Construction Management/Design-Build in Texas: General Contractor, or Something More?

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July 30, 2018

I. General Contractor, or Something More
A. Overview of Project Delivery Systems
The difference between the use of classic versus alternate delivery methods was typically based on whether the project was public or private projects. Owners on a private job have little constraints beyond laws, codes ordinances, etc. and thus have sought the system that would deliver the project on time, on budget, with the most quality and for the least cost. In general, private owners chose traditional competitive bidding method where they wanted a complete design and a known price for construction (though some owners used the bid price as the start of negotiations for a cheaper price, but that is another story). Owners typically looked toward design-build or Construction Manager at Risk when they wanted their projects delivered more quickly and to increase builder participation in the design phase.

Alternate delivery methods have only recently become available in the Texas public sector. Texas law required awarding the construction project to the lowest responsive, responsible bidder.1 Traditionally, because tax dollars were being used, cautious municipalities were only allowed to use the design-bid-build method. This was because competitive bidding was relatively simple, and provided the ability to construct a project for the lowest price with the least possibility for corruption. While those are likely the reasons that this delivery method is still widely favored and used.

However, the most significant drawback of the competitive bidding system is also what makes it attractive - the lack of subjectivity. While the low bidder may have the best price, responsiveness, and responsibility, it might not be an entity the government wants to use based on characteristics other than price, e.g., time of performance, safety, prior successful work with this owner, claims history, experience with this particular type of construction, etc. The trend of “privatization” was beginning to take hold in all aspects of government, and now it was entering the world of public contracting. Lobbyists and legislators realized that in some circumstances, in order to best facilitate the project for the best price, public contracting delivery methods needed to be expanded. Below is an examination of each delivery system.

1. Traditional Method (Design-Bid-Build)
Historically, the traditional method of construction, also known as competitive bidding, has been most popular among all methods.2 The best explanation in favor of this delivery system is:

Competitive bidding requires due advertisement, giving opportunity to bid, and contemplates a bidding on the same undertaking upon each of the same material items covered by the contract; upon the same thing. It requires that all bidders be placed upon the same plane of equality and that they each bid upon the same terms and conditions involved in all the items and parts of the contract, and that the proposal specify as to all bids the same, or substantially similar specifications. Its purpose is to stimulate competition, prevent favoritism and secure the best work and materials at the lowest practicable price, for the best interests and benefit of the
taxpayers and property owners.3

This method, like most, begins with an Owner interested in building a project. Typically, the Owner will obtain a civil survey and geotechnical report for the land upon which he plans to build. Once the Owner receives this information, he then hires an Architect (for an architectural job) or an Engineer (for a civil-type job) for assistance with programmatic goals and schematic design. The Owner and designer work together to further develop the design, and upon the Owner’s approval, the designer produces a set of construction drawings, which will be used for pricing and permitting, and ultimately constructing the project. Additionally, the Architect will hire subconsultants, including Structural, Civil, and Mechanical, Electrical & Plumbing (“MEP”) Engineers, on an architectural type project (e.g., schools, office buildings, hospitals, etc.). The designer then assists the Owner with soliciting bids under a prescribed process, known to all. All participating bidders bid on the same criteria. Under this method, the Owner selects a Contractor based on price. The lowest responsible, responsive bidder wins the award of contract.

Typically, once the project has been awarded to a Contractor, a lump sum, fixedprice contract is executed or negotiated. The use of “standard” contract forms sponsored by various trade groups such as the American Institute of Architects and Associated General Contractors, etc., with or without modifications, are common.4 The Contractor will then hire various subcontractors to perform the vast majority, if not all, of the actual work. Subcontractors sometimes hire specialty sub-subcontractors to perform certain components of their scope of work. Subcontractors also contract with vendors and suppliers. During the course of the work, the architect or engineer, as the case may be,  may provide construction contract administration services, if that is a requirement of the contract with the Owner. The purpose is to ensure the project is built in accordance with the design intent.

Most importantly for our purposes, no contractual privity exists between the Designer and the Contractor. Other than contractual responsibilities spelled out in the various signed contract documents, (Owner/Designer agreement, and Owner-Contractor agreement), there are no contractual obligations between the Designer of the project and the constructor, all such obligations flowing through the Owner. In many instances, the Architect or Engineer administers the construction contract through the Owner, with whom he directly contracts.

This method allows the Owner to shift most of the risk to the Designer and the Contractor. The Designer is responsible for proper design of the project and the Contractor is responsible for constructing the project according to the plans and specifications provided by the Designer. Generally, these are separate duties for which the Designer and Contractor are liable to the Owner. Thus, upon discovery of any defects, the Owner will look to the Designer and/or the Contractor for remedies and possibly damages. Although the Contractor will normally assert the defect is design related, and the designer will contend the defect resulted from poor workmanship, the Owner should not bear any liability, at least in theory. The system is designed to allow (and most contracts require) the Designer to monitor the Contractor’s work to verify it is in accordance with the design and that it is acceptable work. Conversely, most contracts also require the Contractor to review the design documents and to bring to the Owner and Designer’s attention any discovered error or omission in the design. Although theoretically sound, in practice this system is a recipe for finger pointing, escalating tension, claims and battle throughout the project, and often times thereafter.

Relative to time, the design-bid-build delivery system is not the most efficient, in comparison to the others available. The primary reason is that the design (e.g., construction drawings) must be fully complete before the project can be put out for bid, much less constructed. It can be argued, however, that giving a designer a full opportunity and enough time to prepare the entire set of drawings reduces errors in the design and specifications, thereby reducing construction issues as the project is built. Regardless of whether that theory holds water in practical terms, the competitive bidding method requires a significant period of time from the start of design to the end of construction.

In addition to any number of proprietary contract forms in use for the design-bidbuild method, typically used forms are promulgated by the American Institute of Architects (“AIA”) and the Associated General Contractors (“AGC”). Contract forms include the AIA B101, for Owner-Architect agreements, and AIA Al0l and A201 for Owner-Contractor agreements.5 “ConsensusDocs,” forms promulgated by the AGC and endorsed by several contractor organizations, use the “200 Series” forms.6

2. Competitive Sealed Proposal
Competitive Sealed Proposal is a delivery method similar to the traditional method in that the Owner selects an Architect/Engineer to design the project. Once construction documents are fully completed, the Owner solicits proposals from Contractors to perform the work. The main difference between the traditional method and competitive sealed proposal is the latter allows the Owner flexibility to select a Contractor on criteria other than price. As a result, the selection does not always result in the lowest price. There are no intrinsic efficiencies of time with this delivery system. The method and form of contracts is the same - either stipulated sum or cost-of-the-work up to a guaranteed maximum price. In both this method and the following, Construction Manager at Risk, Owners in the private sector have for years considered (or at least had the option to consider) many different and varied interests in choosing a Contractor. Since the actual contracting scheme is no different in this system than in competitive bidding, the contract forms are virtually similar.

