The construction industry and architectural and engineering ("A/E") firms in particular have been enthusiastically embracing the use of computers in generating, revising, plotting, and transmitting their work product and project-related communications. Clients and competition demand it. As a result, the average firm now uses some form of Computer Assisted Design and Drafting ("CADD") on well over ninety percent of its projects. The technology to aid design professionals is also evolving with ever-increasing speed. Of the technology currently in use in the typical A/E firm, ninety percent is new within the last five years.
All indications are that CADD represents only the tip of the information technology revolution in construction. The extraordinary rate of change which has characterized the last five years will be dwarfed by the changes to come. Project websites or extranets are only in their relative infancy, but may well become standard operating procedure in the very near future. The September 25, 2000 edition of Engineering News Record detailed no fewer than seventeen project website providers. Similarly, computer-assisted design software is continually becoming increasingly self-executing and thus involved in and supplanting traditional design roles.
The evolution of CADD and other electronic design tools is represented to be a tremendous boon and opportunity for most A/E firms. CADD and related tools theoretically allow design professionals to work faster and more efficiently while providing the client with a better quality and more accurate product. Moreover, the use of electronic mediums also offers design firms an opportunity to expand their scope of services. With only minor modifications, electronically-generated design documents can be modified to meet clients' other needs, such as facilities management and planning.
However, as with any such rapid and radical revolution, the growing use of computers in the A/E practice and the introduction of so many new technologies raise previously unrecognized risks and liabilities. Few of these concerns have to do with the creation of the design itself. CADD design is essentially the same traditional design process which simply replaces the pencil with a mouse. Rather, the new concerns focus primarily on the compatibility of various systems and software, the transmission of electronic information, potential degradation of electronically communicated information, potential misuse of electronically communicated information, and redefined design roles and responsibilities. None of these risks is so threatening as to justify not utilizing CADD and other evolving electronic technology. However, each warrants recognition and a well-reasoned response of practice management and contractual provisions.
The following discussion will begin by addressing an overall approach to electronic design concerns. This paper then addresses some of the concerns related to the emerging and expanding use of project websites and self-effectual design software.
Electronic Design Conciderations and Strategies
During the course of a project, electronic information and documents may be transferred to and received by a variety of project participants. Broadly stated, these participants may be grouped into three categories: (1) other design team members; (2) clients; (3) and third parties such as contractors. Although the practice and risk management issues relative to each group touch on many similar themes, the actual exchange of electronic information with each group presents unique concerns and challenges. Accordingly, each group of potential recipients should/must be approached separately. A separate File Transfer Protocol ("FTP") should be thoughtfully adopted and followed for each group.
1. Design Team Members
The starting point has to be the design team. If each and every design team member is not prepared to handle the electronic information and document demands of the project, there will be problems in the delivery of the design product, and issues relative to the client and third parties only become matters of damage control. The growing use of and experience with project extranets and project websites makes this absolutely clear. Accordingly, the FTP for the design team should be established in advance of the project and will ideally be included within the contractual obligations of the design team members.
A. System and Software Compatibility
The first and foundational concern of electronic design is the adequacy, longevity, compatibility, and integrity of the various system components. Systems and software may have their own glitches and may not be able to perfectly or completely read/translate a product generated by another program or system. These potential problems are particularly acute during the current era, as hardware and software are continually evolving while the acquisition of such evolutions is unevenly distributed between firms. The errors created by such software "defects" are often not detected until after the design is complete.
Even though not technically "caused" by the responsible design professional, such errors may lead (and have led) to design liability. This problem is particularly significant because virtually every software licensing agreement has a limitation of liability which narrows the software provider's exposure to replacement of the software. Clients are generally unsympathetic to such limitations. The consequences can be significant. In one recent case, a glitch in a cost-estimating program cost a firm $2 million without any recourse against the software provider.
These concerns apply both to a design firm's internal systems and to those of outside recipients expected to receive electronic versions of the design product. Each must be analyzed separately. The time and effort necessary to coordinate the system and software compatibility with an outside recipient of electronic design documents is a category of services which should be considered in preparing a plan of action, proposal, and fee estimate for a particular project.
