with one another, incidentally. The documents that relate to B901 are A191, Standard Form of Agreements Between Owner and Design Builder; A201, General Conditions of the Contract for Construction; A491, Standard Form of Agreements Between Design/Builder and Contractor; and B352, Duties, Responsibilities, and Limitations of Authority of the Architect's Project Representative.

Copyright 2001 The American Institute of Architects. All rights reserved.


Robert Erikson, AIA, is an associate principal with CSO Architects Engineers & Interiors in Indianapolis, and is currently chair of the AIA Risk Management Committee. His thanks go to members of the Risk Management Committees of the AIA, NSPE, and PEPP for their review of this article.

This article is not intended as legal advice. As always, when considering a risk-management strategy, consult your legal and insurance counsel.

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