3. Construction Manager at Risk
Construction Manager at Risk is a delivery method wherein the Construction Manager at Risk (“CMAR”) ultimately serves as the General Contractor assuming the risk for the price, and provides design phase consultation in evaluating costs, schedule, and implications of alternative designs during and after the design phase. Selection of the CMAR is based on criteria including qualifications and experience, and may involve a fee and general conditions. In the typical scenario, the CMAR is hired to give preconstruction input and to help through the design phase. Job pricing has not been done at this point, since the design is not complete enough to allow pricing to take place. At this junction, the CMAR is not “at risk”, e.g., he has no responsibility and is under no contractual requirement to construct the project for a stated cost. At some point as the design begins to mature, usually at the discretion of the CMAR, the CMAR offers to construct the project either for a lump sum or, more frequently, under a cost-of-the-work up to a guaranteed maximum price scenario. If the Owner agrees to the price and time suggested by the CMAR, a change order-type document is executed, requiring the CMAR to build the project for this price and time. It is at this point that the CMAR becomes “at risk” for completing the job for the agreed upon price, hence the name “Construction Manager at Risk.”

In the typical scenario, the CMAR provides a Guaranteed Maximum Price (“GMP”) to fix the cost of the project. The CMAR competitively bids with subcontractors to perform the work. Under this method, the Owner may elect to expedite the process by authorizing certain elements of construction to begin prior to completion of the design phase. n this regard, CMAR takes on some of the time benefits of the design/build system, allowing for work to take place before the entirety of the design is complete. Theoretically, there is a reduced adversarial relationship, as the designer and constructor are supposed to work in a “loose” collaboration during the design phase. Although this system can work as intended, there is a potential for adversity between the constructor and designer if proper attitudes are not employed. The CMAR may inadvertently assume design risks related to decisions for which it gave input. At a minimum the CMAR can be questioned about alleged design errors because the CMAR is supposed to review the design during its inception. Moreover, the CMAR may assume liability for construction defects or delay issues although it is not performing the work. This method is best suited for large projects with scopes that are difficult to define or subject to change. Typical contract forms used are AIA-A121 and the “500 Series” Consensus Docs.7

4. Construction Management Agency
Construction Management Agency is a delivery method wherein the Construction Manager serves as the Agent for the Owner. The Construction Management Agent (“CMA”) provides administration and management services instead of a General Contractor. The CMA provides design phase assistance, but does not hold any subcontract, nor does it provide bonds for the project. Selection of the CMA is based on qualifications and experience. The distinguishing characteristic is that the CMA is not responsible for constructing the project. It does not hold any subcontracts with any of the trades.

Construction Management Agency is characterized by the work divided into multiple packages and bid directly to the trades. The Owner holds all trade contracts directly, usually with multiple Prime Contractors, and the CMA acts as the Owner’s agent in the management and direction of the work. The CMA is normally selected at the same time as the Architect/Engineer or shortly thereafter, and provides assistance in the design phase for costs, schedule, and constructability. The Owner can speed construction by awarding contracts for certain elements of the work prior to completion of the design phase.

Under this method the Owner is given great flexibility with the selection of trades, design phase assistance, a faster schedule, and anon-adversarial relationship with the CMA. However, there is no single point of responsibility, no guaranteed price, the Owner must manage multiple contracts albeit with the help of the CMA), and there are potential price increases due to design changes. Like the CMAR, the CMA may inadvertently assume design risks related to decisions for which it gave input. The CMA may also assume liability for construction defects or delay issues although it is not performing the work. This method generally lends itself to owners with sophisticated in-house construction capability, and relatively simple, straightforward projects, regardless of size. Typical contract forms used are AIA-121 CMC and the “800 Series” Consensus Docs.8

5. Design-Build
Under the Design-Build method, one party assumes responsibility for both design and construction of the project. It can promote an interdisciplinary team approach for the duration of the project. Here, the Owner hires a Design-Build firm to design and build the project. In some cases, the Owner hires a Contractor who will then hire an Architect/Engineer to design the project. In other cases, the Owner will hire the Architect/Engineer who will then contract with a Contractor to build the project. In both cases, the Owner looks solely to the Design-Build firm for any liabilities regarding the design and construction of the project. Because the Owner does contract directly with the Design Build firm, this method imposes greater responsibilities on the Owner. Without an Architect/Engineer looking out for the Owner’s best interests (in this case, the Architect/Engineer looks out for the Contractor’s best interests) the Owner must stay involved to “bridge” the designer’s traditional role of construction watchdog.

Additionally, there are times when the design and construction move so rapidly that the design does not have time to “mature.” Sometimes, design errors are not caught in time, causing costly fixes for the Design-Build team. Again, safeguards are put in place in public contracting requiring an “overseeing” designer, to fulfill a watchdog function. Under this method, the risks are clearly defined, and it is decidedly in the owner’s favor. The Design-Build firm assumes all risk associated with design defects, construction defects, and scheduling/delay issues. Regardless of whether the Contractor, Architect/Engineer, or a Subcontractor is responsible for the delay/defect, the Owner’s single point of remedy is the Design-Build firm (assuming, of course, the Owner met all of his contractual responsibilities, selection, design decisions, etc.). This method tends to minimize adversarial relationships because the Architect/Engineer and Contractor are on the “same side.” A great virtue of this system is speed. Complex projects sometimes are problematic using this system. It is also helpful to have a decisive Owner to make decisions in a short period of time. Typical forms used are AIA Al41 and the “400 Series” Consensus Docs.

6. Bridging
Bridging is another form of Design-Build wherein the Owner hires an Architect/Engineer to prepare its “design criteria” package that enables the Owner to then receive competitive sealed proposals from Design-Build teams. The Design-Build firm is selected on either a competitive bid process or on a combination of qualifications, experience and price. The Design-Build firm then completes the construction documents and performs the work. This involves two Architect/Engineer teams. One AIE team is hired by the Owner to prepare the initial design criteria package and the other A/E team is hired by the Design-Build firm to complete the construction documents. It offers the Owner a single point of responsibility for design and construction, faster delivery, an enhanced definition of scope of work, and stronger relationships between the Architect/Engineer and Contractor.

This method may diminish checks and balances, can be difficult to manage, and creates an adversarial relationship between the Owner’s AIE and the Contractor’s A/E. It is best suited for large projects that are sensitive to scheduling and difficult to define. This system has not gained extremely wide use as of this point in time. Contract forms are proprietary. Standard forms have yet to be devised.

7. Job Order Contracting
As normally defined in the construction industry, Job Order Contracting is a process for contracting the minor construction, repair, rehabilitation, or alteration of facilities when the work is of a recurring nature, but the delivery times, type and quantities of work required are indefinite. Orders are priced substantially upon predescribed and pre-priced tasks contained in an Owner specified Unit Price Book (“Means” is a typical source used). The Prime Contractor bids a “coefficient” or multiplier that is applied to these unit prices to determine the contractual rates. Selection is based upon the combination of experience, qualifications, past performance, technical ability, financial stability, reputation and price that provides the overall best value. No standard forms have been created for this delivery method.