To manage these concerns, a design professional should:
B. Transmission or Translation Errors/Corruption of Information
Regardless of whether the transfer takes place on a disk or over modem lines, the potential for transmission errors or subsequently created electronic glitches is enormous. The liability risk is even greater. Similarly, information transferred from one program to another may not translate the information completely or comprehensively.
In the transmission of electronic documents, a host of possible errors can occur. For the transfer of disk-stored material to proceed without error, all of the following must occur: the computer from which the material is downloaded must be fully operational and defect-free; the disk onto which the material is copied must be defect-free; the disk must not be subject to any physical or magnetic forces during transit that would alter the information on it; the information on the disk must be compatible with the recipient's computer software and hardware; and the recipient's computer must be fully operational and defect-free. At any of these stages, critical errors that are difficult to detect can be included in the data. Similarly, electronic transfer of data via modem can encounter all of these problems, as well as potential problems with phone lines. Once the information is utilized by the recipient, there is more possibility of error. The electronically-transferred design data can be altered or damaged by the recipient. Exacerbating each of these risks is the possibility that the recipient is using the software improperly and small glitches often go undetected.
In most respects, liability risks arising from information transmitted to the design professional are similar to those which existed before the CADD evolution. Whether generated in print or electronically, insufficient or incorrect information provided to the design professional by others may lead to a defective design product. However, with computers, A/Es must now verify that the information provided to them electronically is identical to that which the other party intended to transmit.
New liability exposures arise first and foremost because the electronic transfer of data, particularly by way of modem or network, is often not documented. Even more seriously, the information can be deleted from the recipient's files so that data (as well as any record of its receipt) may be lost. In addition, unlike written copies that clearly reflect changes, computer data can be modified and bear no evidence of the modification. When liability issues arise, one must trace the design data to its source. If A/Es are unable to prove they relied on particular information provided by others, they may bear the loss. Therefore, procedures to document the receipt of information electronically, as well as a means of retaining a copy of the information "as transmitted", are critical.
Some of the key FTP steps for information received by or transmitted between design team members should be as follows:
For information received from outside sources (such as clients and separately retained consultants):
For information exchanged among the design team members:
Where information will be available for electronic access such as on a project website or a firm homepage, security measures must be established. The primary issues are: who will have access, how will access be controlled (i.e., by passwords), who will have "read only" rights, who will have downloading rights, and who will have rights to add to and/or alter what material. Such procedures must be agreed to, reduced to writing, and distributed in advance of the release or availability of the information.
D. Outside Contacts
Finally, the design team's own FTP should expressly provide who is authorized to receive and convey electronic information to and from the client and third parties, and how such exchanges are to be documented and shared with the other team members.
2. Client Concerns
Many (or even most) clients now expect and demand that the design will be done electronically and that they will receive access to the electronic design documents. In such a situation, the most important issue to resolve at the outset is to identify the client's expectations and intended uses. Most often, clients want access to and copies of electronic documents to monitor and/or participate in the design process, to create a project archive, to use the documents on subsequent projects, to provide copies to third parties, to create a set of record "as built" drawings, or to serve as a basis for facility management. Depending on the project, these various uses may or may not be realistic and may or may not impose additional burdens on or present additional opportunities to the design team.
A. Identify and Document CADD/Electronic Expectations
The very first and most important step with any client is to address the issues of CADD and the exchange of electronic information and documents at the outset of the contract. This discussion should take place before any work has begun and before the contract for services is finalized.
Depending on the relative sophistication of the client, explain the opportunities, limitations, and risks of CADD and the electronic process. Once the client has been adequately educated, focus on what electronic information and documents the client really wants and work with the client to make those expectations realistic. This discussion presents both an opportunity and a danger to A/E firms. The opportunity is to demonstrate sophistication to the client and to expand the scope of services to meet the client's desires for electronic information. The danger is that the A/E firm may agree to furnish more than the electronic documents can actually provide or fail to account for the time and fees associated with those services. The most frequent area of client misconception is the realistic and long-term accessibility and utility of electronic design information.
