IPD BIM & Objectives Less on site administration effort as conflicts and questions resolved virtually Fewer RFIs because stakeholders collaboratively involved in design (and longer precon phase) and better communication of design intent Less shop drawing and submittal approval time More prefabrication and procurement of long lead items Less waste and inefficiency As builts incorporated into the virtual model Schedule tied to virtual model (allows for visualization of deviation from planned sequences and durations) David Adelstein 13 dma@kirwinnorris.com
IPD Standard Form Contracts Both the ConsensusDOCS and AIA have standard documents addressing BIM and IPD (legal and administrative issues and risk allocation): ConsensusDOCS 300 Multi-Party IPD Agreement ConsensusDOCs 396 Tri Party Agreement for IPD ConsensusDOCS 301 BIM Addendum ConsensusDOCS 301 BIM Addendum AIA E203 BIM and Digital Data Exhibit AIA G202-2008 BIM Protocol Form AIA B195, A295 and A195 Transitional Documents between O-C and O-A for IPD AIA C195-2008 Single Purpose Entity Agreement for IPD AIA C191-2009 Multiparty Agreement for IPD AIA C196-2008 Single Purpose Entity and Owner for IPD 14 David Adelstein dma@kirwinnorris.com
SP Considerations: LEED certification Financial incentives and projected cost savings Claims associated with achieving certification, incentives, projected cost savings 15 David Adelstein dma@kirwinnorris.com
SP Identify objectives relating to sustainable design / green building elements such as LEED certifications, energy efficiency, product ratings, etc. AIA A101-2007 SP Agreement between O-C AIA A201-2007 SP General Conditions AIA A201-2007 SP General Conditions AIA B101-2007 SP Agreement between O-A * Note : See AIA Document D503-2013 Guide for Sustainable Projects ConsensusDocs 310 Green Building Addendum 16 David Adelstein dma@kirwinnorris.com
P3 Partnership between public and private entities to deliver project for public purposes (e.g., infrastructure) where private entity finances (and perhaps operates and maintains) project in consideration for revenue (or % of revenue) completed project will generate for “x” number of years 17 David Adelstein dma@kirwinnorris.com
P3 Considerations: Sophisticated leadership teams with understanding of process Cost of private financing (cost associated with debt) Increased private party participation in delivering public project Risk transfer to private consortium ( e.g ., design, Risk transfer to private consortium ( e.g ., design, construction, financing, operations and maintenance, etc.) construction, financing, operations and maintenance, etc.) Insurance considerations (similar to design-build or potentially IPD) 18 David Adelstein dma@kirwinnorris.com
P3 Contract Forms EJCDC P3-508 (premised on design-build delivery) 19 David Adelstein dma@kirwinnorris.com
II. Theories of Liability Design Professional Liability: 1) Common Law (Tort) 2) Statutory / Administrative Obligations 3) Contractual (breach of contract) 3) Contractual (breach of contract) * Note : Contractual liability becomes VERY important with evolving delivery methods where A/E’s role falls outside of more conventional delivery methods. Reason insurance considerations applicable to design errors & omissions become major criteria 20 David Adelstein dma@kirwinnorris.com
II. Theories of Liability Common law Design professional’s standard of care gaged under negligence theory (hence, importance of professional liability coverage…) Failure to use use reasonable / due care which reasonable, Failure to use use reasonable / due care which reasonable, careful design professional would use under like circumstances Failure to use reasonable / due care that conforms to acceptable standards that is detrimental to client or public 21 David Adelstein dma@kirwinnorris.com
II. Theories of Liability Common law Ex . Lochrane Engineering, Inc. v. Willingham Realgrowth Investment Fund, Ltd ., 552 So.2d 228, 232 (Fla. 5 th DCA 1989) –”However, the duty imposed by law upon professionals rendering professional services is to perform such services in accordance with the standard of care used by similar professionals in the community under similar circumstances .” Note : FL- duty of care of supervising design professional not extended to subs. See Spancrete, Inc. v. Ronald E. Frazier & Associates, P.A. , 630 So.2d 1197 (Fla. 3d DCA 1994) Ex . Overland Constructors, Inc. v. Millard School District, School District No. 17, Douglas County , Ex . Overland Constructors, Inc. v. Millard School District, School District No. 17, Douglas County , 369 N.W.2d 69, 76 (Neb. 1985) -“the test is