B. Public Project Delivery System Options
1. General
After much thought and deliberation, in 1995 modifications to Chapter 44 of the Texas Education Code allowed alternate delivery systems in the public sector. Unfortunately, the law relative to the availability of delivery systems is spread throughout the Texas statutes. This section provides a brief overview of procurement of construction services and where to find the applicable law for each governmental entity. 2. Public Schools (K-12) Chapter 44 of the Texas Education Code allows a school district to choose between one of the following methods:
• Competitive Bidding;
• Competitive Sealed Proposals;
• Construction Manager-Agent;
• Construction Manager-at-Risk;
• Design/Build; or
• Job Order Contracting.9

However, before selecting a method and advertising for bids, the district must determine which method will provide the “best value” to the district.10 Once a method is selected, the school board must publish the request for bids along with the criteria the board will be using to evaluate the offerors and the weight to be given to each aspect of the criteria.11 The criteria the district is permitted to use are specifically laid out in section 44.031(b), as follows:

• The purchase price;
• The reputation of the vendor and of the vendor’s goods or services;
• The quality of the vendor’s goods or services;
• The extent to which the goods or services meet the district’s needs;
• The vendor’s past relationship with the district;
• The impact on the ability of the district to comply with laws and rules relating to historically underutilized businesses;
• The total long-term cost to the district to acquire the vendor’s goods or services; and
• Any other relevant factor specifically listed in the request for bids or proposals.12

a) Design/Build Contracts
When choosing to use the Design/Build method, the district must follow the procedures provided in section 44.036 of the Texas Education Code. First, the district must “designate an engineer or architect independent of the design-build firm to act as its representative for the duration of the work on the facility.”13 This requirement of a separate designer as the Owner’s representative is to fill the “checks and balances” void left by the Owner not contracting separately with the project designer of record. It provides a level of comfort for the public owner in the design-build scenario.

Additionally, the district must “prepare a request for qualifications that includes general information on the project site, project scope, budget, special systems, selection criteria, and other information that may assist potential design-build firms in submitting proposals for the project.” 14 This is to give some direction of project parameters to the designbuild firms. Once the design-build firms provide the statements of qualifications, the district must perform a two-phase evaluation before selecting a firm and awarding the contract.15 In phase one, the district must “prepare a request for qualifications and evaluate each offeror’s experience, technical competence, and capability to perform, the past performance of the offeror’s team and members of the team, and other appropriate factors submitted by the team or firm in response to the request for qualifications.”16 Essentially this is the “beauty contest” part of the selection process. Based on these evaluations, the district is to qualify a maximum of five offerors who are required to submit additional information and interview with the district.17

In phase two, the district must “evaluate the information submitted by the offerors on the basis of the selection criteria stated in the request for qualifications and the results of any interview.”18 During this phase, the school district is also allowed to request additional information regarding demonstrated competence and qualifications before ranking the proposals based on the required criteria. Once ranked, the district must select the design-build firm that offers “the best value to the district based on the published selection criteria and its ranking evaluations.”

b) Construction Manager-Agent
Under section 44.037 of the Texas Education Code, “[a] school district may use the construction manager-agent method for the construction, rehabilitation, alteration, or repair of a facility.”19 However, unlike the design/build method, the district must select a construction manager-agent on the basis of demonstrated competence and qualifications in the manner provided for engineers or architects under Section 2254.004 of the Texas Government Code.20 Under section 2254.004 of the Government Code, the district must first select the most qualified provider of services on the basis on competence and qualification; and then attempt to contract with that party.21 Although price can be a factor, the selection of a construction manager-agent is akin to selecting a professional (e.g., architect, engineer, lawyer, etc.) with the emphasis on qualifications. If a contract cannot be negotiated with that party, the district must formally end negotiations with that party before it selects the next most qualified party and attempts to negotiate a contract with that party.22

c) Construction Manager-At-Risk
When using the construction manager-at-risk method, a school district has the choice of using a one-step or a two-step process.23 When using the one-step process, the district must prepare a request for proposals, including proposed fees and prices for fulfilling the general conditions.24 Once the proposals have been made, the district must then “select the offeror that submits the proposal that offers the best value for the district based on the published selection criteria and on its ranking evaluation.” When using the two-step process, the district must first prepare a request for qualifications.25 The district may then request that five or fewer offerors, selected solely on the basis on qualifications, provide additional information, including the construction manager-at-risk’s proposed fee and its price for fulfilling the general conditions.26 After each step the district shall read allowed the names of the offerors, and shall read allowed prices and fees, if any within forty-five (45) days after the date of opening the proposals.27 Then, just as in the one-step process, the district must select the proposal that offers the best value to the district.28

Unlike other delivery systems, in the construction manager at risk method, the CMAR publicly advertises and receives bids from subcontractors for the major elements of the work.29 A CMAR may itself perform work, but it must submit a bid to do so in the same manner as other subcontractors, and the district must determine if this provides the “best value” for the district.

Additionally, the CMAR and the district must review all subcontractor bids in a manner that does not disclose the contents of the bid proposals to people not employed by the CMAR, the district, or the architect or engineer. However, all bids must be made public after the award of the contract or within seven (7) days after the final selection of the bids.30

3. Junior College Districts
Chapter 44 of the Texas Education Code extends the same delivery methods available for public schools (K-12) to Junior College districts.31 Thus, Junior Colleges have the same delivery system options and restrictions as K-12 school districts, as discussed above.

4. Higher Education
The Texas Education Code prescribes the sealed competitive bidding method for the award of construction contracts pertaining to institutions of higher education.32 Chapter 61 of the Texas Education Code defines “institution of higher learning” as “any public technical institute, public technical college, public senior college or university, medical or dental unit, public state college, or other agency of higher education as defined in this section.”33 Chapter 51 of the Texas Education Code outlines the approved methods for construction. They include the following:
• Design-Build Contracts;
• Construction Manager-Agent; and
• Construction Manager-at-Risk.34
Again, for all practical purposes, these approved methods are identical to those applicable to K-12 Public Schools and Junior College Districts, found in sections 44.036 to 44.038 of the Texas Education Code.35

5. Local Government
After seeing the success of alternate project delivery systems in the public school systems, counties, cities, and others wanted on the bandwagon. In 2001,Chapter 271 of the Texas Local Government Code was amended to allow for the new delivery systems for certain governmental entities. The statute defines “governmental entity” as “a  municipality, county, hospital district, water district or [other] authority ... including a river authority, or conservation and reclamation district…or a defense base development authority…”36 Chapter 271 authorizes these types of governmental entities to use any of the following methods for procuring construction services “that provides the best valuefor the governmental entity”:
• Competitive Bidding;
• Competitive Sealed Proposals;
• Design-Build Contracts;
• Construction Manager; or
• Job Order Contracts.37
If the governmental entity considers using any of these methods other than competitive bidding, before advertising, the entity must first determine which method provides the “best value” for the governmental entity.38 In determining to whom a contract is awarded, the governmental entity may consider criteria identical to that found in section 44.031(b) of the Education Code, listed above, including, specifically, “any other relevant factor specifically listed in the request for bids or proposals.”39 Again, a governmental entity can shape the selection process to its specific needs.

Sections 271.117-.119 of the Local Government Code outline the approved methods of construction. They include the following:
• Design-Build Contracts;
• Construction Manager-Agent; and
• Construction Manager-at-Risk.40

Again, for all practical purposes, these approved methods are identical to those applicable to K-12 Public Schools and Junior College Districts, found in sections 44.036 to 44.038 of the Texas Education Code.41

6. TxDOT
Chapter 223 of the Texas Transportation Code limits the Texas Department of Transportation (“TxDOT”) to use of the Sealed Competitive Bidding method of procuring construction services.42 The closest TxDOT has come to alternate delivery systems is the 2007 legislation (and the 2013 amendments thereto) allowing work to be performed using “comprehensive development agreements.”43 This legislation authorized “public-private partnerships” for large road projects, the idea of which was to potentially use private monies for construction, allowing the private entity to participate in the proceeds of the finished construction. Although complicated and restrictive, the law under this new vehicle does specifically allow design-build as a method of road construction.44 A legislative study committee is to report to the current legislative session as to the effectiveness of private monies for construction, allowing the private entity to participate in the proceeds of the finished construction. Although complicated and restrictive, the law under this new vehicle does specifically allow design-build as a method of road construction.45

II. When a “Builder” Becomes a “Designer”
As discussed above, in the design-build contracting relationship, a contractor is obviously responsible for the sufficiency of the design. In this project delivery system, a contractor must thoroughly understand its design responsibilities and should shift those risks to a design professional. In the design-bid-build contracting relationship, contracts typically place the design responsibility on the owner's architect. However, there are many contractual provisions that shift design responsibilities to the general contractor. A general contractor will obviously need to delegate design responsibility to its specialty subcontractors. Subcontractors need to carefully review contract documents when they are being asked to assume the general contractor’s responsibilities to the owner. Limitation of liability clauses and professional liability insurance may provide some financial relief for this transfer of design responsibility.