Once these discussions have clarified the parties' expectations and obligations for electronic documents, the details should be included in the service agreement with the client. Specifically, the client's expected uses and the agreed-to electronic deliverables should be expressly set forth in the contract. The contract should also provide: (1) the hard copy is the deliverable, and controls; (2) the electronic documents are provide at the client's risk as a courtesy; and (3) the electronic documents are not warranted beyond the completion of the project or for any purpose not expressly contemplated by the agreement.
If the intended uses include the client's input into the design process, clear procedures should be established for the timing and format of that input. For example, how long does the client have to comment and how will that input be communicated and to whom?
B. System Compatibility
All of the same system compatibility issues which exist between the design team apply equally to any client who will receive electronic information. Accordingly, as with the design team, the client and prime A/E should discuss the software and programs anticipated for the project. This may generally be accomplished in one of two ways. Ideally, the A/E will simply identify the programming it uses and shift the responsibility to the client to make certain its own system is compatible. Alternatively, the A/E may take on the responsibility to coordinate the compatibility of the systems. If this latter approach is taken, the A/E should avoid guaranteeing or warranting the compatibility and should make certain that the time and expense of this process is adequately built into the fee and schedule.
C. Transmission Errors/Document Curruption
Transmission errors and subsequent document corruption are concerns applicable to all electronic transmissions, including those to clients. Accordingly, the key FTP steps for information received from or transmitted to the client are similar to those applicable to communications between design team members. These steps should include:
D. Defining "Deliverables" and Protecting Compensation
A/Es have traditionally defined discrete moments when information is transferred, and a right to payment is established (i.e., delivery of schematic drawings, design development drawings, and working drawings). Client approval sets the parameters for the distinction between "basic" and "additional" services. Post-approval changes entitle the design professional to increased compensation.
With computers, it's possible for clients to be "on line" throughout the design process and to have available all interim design data. As a result, delivery of the design product is made on a continuous basis. The clear lines between "schematic", "design development", and "working" drawings are easily muddied, especially when clients are technically competent and desire to work along with the A/E. With the rhythm of approval and payment disrupted, and with control over design products lost, the A/E's risk of nonpayment increases. It is therefore imperative that these issues be specifically addressed in the contract. In particular, the contract must incorporate language both defining "deliverables" and tying payment to the "deliverables". The precise approach will depend on the nature of the project. Consistent with this approach, clear records should be created to document the progressive deliverables.
The use of in-process design data also creates liability concerns. Assuming the client is willing to pay for the work performed to date, is the client entitled to make use of less-than-final design data in order to speed up a project without agreeing to relieve the A/E from liability for errors and omissions existing in the not-yet-finalized documents? This is an issue that needs to be addressed in the contract. If the client is to be entitled to use such incomplete documents, the A/E's liability should be appropriately limited and the client should be obligated to retain another A/E who will serve as A/E of record.
E. Ownership and Reuse
Without question, the greatest financial and liability concern has to do with the unauthorized use of electronic design documents. Anyone with the right software (or even the wrong software) can access and modify an electronic document. Such access to the documents presents a myriad of concerns. When a design work product can essentially be stolen, the first impact to the design professional is the loss of potential fees and revenues. When the reused design is actually used in construction, it may still be traceable or linked to the design professional and thereby become a source of potential liability. What is an A/E to do?
In the United States, design professionals are theoretically protected by Federal copyright law. The creators of "original work of authorship" (such as plans, specifications, or a building design as embodied in a completed structure) are entitled to statutory protection against unlawful copying of their work. A copyright protects the right to:
A copyright is established automatically when any written or visual work is reduced to a hard-copy form or a recording. Although it is advisable to do so, the indication of a copyright and the copyright owner does not necessarily need to appear on the document. Similarly, no registration is required to establish the copyright. However, owners have the right to register copyrights with the Federal government. If the copyright is registered before an infringement of the work occurs, the author can recover attorneys' fees and statutory damages which can be as much as $100,000 per illegal copy.