whether the architect has exercised that degree of skill 369 N.W.2d 69, 76 (Neb. 1985) -“the test is whether the architect has exercised that degree of skill and diligence ordinarily exercised under like circumstances by architects in good standing in the same or similar communities.” Ex . Martin v. Barge, Waggoner, Sumner & Cannon , 894 S.W.2d 750 (Tenn.App. 1994) – “Tennessee courts have adopted the “ same or similar community” standard of care with respect to professional negligence.” But see ex . In re Parsons, Main, Inc ., ASBCA No. 51355, 2002 WL 1307490, (June 10, 2002) – USACOE project near St. Louis; A/E argued that government must apply standard of care of geotechnical engineers in St. Louis; rejected local standard in favor of national standard 22 David Adelstein dma@kirwinnorris.com
II. Theories of Liability Statutory Design Professional’s reasonable / due care requirement based onstatutory / administrative licensing requirements: Ex : Florida Administrative Code 61G1-12.001(4 )- An architect, firm, or business holding a certificate of authorization may not be negligent in the practice of architecture. The term negligence is defined as the failure, by an architect, to exercise due care to conform to acceptable standards of architectural practice in such a manner as to be detrimental to a client or to the public at large. (a) Plans, drawings, specifications and other related documents prepared by an architect shall be of a sufficiently high standard to inform the users thereof of the requirements intended to be illustrated or described by them. Such documents shall clearly and accurately indicate the design of all essential parts of the work to which they refer. An architect shall meet a standard of practice which demonstrates his knowledge and ability to assure the safety and welfare of his clients and the public . (b) An architect shall be required to coordinate his activities with other professionals involved in those projects wherein the architect is engaged to provide plans, drawings and specifications which result in the production of working documents which are used or intended to be used for the construction of a structure . 23 David Adelstein dma@kirwinnorris.com
II. Theories of Liability Statutory Ex . Ohio Administrative Code 4703-3-07 (A) (1)- In practicing architecture, a registered architect shall act with reasonable care and competence and shall apply the knowledge and skill which is ordinarily applied by registered architects of good standing, practicing in the same locality. Ex . Alabama Administrative Code 100-X-7-.01 (1)- In practicing architecture, an architect’s primary duty is to protect the public’s health, safety, and welfare. In discharging this duty, an architect shall act with reasonable care and competence, and shall apply the knowledge and skill which is ordinarily applied by architects of good standing, practicing in the same locality. 24 David Adelstein dma@kirwinnorris.com
II. Theories of Liability Contractual Duties are imposed by contracts such as industry form contracts: EJCDC E-500 – Standard Form Agreement Between Owner and Engineer for Professional Services 6.01.A. Standard of Care : The standard of care for all 6.01.A. Standard of Care : The standard of care for all professional engineering and related services performed or furnished by Engineer under this Agreement will be the care and skill ordinarily used by members of the subject profession practicing under similar circumstances at the same time and in the same locality. Engineer makes no warranties, express or implied, under this Agreement or otherwise, in connection with Engineer’s services. 25 David Adelstein dma@kirwinnorris.com
II. Theories of Liability Contractual AIA B101 – Standard Form Agreement Between Owner and Architect 2.2 The Architect shall perform its services consistent 2.2 The Architect shall perform its services consistent with the professional skill and care ordinarily provided by architects practicing in the same or similar locality under the same or similar circumstances. The Architect shall perform its services as expeditiously as is consistent with such professional skill and care and the orderly progress of the Project. 26 David Adelstein dma@kirwinnorris.com