A. The Basics
Many state and federal courts adopt the “Spearin Doctrine.” Essentially, under the Spearin Doctrine, an owner impliedly warrants the sufficiency of the plans and specifications prepared by its architect.46

If a contractor is required to construct a project according to plans and specifications prepared by the owner or its representative, the contractor will not be responsible for the consequences of defects in the plans and specifications.47

Many Texas courts, however, apply the Lonergan rule. This rule is based upon the decision of the Texas Supreme Court in Lonergan v. San Antonio Loan & Trust Co.48 In Lonergan, the contractor argued that the owner impliedly warranted the sufficiency of plans and specifications on a project which had not yet been completed by the contractor when damage occurred. The Texas Supreme Court held that the owner was in no better position than the contractor to determine the sufficiency of the plans and specifications and, if there was to be any obligation placed upon an owner, as a guarantor of the sufficiency and specifications, it must be expressed in the contract. The Fifth Circuit Court of Appeals, in interpreting Texas law, has determined that Texas law does not provide an implied warranty of the sufficiency of plans and specifications. In Interstate Contracting Corp. v. City of Dallas,49 the Fifth Circuit indicated that the Texas Supreme Court would require contractual language indicating an intent to shift the risk of an improper design to the owner in order to find that an owner breached a contract by providing defective plans.

Contractors in Texas cannot rely upon case law in other jurisdictions that adopt a broad implied warranty of the sufficiency of the plans and specifications. The determining factors as to whether or not the design responsibility has been shifted will normally focus upon the written contract.

B. Performance Specifications
An owner can shift design responsibility to the contractor through performance specifications. Performance specifications are those that set forth an end product or standard to be achieved by the contractor. Many of these specifications incorporate design responsibilities. If the contract incorporates performance specifications, the contractor is typically given wide latitude as to how it may achieve the end result, as contrasted with typical design specifications, in which a contractor must furnish a specific piece of equipment or system.

For legal purposes, A performance specification has been described as one which “[sets] forth an objective or standard to be achieved. The successful bidder is expected to exercise his ingenuity in achieving that objective or standard of performance, selecting the means and assuming a corresponding responsibility for that selection.”50 Examples of performance specifications are as follows:

Subcontractor shall furnish all labor, materials and equipment for a fully operating fire protection system in full compliance with the NFPA and all other codes, regulations and laws applicable to the work, and in full compliance with the intent of the drawings and specifications, including all work inferable from said drawings and specifications.
* * *
All glass systems shall withstand the effects of the following performance requirements without exceeding performance criteria or failure due to defective manufacture, fabrication, installation or other defects in construction.
* * *
All glass systems shall withstand the effects of gravity loads and the following loads and stresses within limits and other conditions indicated according to . . .
* * *
As scope and performance documents, the drawings and specifications do not necessarily indicate or describe all the work required for the performance and completion of the work. Contractor shall furnish and install the items required for proper completion of the work without adjustment to the price…This is a performance specification and criteria for the solution of structurally sound work as indicated on the drawings and herein specified are for the sole purpose of defining the design intent and performance requirements. The details shown are intended to emphasize the acceptable profiles and performance requirements for this project and the general orientation, arrangement and dimensional coordination necessary for the contractor to fulfill its obligations. The contractor is required to meet the intent, purpose, criteria, parameters and functional requirements of the work described in this section.

Other examples of performance specifications that clearly require professional services are as follows:
Design all glass systems, including comprehensive engineering analysis, by a qualified professional engineer, using performance requirements and design criteria indicated.
* * *
Submit structural calculations for the work and anchorage to the building structure, with all materials and connections fully dimensioned. Show stresses, deflections and thermal movement. All drawings and calculations shall bear the seal and signature of a professional engineer licensed in the State of _______.

Where the services of a professional are required in the performance specification, the specifications may require that shop drawings be "sealed" by the contractor, which responsibility the contractor will in turn delegate to the specialty subcontractor and its engineer. Those sealed drawings practically become the design documents for a particular aspect of the work. The architect or engineer of record typically provides in those specifications that he or she is entitled to rely upon the accuracy of any sealed drawings and calculations prepared by other professionals.

Additionally, the specifications may require that a contractor follow the manufacturer's instructions for a particular installation. The architect may also require that the contractor follow the more stringent of the manufacturer's instructions or the specifications. An example of such a specification is as follows:

Comply with manufacturer's instructions, except where more stringent requirements are indicated.

In these instances, the contractor must be thoroughly aware of the instructions of the manufacturer. The contractor should only agree to follow manufacturer's instructions as they pertain to the means and methods of the contractor's work, as opposed to any design requirements by the manufacturer in its literature, unless it is clearly understood that professional services are to be provided by the contractor. Most specifications are in fact hybrid in nature in that they contain some performance criteria as well as design specifications. In cases where it is difficult to determine whether or not a specification is a “design” or “performance” specification, contract interpretation and other factors are examined to determine the intention of the parties regarding the allocation of the design responsibility. Some of the other factors that may be examined include the completeness of the plans, the circumstances surrounding the bidding, the amount of development and testing the contractor is expected to perform, the contractor’s representations regarding its expertise, the terms of the contract, and the knowledge regarding the design information that each party brings into the contract.51

Contractors that are bound to performance specifications face more liability because they may be held liable in the event the design fails, including potential liability for a latent design defect. There are also increased warranty obligations since the obligations of the contractor shift from warranting that the contractor complied with the specifications to warranting that the contractor met or exceeded the performance standards established in the specifications. Therefore, the contractor will be liable in the event it is not able to meet the performance guarantees.

One defense a contractor may be entitled to assert in some jurisdictions is that the owner knew at the time it provided the performance specifications that the specifications were most likely impossible or impracticable to achieve.52 A contractor may also be allowed to argue that the reason it failed to achieve a desired result was due to inconsistent design specifications within the contract.53

The AIA general conditions standard form gives some protection to a contractor when the design is being delegated. The AIA documents essentially require that the owner and architect specify all performance and design criteria, that must be satisfied by any engineering or architectural services provided by or through the contractor, and relieve the contractor of responsibility for the adequacy of such criteria. However, there is an exception for services that "the contractor needs . . . in order to carry out the contractor's responsibilities for construction means, methods, techniques, sequences and procedures.”54 This provision can be a trap for the unwary. Typical design responsibilities encompassed within this provision include sheeting and shoring designs, safety railing, false work for steel erection and ties to buildings for tower cranes. These "designs" may be required as part of the means and methods of the work even though the professional service may not be specifically required in the project specifications. Specifically, the A201 General Conditions provide as follows:

§ 3.12.10 The Contractor shall not be required to provide professional services that constitute the practice of architecture or engineering unless such services are specifically required by the Contract Documents for a portion of the Work or unless the Contractor needs to provide such services in order to carry out the Contractor's responsibilities for construction means, methods, techniques, sequences and procedures. The Contractor shall not be required to provide professional services in violation of applicable law. If professional design services or certifications by a design professional related to systems, materials or equipment are specifically required of the Contractor by the Contract Documents, the Owner and the Architect will specify all performance and design criteria that such services must satisfy. The Contractor shall cause such services or certifications to be provided by a properly licensed design professional, whose signature and seal shall appear on all drawings, calculations, specifications, certifications, Shop Drawings and other submittals prepared by such professional. Shop Drawings and other submittals related to the Work designed or certified by such professional, if prepared by others, shall bear such professional's written approval when submitted to the Architect. The Owner and the Architect shall be entitled to rely upon the adequacy, accuracy and completeness of the services, certifications and approvals performed or provided by such design professionals, provided the Owner and Architect have specified to the Contractor all performance and design criteria that such services must satisfy. Pursuant to this Section 3.12.10, the Architect will review, approve or take other appropriate action on submittals only for the limited purpose of checking for conformance with information given and the design concept expressed in the Contract Documents. The Contractor shall not be responsible for the adequacy of the performance and design criteria specified in the Contract Documents.55

The Consensus Documents™ also provide some protection for the contractor with respect to any requirement for the contractor to provide professional services. Consensus

Document 500™ (Standard Agreement Between Owner and Construction Manager) states as follows:

3.1.6 PROFESSIONAL SERVICES The Construction Manager may be required to procure professional services in order to carry out its responsibilities for construction means, methods, techniques, sequences and procedures or as such services are specifically called for by the Contract Documents. The Construction Manager shall obtain these professional services and any design certifications required from licensed design professionals. All drawings, specifications, calculations, certifications and submittals prepared by such design professionals shall bear the signature and seal of such design professionals and the Owner, and the Architect/Engineer, shall be entitled to rely upon the adequacy, accuracy and completeness of such design services. If professional services are specifically required by the Contract Documents, the Owner shall indicate all required performance and design criteria. The Construction Manager shall not be responsible for the adequacy of such performance and design criteria. The Construction Manager shall not be required to provide such services in violation of existing laws, rules and regulations in the jurisdiction where the Project is located.56

C. Value Engineering
Value engineering is a term that refers to cost savings ideas and suggestions by a contractor that usually occur during the preconstruction phase and prior to an overall agreement upon a guaranteed maximum price or contract sum. On federal projects, value engineering is defined as follows:

Value engineering is the formal technique by which contractors may (1) voluntarily suggest methods for performing more economically and share in any resulting savings or (2) be required to establish a program to identify and submit to the government methods for performing more economically. Value engineering attempts to eliminate, without impairing any of the essential functions or characteristics, anything that increases acquisition, operation or support costs.57

Many construction manager contracts require the construction manager to consult with the owner and architect during the design phase for cost savings ideas. Related AIA contractual provisions are as follows:

§2.1.2 . . . the Construction Manager shall provide recommendations on construction feasibility; actions designed to minimize adverse effects of labor or material shortages; time requirements for procurement, installation and construction completion; and factors related to construction cost, including estimates of alternative designs or materials, preliminary budgets and possible economies.58
* * *
§ If any estimate submitted to the Owner exceeds previously approved estimates or the Owner's budget, the Construction Manager shall make appropriate recommendations to the Owner and Architect.59
* * *
§2.1.8 The Construction Manager does not warrant or guarantee estimates and schedules except as may be included as part of the guaranteed maximum price. The recommendations and advice of the Construction Manager concerning design alternatives shall be subject to the review and approval of the Owner and the Owner's professional consultants. It is not the Construction Manager's responsibility to ascertain that the drawings and specifications are in accordance with applicable laws, statutes, ordinances, building codes, rules and regulations. However, if the Construction Manager recognizes that portions of the drawings and specifications are at variance therewith, the Construction Manager shall promptly notify the Architect and Owner in writing.60

The Consensus Documents™ contain the following provisions:
3.2.2 CONSULTATION The Construction Manager shall schedule and attend regular meetings with the Owner and Architect/Engineer. The Construction Manager shall consult with the Owner and Architect/Engineer regarding site use and improvements and the selection of materials, building systems and equipment. The Construction Manager shall provide recommendations on construction feasibility; actions designed to minimize adverse effects of labor or material shortages; time requirements for procurement, installation and construction completion; and factors related to construction cost, including estimates of alternative designs or materials.61
* * *
3.2.5 CONSTRUCTION DOCUMENT REVIEW The Construction Manager shall review the drawings and specifications in an effort to identify potential constructability problems that could impact the Construction Manager's ability to perform the Work in an expeditious and economical manner…62

A contractor would be well advised to not refer to its cost savings proposals as “value engineering.” Appropriate descriptions for these services include "cost savings ideas" or “value analysis." At the very least, the contractor must expressly disclaim any design responsibility and place this ultimate design review and approval upon the architect. A suggested contractual clause is as follows:

It is agreed by the parties that the suggestion of cost saving alternatives by the Contractor is solely in its capacity as a contractor and is advisory only. Notwithstanding any such suggestions by the Contractor, the Architect shall be solely responsible with respect to the design sufficiency of any such suggestions which are incorporated into the work on the project. The services to be provided by the Contractor in suggesting cost savings alternatives shall in no manner be construed to be professional design services.

Alternatively, the contractor can limit its liability to insurance provided under a professional liability policy or to an acceptable monetary amount. Contractors are also prone to give "advice" in the RFI process. If an RFI is requested, the contractor must be careful that it does not indirectly suggest any design related solutions. The purpose of the  RFI is to request instructions from the architect as to design intent.

D. Shop Drawings
Design work, in general, typically begins with the architect's preparation of schematic design drawings that set forth the general design intent of a project. Once schematic drawings are approved, design development drawings are issued, usually after extensive consultation between the architect and subconsultants, and these drawings should be suitable for initial pricing by trade contractors. Design development drawings are followed by construction drawings that allow for firm pricing and actual construction of the project.63

Shop drawings are drawings and/or other written materials prepared by contractors and subcontractors that provide precise information on how a part of the project is to be constructed. Shop drawings are usually the last drawings depicting how a particular part of the project will be constructed. The AIA A201™ General Conditions define shop drawings as follows:

§ 3.12.1 Shop Drawings are drawings, diagrams, schedules and other data specially prepared for the Work by the Contractor or a Subcontractor, Subsubcontractor, manufacturer, supplier or distributor to illustrate some portion of the Work. Shop Drawings, Product Data, Samples and similar submittals are not Contract Documents. Their purpose is to demonstrate the way by which the Contractor proposes to conform to the information given and the design concept expressed in the Contract Documents for those portions of the Work for which the Contract Documents require submittals. Review by the Architect is subject to the limitations of Section 4.2.7. Informational submittals upon which the Architect is not expected to take responsive action may be so identified in the Contract Documents.

Submittals that are which that are not required by the Contract Documents may be returned by the Architect without action.

The contractor's responsibility for shop drawings under the AIA A201 is as follows: § 3.12.5 The Contractor shall review for compliance with the Contract Documents, approve and submit to the Architect Shop Drawings, Product Data, Samples and similar submittals required by the Contract Documents in accordance with the submittal schedule approved by the Architect or, in the absence of an approved submittal schedule, with reasonable promptness and in such sequence as to cause no delay in the Work or in the activities of the Owner or of separate contractors.