When the design product is created, modified, or transmitted with the use of electronic processes, additional issues relating to copyright protection must be addressed. Although the treatment of these materials under copyright laws will not differ from the treatment of a hard copy, the opportunity for the owner to alter, adapt or transfer the materials may be significantly greater. This leads to the obvious question of how to copyright electronically-stored data or design information. In general, regardless of whether or not the design professional has provided the owner with a set of the hard copy or electronic plans or drawings for use on the project, the A/E retains ownership rights unless otherwise agreed in writing.
Nevertheless, every A/E agreement with clients should address the ownership of all copyrights as well as any rights to use or make copies of such documents (a.k.a. licenses). Ideally, such a provision will provide:
If the client insists on becoming the owner of the final design documents, its ownership rights should included restrictions on unauthorized uses and modifications as well as supporting indemnity provisions and liability waivers.
F. Risk Allocation
Finally, some errors or omissions inherent in a design process and in an electronic transfer of design data cannot be completely avoided. The issue becomes who bears such risks. The A/E must necessarily bear the risk of internal operations -- employees' errors in conceptualization, documentation and transmission. However, the risks in the electronic transfer of information and the improper use of that information by others should be borne by others who control that risk. Many of these issues can and should be addressed at the outset of the project in the form of contractual commitments.
Many such provisions have been identified above (i.e., indemnity provisions). However, there are other contractual provisions which may and can affect potential liability. In particular, careful consideration should be given to such issues as insurance commitments by the A/E and others, schedule commitments, liquidated damages provisions, and force majure provisions. (Note: Any A/E acting as a subconsultant should consider these issues both as to the owner and the prime A/E.)
3. Thirdy Party Concerns
Third parties are strangers to the relationship between the A/E and the client. Such third parties present a particular concern if they receive copies of the A/E's electronic work product. Such parties may include contractors, separately retained consultants, lenders, tenants, and subsequent owners. Such parties do not have a contractual relationship with the A/E and are therefore not contractually limited in their uses of the documents. If it is necessary to provide a third party with access to such electronic documents, careful consideration should be given to protective measures before access is granted. Relevant issues to consider are as follows:
System Compatibility. All responsibility for system and software compatibility should be placed on the third-party recipient. The A/E's sole responsibility should be to identify its own program and method of transmission.
Transmission Errors. Similarly, all risks of transmission errors should be, for such things as shop drawings, placed on the third-party recipient. In the case of contractor's using the electronic documents, this will help lead them to conduct some form of reasonable analysis of the documents.
Authorized Uses and Modifications. The authorized uses of the documents should be expressly identified. Similar restriction on the use, reuse, and modification to those imposed on the client should also be imposed on any third-party recipient. Consider precluding any further transmissions.
Compensation. Transmittal and interaction with third parties may also lead to additional costs and expenses. If so, such costs and expenses should be allocated to and paid by someone. The A/E should clarify this before transmitting the documents.
Risk Allocation. Such transmittals should also have the protection of contractual risk allocation provisions. In particular, the recipient should agree to indemnify the A/E for any unauthorized use, misuse, or modification.
Ideally, each of the foregoing will be reduced to a written agreement prior to the transmission of the document. However, if such an agreement cannot be reached, the transmittal should be accompanied by a transmittal document setting forth these or similar provisions and providing that any and all uses are subject to these restrictions.
Project Websites and Extranets
The most recent surveys indicate that only one of four firms is currently involved in projects utilizing a project website or extranet. Those who are using project websites are generally only using those websites on a minority of their current projects. However, most "experts" predict that within the next five years, project websites will become the norm for both design and construction administration. As a result, firms must be prepared to address the technology and risk management issues presented by the use of such technologies.
All of the risk management concerns presented by electronic design generally are equally applicable to design and project management through a project website. However, the context of a project website also presents a number of additional considerations and challenges which are discussed below.
1. To Host Or Not To Host
The first question is who will be responsible for selecting, programming, and administering the project website. Such "web masters" may unwittingly become responsible for many risks far beyond their control and risks which may not be covered by applicable insurance coverage.
