Risk Management Articles
Design Professionals and Contractor-Led Design-Build - Some Professional Practice and Risk Management Observations Part II
By David J. Hatem, Esq.
WHAT DOES THE ROLE OF THE DESIGN PROFESSIONAL AS SUBCONTRACTOR TO A DESIGN BUILDER REPRESENT FOR THE FUTURE OF THE DESIGN PROFESSIONS?
Design-build has important professional practice implications for the future of the design professions that require that those professions ask and carefully evaluate several questions, including the following:
- What is the present and anticipated future use of design-build in your practice and project (clientele) areas?
- Will your clients be requesting that you participate in design-build projects and, if so, in what capacity?
- Are you willing and/or qualified to become involved in design-build projects and, if so, in what role or capacity?
- Will your role as a subcontractor to a design-builder conflict with or otherwise disrupt your traditional and existing client relationships?
- Is design professionals satisfied - professionally, financially or otherwise - with their present, prevalent role as a subcontractor to a constructor on design-build projects?
- Are you willing and qualified to assume a prime position - i.e., designer-led design build - in design build? If not, is this something that you would be interested in doing and, if so, how do you get to that point?
- What are your professional organizations doing to assist you in evaluating these types of questions?
If design professionals continue in the present trend of serving as a subcontractor to a constructor in the design-build delivery method, what will that trend represent for the future of the independence and traditional client relationships of the design professions?
These questions, while challenging and difficult, and disconcerting for many design professionals, should be given serious and present consideration. Underlying each of these questions are a host of subsidiary questions about the future of the design professions. Avoiding these types of questions would be a serious mistake.
I am strongly of the view that professional organizations which represent the interests of design professionals should take an active role in educating their membership regarding these and related questions and assisting them both in the process of evaluating the options and implementing decision-making with respect to roles of design professionals in the design-build delivery method. A series of public forums to accomplish these objectives would provide tremendous value to design professionals. To stick one's head in the sand and refuse to think "out of the box" regarding the role of design professionals in design-build demonstrates a lack of leadership. As one commentator has stated:
"The obvious advantages of design-build procurement methods, combined with the tensions resulting from contractor prime team structures, have sparked a trend toward designer-prime design-build teams. Architects and engineers are increasingly pursuing design-build projects as the prime team member, with a contractor as the sub team member. Owners are encouraging this trend and are increasingly evaluating design-build proposals, in part, on how much control the design professional has over the design-build team. The following reasons are sometimes advanced in favor of design professional prime-contractor sub design-build:
- The A/E is trained for the function of and is more likely to conform to the owner's desires in balancing issues of design quality versus issues of cost and constructability.
- When the designer leads the team, it facilitates a situation in which design can commence before the owner has selected design-build as the project delivery method. This allows the owner to become comfortable with the design-build team before committing to a design-build contract. It also allows the owner the option to competitively bid the construction in the event that the owner declines to employ design-build project delivery.
- The design professional, far more often than the contractor, has the initial contact with and confidence of the owner and thus has more control of the business opportunity.
- The A/E has less of a conflict of interest because the owner is the only client that it is trying to please.
- The common complaint about the A/Es lack of discipline with regard to cost loses much of its validity when the A/E is responsible to the owner for the project cost.
- The design professional's lack of financial capitalization can be overcome by relatively simple legal devices which make the contractor's assets or bond available directly to the owner to secure the construction obligations. The design obligations are secured by professional liability insurance.
- Designer-led design-build has a high likelihood of creating desirable interdependence between the team members by emphasizing the A/E's role as business generator for the contractor.
Designer-led design-build is fairly controversial, at least today. Its opponents believe that there is something disingenuous about having the A/E lead the team when the majority of the revenue and the risk is passed through to the contractor. Proponents of designer-led design-build maintain that it is the flip side of the contractor-led structure, with the design professional subcontracting construction risks just as the contractor subcontracts design risks when it leads the team. Proponents further assert that, of the two structures, designer-led is more logical in that it follows the natural chronological sequence of involvement in a typical project.
Much of the controversy appears to derive from entrenched economic interests. Designer-led design-build is a structure that more easily makes design-build opportunities available to companies without strong design-build experience or backgrounds. Most of the criticism of designer-led design-build comes from the largest design-build contractors and integrated firms that control most of the market. It is not surprising that they disapprove of a structure that potentially threatens their hegemony. Design Build Contracting Claims, Aspen (1999), §2.03 [B], pp. 38-40.
The design-build method clearly has a permanent place in the menu of realistic project delivery options for many private and public sector owners. The critical issue for design professionals is what position they want to assume in the design-build method. Although there are a variety of options, design professionals, at least presently, seem inclined and/or reconciled to accept a subordinate position as subcontractor in a contractor-led approach. Whether this position is professionally and economically rewarding and fulfilling and, in the long term, in the best interest of the independence and traditional mainstream client relationships of design professionals, is open to serious question and, presently, should be carefully evaluated by design professionals and the organizations which represent their interests.
The following risk management "best practices" have been recommended to assist design professionals in managing risk in the contractor-led design build approach:
- Develop a sound basis for long-term working relationships with design-build constructors who specialize in similar project types before pursuing work as a design-build team.
- Seek out sophisticated design-build constructors whose management practices reflect sound business judgment and who recognize that design professionals should not be managed in the same manner as other subcontractors.
- Plan to work with the design-build constructor to reduce the risk of design errors and omissions and resist pressure to assume the risk of warranting perfection in design.
- Build skills and relationships on private projects, where all parties - including the owner - define their interest to continually improve over time.
- Approach design-build in the public sector with particular caution. Pursue public design-build work as a member of an experienced design-build team on whose performance the design professional can rely.
- Recognize that design-build requires that major elements of the design be fixed far earlier in the life of a project than on traditional projects.
- Tailor your compensation strategies to reflect the unique aspects of each project.
- Start with a project budget that has adequate contingency funds for design problems most effectively resolved in the field.
- Do not let insurance control your design-build decisions. Keep the following questions in mind:
- Is the design-builder willing to name you and your consultants as additional insureds on its general liability policy?
- Will your design-build partner agree to mutual indemnification?
- Do your subconsultants maintain adequate insurance protection, and have you received current certifications of insurance that show they do? This is particularly important in a design-build setting.
"Practice Makes Perfect," 67 Civil Engineering 57 (No. 9, Sept. 1997).
David J. Hatem, Esq. is a partner with Burns & Levinson, LLP, Boston, MA and chairs the firm's Professional Practices Group. Mr. Hatem is nationally known for his representation of architects, engineers, construction management professionals and environmental professionals. He may be reached at (617) 345-3000 or by e-mail at firstname.lastname@example.org.