§ 3.12.6 By submitting Shop Drawings, Product Data, Samples and similar submittals, the Contractor represents to the Owner and Architect that the Contractor has (1) reviewed and approved them, (2) determined and verified materials, field measurements and field construction criteria related thereto, or will do so and (3) checked and coordinated the information contained within such submittals with the requirements of the Work and of the Contract Documents.

§ 3.12.7 The Contractor shall perform no portion of the Work for which the Contract Documents require submittal and review of Shop Drawings, Product Data, Samples or similar submittals until the respective submittal has been approved by the Architect.

§ 3.12.8 The Work shall be in accordance with approved submittals except that the Contractor shall not be relieved of responsibility for deviations from requirements of the Contract Documents by the Architect's approval of Shop Drawings, Product Data. Samples or similar submittals unless the Contractor has specifically informed the Architect in writing of such deviation at the time of submittal and (1) the Architect has given written approval to the specific deviation as a minor change in the Work, or (2) a Change Order or Construction Change Directive has been issued authorizing the deviation. The Contractor shall not be relieved of responsibility for errors or omissions in Shop Drawings, Product Data, Samples or similar submittals by the Architect's approval thereof.

§ 3.12.9 The Contractor shall direct specific attention, in writing or on Shop Drawings, Product Data, Samples or similar submittals, to revisions other than those requested by the Architect on previous submittals. In the absence of such written notice, the Architect's approval of a resubmission shall not apply to such revisions.64

The Consensus Documents™ provide as follows with respect to shop drawings: The Construction Manager shall submit to the Owner and, if directed, to its Architect/Engineer for review and the Owner's approval all shop drawings, samples, product data and similar submittals required by the Contract Documents . . . The Construction Manager shall be responsible to the Owner for the accuracy and conformity of its submittals to the Contract Documents . . . When the Construction Manager delivers its submittals to the Owner, the Construction Manager shall identify in writing for each submittal all changes, deviations or substitutions from the requirements of the Contract Documents. The review and approval of any Construction Manager submittal shall not be deemed to authorize changes, deviations or substitutions from the requirements of the Contract Documents unless express written approval is obtained from the Owner specifically authorizing such deviation, substitution or change . . . Further, the Owner shall not make any change, deviation or substitution through the submittal process without specifically identifying and authorizing such deviation to the Construction Manager.
* * * The Construction Manager shall perform all Work strictly in accordance with approved submittals. Approval does not relieve the Construction Manager from responsibility for Defective Work resulting from errors or omissions of any kind on the approved shop drawings.65

Shop drawings serve a central purpose in the constructability of a project. It is simply not reasonable to expect that the architect will have knowledge of all the "shops" of the specialized trade subcontractors and their particular method of fabrication for a particular project. The design professional, and owner, benefit from this expertise because competition is encouraged among trade subcontractors to develop particular processes and to expedite the time of construction.

It has been estimated that there are at least 15 shop drawings prepared to every design drawing.66 Typically, the shop drawings are prepared well in advance of the actual fabrication or installation by the trade subcontractor so as to allow for review and approval by the general contractor, review by the architect, and distribution back to the general contractor and trade subcontractors in order to allow for the ordering of materials and a timely fabrication process. Prompt review and approval of shop drawings is critical for the timely completion of the project and avoidance of costly repairs to nonconforming work.

Some courts have viewed shop drawings as the "final word" as to the design on a particular project.67 However, most construction contracts contain provisions that specifically disclaim responsibility on the part of the architect in reviewing shop drawings. Courts typically will enforce contractual provisions absolving the architect from liability for reviewing shop drawings that vary from the architectural drawings unless the deviation is specifically highlighted. Many cases have presented issues in which courts have been asked to evaluate design responsibility for shop drawings and the impact they have on construction projects and, in many cases, construction defects.

Responsibility for errors in shop drawings also often becomes an issue in injury or death claims. One of the most significant events involving a massive loss of life resulting from errors in design and shop drawings was the Kansas City Hyatt Walkway collapse of July 17, 1981. The collapse of the Kansas City Hyatt Walkway was the result of a simple design error that was not caught during the design and construction phase of the Project, resulting in significant loss of life. There were 114 people killed and over 200 injured when the atrium walkway, which was packed with people attending an event at the hotel, collapsed under the weight.

The original design of the walkways and their supports required the walkways to be suspended from one another through support rods anchored to the ceiling. As a result of certain material shortages, the design was changed in order to keep the Project on schedule. The fabricator and installer submitted a proposed re-design through the shop drawing process. The primary change in design changed the support structure from a double hanger rod box bean to a single hanger rod box beam. The accident resulted from the excess load on a nut connection that had twice the load as contemplated in the original design and only 30% of what the connection would actually support.

This was not the first accident for this Project. On October 14, 1979, the atrium roof collapsed during construction. There were no injuries but the Owner mandated a complete review of all design aspects to ensure safety. Despite this review, this particular design flaw was not discovered. The project specifications did not require the fabricator to design the connections that ultimately failed; however, the fabricator designed the connections during the shop drawing process. The ultimate responsibility for the error was placed on the engineer of record. It was his responsibility to ensure that the design was adequate for loads to be placed on the steel members at issue. He ultimately stamped the shop drawings as approved and meeting the design intent of the original drawings. It should be noted that the original design was also determined to be inadequate, as it was only capable of supporting 60% of the required loads.

In order for a contractor to reduce its liability in the shop drawing process, one suggestion is for a contractor and/or subcontractor to clarify that the shop drawings are contract documents once they have been approved. A suggested contract clause is as follows:

Shop drawings and submittals, once approved by the architect, shall constitute Contract Documents. Contractor shall not be liable unless its work deviates from approved shop drawings. Contractor is not a design professional and, by submitting shop drawings and submittals, is not representing or rendering any opinion regarding the design integrity or suitability of the material for the project and specifically disclaims any responsibility.

Another suggestion is to provide that shop drawings depicting critical elements of the project will be considered contract documents. A suggested clause is as follows:

Notwithstanding anything in the contract to the contrary, shop drawings and submittals with respect to structural, mechanical, electrical, plumbing and fire sprinkler systems, approved by the architect/engineer shall be considered Contract Documents.

A general contractor should note that, by approving and/or reviewing shop drawings prepared by subcontractors, an argument could be made that a subcontractor is relieved from performing its work in a proper manner. In the prime contract, the general contractor should only agree to "review" shop drawings. Even if it cannot negotiate any revision to the standard contractual provision with respect to "approval" of shop drawings, a general contractor should consider the following clause in its subcontracts:

General Contractor's actions in approving or reviewing any shop drawings or submittals prepared by Subcontractor shall not relieve Subcontractor from performing its work as required by the Contract Documents.

E. Failing to Discover Design Errors
Attempts are often made to place responsibility upon the contractor to discover design errors in the plans and specifications. In this manner, an owner has two potential defendants if the design proves to be defective. While it is certainly reasonable for an owner to require the contractor to review the design, it must be clear in the contract that the review by the contractor is solely in its capacity as a contractor and that the contractor only has a duty to report "known" defects in the design, as opposed to errors which "reasonably should have been known." Standard AIA provisions with respect to reviewing the design and disclosing design errors are as follows68:

§ 3.2.1 Execution of the Contract by the Contractor is a representation that the Contractor has visited the site, become generally familiar with local conditions under which the Work is to be performed and correlated personal observations with requirements of the Contract Documents.