Regardless of whether acting as the website host, every team member should be concerned with the selection of the website provider. While this presents a number of issues, two are more important than the rest:
Aside from the technical considerations, the agreements with such providers should avoid extreme limitations of liability and should provide that the system or software necessary for operation of the site will be continuously maintained through the duration of the project.
Once the provider is selected, the next natural question is who will be responsible for hosting the site. Natural candidates for such responsibilities are the architects, engineers, and construction managers. On first impression, such a role seems attractive. It keeps the host in the loop on all relevant communications and may provide the opportunities to capture additional services and projects. However, such a role should not be entered into lightly. Such a role may present a number of new and potentially significant liabilities:
The natural corollary to the concerns discussed above for the host is that any site participant should take steps, both contractually and otherwise to make certain they are not held responsible for any of these issues.
A final question relates to whether the typical professional errors and omission insurance policy covers activities as a website host. Most policies would not traditionally cover claims arising out of software programming, copyright violations, or similar issues.
Although part of the overall selection of an appropriate website provider, one concern worthy of special consideration is security. To be reliable and thereby useful, a website and its contents must be secure. Such security is also critical to each team members need to maintain custody and control over its work product. Properly considered, such security must take place on two levels.
The first and most obvious level is the outside world. As a general rule, the public should be given access to the site only under the most careful of controls. Where the public is given access to the site, effective barriers should exclude them from the working areas of the site. The preferred approach where public access is desired would be to establish a separate site for the dissemination of public information.
The second level is within the design and construction team. Although the needs and strategies will vary from firm to firm, generally each firm should provide its design input on a "read and copy" basis only so that it cannot be altered by another party. For those receiving such documentation, they should take steps to preserve a record of what information they have received and from who.
3. What Is The Design And Who Is The Designer?
An inevitable result of the move to project websites and its supporting software is the blurring of the lines between design disciplines, contractors, and vendors. As information from all three sources becomes merged into integrated documents, the lines of responsibility also become inevitably blurred. As a result, new and more detailed definitions of design responsibilities and design deliverables to reflect the realities of electronic design are necessary. For the design professional, this should include the following:
Project websites present even more extreme documentation challenges than do electronic design technologies generally. For example, all relevant documentation may not be contained within the website itself. Rather, the website may simply serve as a portal to other websites where relevant information is stored. The challenge becomes how to appropriately document the progress of such a web-based project. At a minimum, the relevant contract should provide that all project participants maintain copies of their records for a specified period of time. In addition, the status of the project in general and the website in particular should be documented at contractually agreed-to intervals. At a minimum, such "snapshots" should be maintained electronically with particularly relevant portions reduced to hard copies.
World of Tomorrow: Object Oriented Design
The technology of tomorrow (and even today) will increasingly take technology from a design tool to become a part of the design process itself. Smart software will actually perform much of the design automatically. For example, object oriented design software will take designer selected "objects" and actually arrange them to create a structure or system. Each "object" is modeled in a piece of code which then relates to the other "objects" for purposes of arranging the system. For example, a boiler manufacturer may supply the code for its boiler. When that code is placed into the design, it can automatically communicate with the other elements to do such things as size the related piping.
Within such a dynamic system, the identification of the design and the responsibility therefore becomes even more complexing. If a vendor supplies a contractor with code for its product, the contractor submits the code to the architect, and the architect incorporates that code into the design, who is the designer? Absent clear contractual provisions, the accurate and frightening answer may be no one and everyone.
Such software will also demand tremendous discipline on the part of design professionals. The use of such self-coordinating software may well lead to the design equivalent of "spell check blindness". Those relying on computers to perform traditional coordination tasks may not perform enough to the actual coordination themselves to catch those issues not captured by the software or errors created by the software.
Such dynamic design programs may also create substantial licensing issues for design professionals. Most State licensing provisions require design professionals to oversee any design under their stamp to the same extent as if they had performed the design themselves. When electronic design information is simply incorporated into the design, has the design professional fulfilled this obligation?
These and many other issues will arise as the traditional design world continues to incorporate and rely on the growing array of electronic tools available to design professionals. Each such advance requires not only a grasp of the possibilities of the technology, but also the attendant risk and appropriate strategies to control those risks.