II. Theories of Liability Contractual Design Professional’s common law duty of care can be extended / broadened by contract…WATCH OUT FOR THIS! Ex. The School Board of Broward County, FL v. Pierce Goodwin Alexander & Linville , 137 So.3d 1059 (Fla. 4 th DCA 2014) “2.1.3 As to all services provided to this Agreement, the Project Consultant [the architect] shall furnish services by experienced personnel and under the supervision of experienced professionals licensed in Florida and shall exercise a degree of care and diligence in the performance of these services in accordance with the customary professional standards performance of these services in accordance with the customary professional standards currently practiced by firms in Florida and in compliance with any and all applicable codes, laws, ordinances, etc. . . . 2.1.5 All professional design services and associated products or instruments of those services provided by the Project Consultant shall: .1 Be in accordance with all applicable codes, laws, and regulations of any governmental entity , including, but not limited to, [list of regulatory entities] with the Owner serving as the interpreter of the intent and meaning of . . . any other applicable code.” In this contract, architect contracted to heightened standard of care and was contractually obligated to perform to more heightened standard of care than common law standard. Here, architect accepted risk of design plans not code-compliant (no matter what!) 27 David Adelstein dma@kirwinnorris.com
Recent Case Example Ex. The School Board of Broward County, FL v. Pierce Goodwin Alexander & Linville , 137 So.3d 1059 (Fla. 4 th DCA 2014) - Previously discussed - First Cost Defense / Added First Cost Benefit Theory Architect not responsible for costs of items left out of original design since owner would always be responsible for this cost based on cost of item if that item was included in original design “For example, if the school board would have paid a cost for construction in accordance with the code-compliant final design plans, an award of a COI [change order item] expense against the architect attributable to a change in the initial design plans for the same cost would put the school board in a better position than if the design services had been performed as agreed. Stated another way, if there had been no change between the initial plans drawn for bidding by contractors and the final construction plans, the school board would have been solely responsible for paying all construction expenses incurred for the renovation.” 28 David Adelstein dma@kirwinnorris.com
Recent Case Example A&H Properties, v. GPM Engineering , 2015 WL 9435974 (Tex.App.-Austin 2015) –owner hired design-builder to install/design energy efficient improvement including geothermal loop. Engineer hired by design-builder. No contract between engineer and owner. Owner sued engineer for negligence for design of geothermal loop that caused it financial damages. Summary judgment granted in favor of engineer under economic loss rule . Affirmed on appeal. “[T]he Texas Supreme Court recently clarified in a similar factual scenario that the availability of contractual remedies in a vertical chain of contracts on a construction project precludes tort recovery when no personal injury or property damage is alleged. project precludes tort recovery when no personal injury or property damage is alleged. The record before us establishes that GPM [engineer], as subcontractor, was performing The record before us establishes that GPM [engineer], as subcontractor, was performing services part of of the overall construction project based on its contract with the general contractor, Bell. GPM’s duty to perform work on A&H’s [owner] arose of that construction subcontract, and no other duty or relationship between GPM and A&H is presented in this record. *** “Application of the economic-loss rule is particularly appropriate here, where permitting A&H to sue GPM for economic loss would disrupt the risk allocations that A&H negotiated with Bell, and that Bell, in turn, negotiated with GPM.” 29 David Adelstein dma@kirwinnorris.com
Recent Case Example Balfour Beatty Infrastructure, Inc. v. Rummel Klepper & Kahl , LLP, 2016 WL 360875 (Md.Ct.Sp.App. 2016)-City hired engineer to produce construction documents for wastewater treatment plant under design-bid-build. Years later successful bidder (contractor) sued engineering firm for delays associated with defective design and negligent misrepresentations. No contract between contractor and engineer. Trial court contract between contractor and engineer. Trial court dismissed based on economic loss rule . Affirmed on appeal. dismissed based on economic loss rule . Affirmed on appeal. “[I]n the absence of privity, death, personal injury, property damage, or the risk of death or serious personal injury, no duty of care in tort runs from an engineer or architect to a contractor for purely economic losses on a public construction project.” 30 David Adelstein dma@kirwinnorris.com
