PCCA Journal 3rd Quarter 2013 - page 16

PCCA Journal|3
rd
Quarter 2013
16
design to the design-builder. But often design delegation is
more subtle. Performance specifications (which set forth an
objective standard for the contractor to achieve requiring its
ingenuity and means) effectively delegate design to a contrac-
tor.
Contractors may also be performing design in the prepara-
tion and submission of shop drawings or submittals for a
project.
Some design responsibility may be transferred without
explicit delegation. An example of subtle design transfer or
design sharing is found in RUS Form 515. Article V(A)(1.2) of
the Construction Agreement provides as follows:
“1.2 The Construction Sheets showing the proposed plant
shall be joint reviewed in the field by the Contractor and the
Engineer prior to construction. The Contractor shall at that
time propose any changes or clarifications he feels desirable.
These changes, if approved by the Engineer, will be made
at that time and so recorded on the Construction Sheets and
initialed by the Engineer and Contractor.”
Any contractor that proposes changes to the Construction
Sheets and then initials the approved changes is likely go-
ing to share responsibility with the engineer for that design
change despite that lack of any explicit design delegation.
Contractors should strongly consider whether a change to
the Construction Sheets is necessary, rather than “desirable.”
To the extent that a contractor does make any changes to the
Construction Sheets, it should be prepared to accept or share
design responsibility for that change.
The consequences of contractors unknowingly performing
design services are substantial. Design errors and omissions
can result in costly time delays, budget overruns, rework,
and third-party bodily injury and/or property damage. Thus,
insurance coverage is critical. However, most, if not all, com-
mercial general liability (CGL) policies contain endorsements
or language explicitly excluding coverage for liability arising
out of design errors.
In addition, contractors performing design services may
run afoul of the project state’s professional licensing statute
or regulations.
Contractors can mitigate design liability risks by:
• Carefully examining the contract documents to determine
where design risk might arise and taking steps to eliminate
or mitigate such risks;
• Considering the purchase of a contractor’s professional
liability policy or other insurance product, especially for
those contractors routinely engaging in ancillary design
services;
• Ensuring that subcontracts identify design to be performed
by subcontractors and have protections in place to protect a
contractor in the event of subcontractor’s faulty design; and
• Educating field staff and personnel about contract provi-
sions implicating design responsibility, the consequences
of design responsibility, and design avoidance procedures
and practices.
Design delegation and transfer is a pitfall for the unwary
contractor. Contractors who alertly recognize design risk and
properly allocate or mitigate such risks will minimize their
exposure and increase the likelihood of profitable projects.
Matthew Straub is an attorney in the Construction Industry
Group of Ogletree, Deakins, Nash, Smoak and Stewart P.C.,
a PCCA member. He counsels construction clients on pri-
vate and public projects across the country. He emphasizes
risk management at the earliest phases of a project and the
prevention and avoidance of disputes. He develops, negoti-
ates, and drafts contracts, subcontracts, and other construc-
tion documents necessary for successful construction projects.
When litigation cannot be avoided, he prosecutes and defends
construction claims. He can be reached at (312) 558-1424 or
at
.
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