§3.2.2 Because the Contract Documents are complementary, the Contractor shall, before starting each portion of the work, carefully study and compare the various Contract Documents relative to that portion of the Work, as well as the information furnished by the Owner pursuant to Section 2.2.3, shall take field measurements of any existing conditions related to that portion of the Work, and shall observe any conditions at the site affecting it. These obligations are for the purpose of facilitating coordination and construction by the Contractor and are not for the purpose of discovering errors, omissions, or inconsistencies in the Contract Documents; however, the Contractor shall promptly report to the Architect any errors, inconsistencies or omissions discovered by or made known to the Contractor as a request for information in such form as the Architect may require. It is recognized that the Contractor's review is made in the Contractor's capacity as a contractor and not as a licensed design professional, unless otherwise specifically provided in the Contract Documents.

§3.2.3 The Contractor is not required to ascertain that the Contract Documents are in accordance with applicable laws, statutes, ordinances, codes, rules and regulations, or lawful orders of public authorities, but the Contractor shall promptly report to the Architect any nonconformity discovered by or made known to the Contractor as a request for information in such form as the Architect may require.

§ 3.2.4 If the Contractor believes that additional cost or time is involved because of clarifications or instructions the Architect issues in response to the Contractor's notices or requests for information pursuant to Sections 3.2.2 or 3.2.3, the Contractor shall make Claims as provided in Article 15.

If the Contractor fails to perform the obligations of Sections 3.2.2 or 3.2.3, the Contractor shall pay such costs and damages to the Owner as would have been avoided if the Contractor had performed such obligations. If Contractor performs those obligations, the Contractor shall not be liable to the Owner or Architect for damages resulting from errors, inconsistencies or omissions in the Contract Documents, for differences between field measurements or conditions and the Contract Documents, or for nonconformities of the Contract Documents to applicable laws, statutes, ordinances, codes, rules and regulations, and lawful orders of public authorities.

The Consensus Documents™ state as follows with respect to discovering design errors69: 3.4.1 In order to facilitate its responsibilities for completion of the Work in accordance with and as reasonably inferable from the Contract Documents, prior to commencing the Work the Construction Manager shall examine and compare the drawings and specifications with information furnished by the Owner…relevant field measurements made by the Construction Manager and any visible conditions at the Worksite affecting the Work.

3.4.2 If, in the course of the performance of the obligations in Subparagraph 3.4.1, the Construction Manager discovers any errors, omissions or inconsistencies in the Contract Documents, the Construction Manager shall promptly report them to the Owner. It is recognized, however, that the Construction Manager is not acting in the capacity of a licensed design professional, and that the Construction Manager's examination is to facilitate construction and does not create an affirmative responsibility to detect errors, omissions or inconsistencies or to ascertain compliance with applicable laws, building codes or regulations…

3.4.3 The Construction Manager shall have no liability for errors, omissions or inconsistencies discovered under Subparagraphs 3.4.1 and 3.4.2, unless the Construction Manager knowingly fails to report a recognized problem to the Owner.

These provisions highlight the prevailing view that it is the contractor’s primary responsibility to follow the plans and specifications as written. It is not the role of the contractor to search out any errors or violations contained within the plans and specifications. However, if the contractor identifies the errors and chooses to not bring those errors to the architect or owner’s attention, then the contractor proceeds at its own risk and bears the responsibility for its actions.

F. Compliance with Laws
There are many laws and regulations, including building code provisions, which require that the design of the project comply with certain criteria. The contractor's agreement to comply with such laws in the performance of the work, however, should only require compliance as it concerns the means and methods of the contractor's work. A contractor should not allow an owner to shift design responsibilities by the contractor's agreement to comply with laws and regulations. The AIA provisions with respect to compliance with laws are as follows70:

§ 3.7.2 The Contractor shall comply with and give notices required by applicable laws, statutes, ordinances, codes, rules and regulations, and lawful orders of public authorities applicable to performance of the Work.

§ 3.7.3 If the Contractor performs Work knowing it to be contrary to applicable laws, statutes, ordinances, codes, rules and regulations, or lawful orders of public authorities, the Contractor shall assume appropriate responsibility for such Work and shall bear the costs attributable to correction.

A suggested revision to the AIA provision, from the standpoint of a contractor, is as follows:

The Contractor shall comply with and give notices required by applicable laws, statutes, ordinances, codes, rules and regulations and lawful orders of public authorities ("Applicable Laws") applicable solely to the means and methods of Contractor's work and, provided that Contractor complies with the plans and specifications, it shall not be liable for any damages to the extent the plans and specifications are at variance from any such Applicable Laws unless the Contractor had actual knowledge that the plans and specifications deviated from Applicable Laws.

A contractor is responsible for building the project in accordance with applicable building codes. Under Texas law, a cause of action exists for breach of contract when the contractor has failed to comply with building codes relevant to the intended use of the structure. The San Antonio Court of Appeals, in Tips v. Hartland Developers, Inc., held that all contractors impliedly warrant that they will comply with relevant municipal and county codes when entering into building contracts, in absence of an agreement to the contrary.71

G. Building Information Modeling
Building Information Modeling (“BIM”) incorporates extensive databases and technologies for designing all aspects of a project or any system within the project. Design models are used to simulate the structure. The Consensus Documents™ address BIM modeling in an Addendum.72 With respect to design responsibilities, the Addendum provides as follows:

1.4 Nothing in this Addendum shall relieve the architect/engineer from its obligation, nor diminish the role of the architect/engineer, as the person responsible for and in charge of the design of the project.

1.5 Nothing in this Addendum shall diminish the extent to which, but under applicable law, the owner warrants to any party the adequacy and/or sufficiency of the design.

1.6 Participation of the contractor or its subcontractors and suppliers in contributions to a model shall not constitute the performance of design services.

Pursuant to this Addendum, a BIM execution plan is developed which must state which models, if any, shall constitute contract documents. A contributor to dimensional aspects of a BIM model can incur liability depending upon the agreement of the parties. In Paragraph 4.3.11 of the Consensus Addendum, the parties must select whether (a) any contributions to a model take precedence over the dimensions called out in the drawings, (b) the representation is limited to the extent that the execution plan (developed as part of the model) specifies dimensions to be accurate or (c) the contributions do or do not constitute representations of the dimensional accuracy. Each party is responsible for any contribution it makes to a model or which arises from that party's access to a model.73

Therefore, if traditional shop drawing information is used in a BIM model, a party may have liability subject to the limitations of the representations of such contributions as set forth in Paragraph 4.3.11. Liability for input into BIM modeling can be limited through manuscript contract clauses limiting liability, waiving consequential damages and/or limiting liability to the proceeds of insurance. Care must be taken that professional liability insurance specifically encompasses any contributions to any BIM model to the extent the contractor could have liability.74

H. Limitation of Liability
Because of the risk of design liability being either expressly or inadvertently transferred, a contractor should consider a limitation of liability clause to limit its liability to a certain dollar amount, to its fee, or available insurance proceeds. A suggested clause is as follows:
In the event any professional services are performed by Contractor, Contractor's liability for any such professional services shall be limited to the amount and extent of the proceeds of the professional liability insurance coverage furnished by Contractor and the insurance coverage obtained from subcontractors and their consultants. This limitation of liability provision shall be applicable to any claims against Contractor under any theory or cause of action including, but not limited to, breach of contract, negligence and indemnity.
Another suggested clause is:

If either the Contract Documents or any request by Owner require Contractor to perform an activity that constitutes the rendering of a service for which uninsured professional liability may arise, then Contractor's design or professional service liability to Owner shall not exceed the total sum of $_______________. This limitation of Contractor's liability applies to all liability that arises out of or relates to (i) Contractor's activities under the contract (ii) Contractor's activities under any separate agreement with a third party to perform services for Owner's benefit at the site of the work hereunder and (iii) any occurrence involving the breach of any other legal or equitable duty, including, but not limited to, duty arising in contract, indemnity, warranty, statute and tort (whether such occurrence arises out of the sole or concurrent negligence of strict liability of contractor) but this limitation only applies to professional services including design services. This limitation of liability shall survive completion and/or termination of this contract.

