Many people have heard the construction phrase “design-build” in recent years, but few people know what it is. Further, many construction professionals don’t understand the legal and financial risks involved in taking on a design-build project.
Design-build is a project delivery method in which one party, a “design-builder,” takes responsibility for both the design and construction of a project under one contract. Design-build differs from the more traditional project delivery method of design-bid-build, in which an owner first engages design professionals to design a project, and then later engages a contractor to bid on and build the project.
Design-build has emerged in recent years as a preferred delivery method because it simplifies the construction process and offers one point of contact on the project, theoretically saving time and money for project owners.
Once almost unheard of, a recent industry survey found that design-build now accounts for roughly 40 percent of nonresidential construction in the U.S. A growing number of traditional design professionals and traditional contractors throughout the country are taking on projects as design-builders. Springfield is no exception.
But while the design-build method can be advantageous to project owners – so long as they have appropriate people overseeing the project and protecting their interests – it can be fraught with peril for unprepared design-builders. In the traditional design-bid-build method, for example, a contractor is not responsible for the accuracy of the design professionals’ work and will be entitled to additional compensation if the plans are deficient. In design-build, however, legal responsibility for design errors and omissions rests with the design-builder.
What this means in practical terms is that a traditional contractor acting as a design-builder will not be entitled to additional money for changes that must be made due to design deficiencies. If the plans are wrong and a subcontractor must tear out and rebuild a wall, for example, the design-builder must pay the subcontractor with no additional compensation from the owner. The burden for these additional costs belongs to the design-builder.
A traditional contractor acting as a design-builder also might face issues relating to whether its licenses and liability insurance cover all of the work it is coordinating.
A traditional design professional acting as a design-builder also faces increased legal and financial risk. In addition to retaining financial liability for design errors and omissions, design professionals acting as design-builders also can be held responsible for workplace accidents and injuries, subcontractor failures, prevailing wage penalties, and general construction errors and delays. A design professional acting as a design-builder also might face expanded professional liability for mistakes it makes, and furthermore, the design professional’s professional liability insurance might not cover such errors.
Despite these risks, the design-build method appears to be here to stay. As a result, construction professionals acting as design-builders must adapt and take precautions to limit potential problems before taking on a project. These precautions should include, at a minimum:
- ensuring qualified staff or appropriate partnerships are in place to meet the project’s design and construction requirements;
- determining the design-builder has all licenses needed for the work to be done;
- obtaining appropriate insurance coverage for the entire scope of work; and
- paying careful attention to their contract terms.
Jason Smith is a partner with Husch Blackwell LLP in Springfield, concentrating in real estate and construction law. He can be reached at jason.smith@huschblackwell.com.