Specifications concerning specialty items, such as curtain walls, structural steel, sprinkler, HVAC and electrical subcontractors will often required sealed drawings to be prepared by either a licensed architect or registered engineer. Specialty trade subcontractors are often extensively involved during the preconstruction phase of a project. They bring their expertise to the design process but also make it possible for their systems to be specified by the architect. In many instances, the general contractor will agree to subcontract with a particular subcontractor and utilize its system. If possible, a general contractor should attempt to negotiate a contractual clause limiting its liability for the required use of a certain system or trade subcontractor such as the following:

Owner agrees that the liability of Contractor, for any errors or omissions in the work of Subcontractor shall be limited to the amount actually recovered by Contractor from Subcontractor which shall be an express condition precedent to any liability of Contractor to Owner. Additionally, Owner agrees to indemnify Contractor from any claims of third parties which result from errors or omissions on the part of Subcontractors.

I. Insurance for Design Responsibility
A commercial general liability (“CGL”) policy provides coverage, with certain exclusions, for bodily injury and property damage. The CGL policy typically does not cover pure economic damage. Most CGL policies, through special endorsements, also contain an exclusion for professional liability.

In the case of Harbor Insurance Co. v. Omni Construction Inc.,75 a building subsided due to inadequate sheeting and shoring. The sheeting and shoring system was designed by an engineer retained by a subcontractor to the general contractor. The general contractor's liability insurer denied coverage based on a professional services  exclusion endorsement. The general contractor argued that the "design" services performed by the subcontractor were merely incidental to the construction work and were more in the nature of a means and methods service than a professional service. The court disagreed and denied coverage based on the nature of the service that had been provided. Based on this court's ruling, many carriers offer less restrictive endorsements.

1 TEX. LOC. GOV’T CODE § 271.027. The “responsible” requirement was solved by requiring all bidders on
public jobs greater than $25,000 to post a bid bond and performance and payment bonds from a qualified
surety. TEX. LOC. GOV'T CODE §§ 271.054 & 271.059.
2 Thomas J. Kelleher, Jr., et al., Construction Disputes: Practice Guide with Forms §1.03 (2d ed. 1992).
3 Texas Highway Commission et al. v. Texas Association of Steel Importers, Inc., et al 372
S.W.2d 525 (Tex. 1963).Id. at 527.
6 http://www.consensus
9 See Tex. Educ. Code §44.031 (a).
10 Id. § 44.035(a).
11 Id. § 44.035(b).
12 Id..§44.03l(b).
13 Id. §44.036(c).
14 Id..§44.036(d).
15 Id. §44.036(e)
16 Id. §44.036(e)(l).
17 Id.
18 Id. §44.036(e)(2).
19 Id. §44.037(a).
20 Id. §44.037(c).
21 TEX. GOV’T CODE § 2254.004(a).
22 Id. § 2254.004(b).
23 TEX. EDUC. CODE §44.038(e).
24 Id.
25 Id. §44.038(e).
26 Id.
27 Id. §44.038(f).
28 Id. §44.038(g).
29 Id. §44.038(h).
30 Id. §43.038(i).
31 Id. §44.031(a).
32 See id. §51.778(a).
33 Id. §61.003(8).
34 Id. §§51.780-.782.
35 See id. §§51.780-.782; see also id. §§44.036-.038.
36 TEX. LOC. GOV’T CODE § 271.111(10).
37 Id. §271.113(a).
38 Id. §271.117(a).
39 Id. §271.113(b).
40 TEX. LOC. GOV’T CODE §§ 271.117-119.
41 See id. §§271.117-.119; see also TEX. EDUC. CODE §§44.036-.038.
42 TEX. TRANSP. CODE §§223.001, 223.004-.005.
43 Id. § 223.201.
44 Id. § 223.203(e-l).
45 Id.
46 United States v. Spearin, 248 U.S. 132 (1918).
47 Martin K. Eby Constr. Co. v. Jacksonville Transp. Auth., 436 F.Supp.2d 1276 (M.D. Fla. 2005).
48 104 S.W. 1061 (Tex. 1907).
49 407 F.3d 708 (5th Cir. 2005).
50 J.L. Simmons Co. v. United States, 412 F.2d 1360, 1362 (Ct. Cl. 1969); also note Martin K. Eby Constr. v. Jacksonville Transp. Auth., 436 F. Supp. 2d 1276 (M.D. Fla. 2005).
51 Edward B. Lozowicki & Mara S. Turaids, New Trend is “Design-Build” But Which Party Bears Risk For Defective Specifications?, 225 N.Y. LAW JOURNAL 116 (2001).
52 Neal J. Sweeney, 2001 CONSTRUCTION LAW UPDATE 67 (Aspen Law & Business 2001). Oak Adec, Inc. v. United States, 24 Ct. Cl. 502 (1991) (applied various factors in a government contract case)
53 Fruin-Colnon Corp. v. Niagara Frontier Transportation Authority, 180 A.D.2d 222 (N.Y. App. 1992).
54 For all references to the AIA documents in this text, please refer to the “redlined” version of the AIA documents published by the AIA that show each of the modifications from the 1997 documents to the 2007 documents. The redlined version can be found at §3.12.10 AIA A201 2007™ Redlined Comparison to 1997 General Conditions. (Emphasis added).
55 Id.
56 Consensus Document 500™ (2007) (emphasis added); also note Consensus Document 200™ (2007) §
3.15 (Owner-General Contractor Agreement).
57 48 C.F.R. § 48.101(a) (2006).
58 AIA 121/CMc-2003 AGC Document 565™.
59 AIA 121/CMc-2003 AGC Document 565™.
60 AIA 121/CMc-2003 AGC Document 565™.
61 Consensus Document 500™ (Section 3.2.2) (2007).
62 Consensus Document 500™ (Section 3.2.5) (2007).
68 AIA A201 2007 Redlined Comparison to 1997™ General Conditions.
69 Consensus Documents 500™ (Sections 3.4.1, 3.4.2 and 3.4.3) (2007); also note Consensus Document 200™ (2007) § 3.3.1 - 3.3.3 (Owner-General Contractor Agreement).
70 AIA A201 2007 Redlined Comparison to 1997™ General Conditions.
71 961 S.W.2d 618, 622 (Tex. App.—San Antonio 1998, no pet.).
72 Consensus Docs™ 301 (2008).
73 Section 5.1 Consensus Documents™ 301 (2008).
74 Note that the American Institute of Steel Construction, Inc. has adopted in its Code of Standard Practice
Steel Buildings and Bridges (March 18, 2005) an appendix specifically addressing the use of digital building project models in lieu of the contract drawings. In the event of a conflict with design drawings, an approval of the manufacturing model by the owner's designers replaces the approval of actual shop and erection drawings.
75 912 F.2d 1520 (D.C. Cir. 1990).

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