Recent Case Example But see Gongloff Contracting, L.L.C. v. L. Robert Kimball & Associates, Inc ., 119 A.3d 1070 (Penn. 2015)- University hired A/E and GC. GC hired steel sub. Steel sub hired plaintiff (sub-sub) to erect steel. Concerns were raised with A/E roof design. During construction it was determined that roof design not sufficient to bear loads. There were 3 shut-downs of steel erection due to redesigns. Plaintiff submitted 81 change order requests resulting in itbeing unable to pay vendors, laying off its crew, and leaving site. Plaintiff sued A/E for negligent misrepresentation re: the design of the roof. Trial court granted judgment on pleadings based on economic loss rule . Reversed on judgment on pleadings based on economic loss rule . Reversed on appeal. appeal. “We conclude that the amended complaint’s allegations that Kimball’s [A/E] design documents constituted negligently-supplied false information have been pled with the appropriate level of specificity to state a cause of action for negligent misrepresentation…. While Kimball might prove later in the litigation that the allegation that it provided false information concerning the integrity of its roof design was unsubstantiated, it is not entitled to judgment in its favor at this stage of the proceedings.” (relying on case that A/E can be liable for negligent misrepresentation when it negligently supplies information knowing that 3 rd parties will rely on such information) 31 David Adelstein dma@kirwinnorris.com
- THE ART OF WAR -
EFFECTIVE PROJECT DOCUMENTATION Using Documentation For Risk Allocation and Warfare. John D. Broghammer 33
YOUR ENEMY IS YOU!! • Per a large A/E insurance carrier, a • Per a large A/E insurance carrier, a dispute is ALMOST ALWAYS dispute is ALMOST ALWAYS caused by a documentation error— caused by a documentation error— not a design error. not a design error. – 1. No or poorly drafted contracts; – 1. No or poorly drafted contracts; – 2. Failure to manage expectations; – 2. Failure to manage expectations; – 3. Failure to document and follow up. – 3. Failure to document and follow up. 34
GET IT IN WRITING!!! • Contracts should be in writing and many • Contracts should be in writing and many states require a written contract with states require a written contract with specific provisions for inclusion. specific provisions for inclusion. • Ancient Chinese proverb: “The faintest of • Ancient Chinese proverb: “The faintest of ink is worth more than the strongest ink is worth more than the strongest memory.” memory.” 35
FROM THE “DUH” FILES: “An oral contract is “An oral contract is not worth the paper not worth the paper it is written on.” it is written on.” 36
YOU DON’T WIN UNTIL YOU DRAG THE SIGNED CONTRACT HOME. 37
READ YOUR DAMN CONTRACT!! I’ve never been told by I’ve never been told by any client embroiled in a any client embroiled in a lawsuit that he or she lawsuit that he or she regretted taking the time to read regretted taking the time to read and understand the contract. and understand the contract. 38
MORE “DUH” STUFF: • Keep a copy of the contract in • Keep a copy of the contract in separate file. separate file. • Add papers or e-mails that impact the • Add papers or e-mails that impact the contract and/or your scope of work. contract and/or your scope of work. • Scan your contracts and related • Scan your contracts and related documents an electronic file. documents an electronic file. 39
NEGOTIATIONS • It is unsexy, non-paying and • It is unsexy, non-paying and drudgery. drudgery. • The other side fights you on issues • The other side fights you on issues which you think are stupid . which you think are stupid . • And as Colin Powell once said: “No • And as Colin Powell once said: “No battle plan survives contact with the battle plan survives contact with the enemy.” enemy.” 40
SUN TZU “ The general who wins the battle “ The general who wins the battle makes many calculations in his makes many calculations in his temple before the battle is fought. temple before the battle is fought. The general who loses makes but The general who loses makes but few calculations beforehand.” few calculations beforehand.” • BE PREPARED…. • BE PREPARED…. 41
Paris Hilton??? What the… What the… what??? what??? 42
NEGOTIATIONS • Your contract is your friend…maybe your • Your contract is your friend…maybe your only friend on a project. only friend on a project. • It is the single most critical thing on a • It is the single most critical thing on a project. project. • Never give contract negotiation short shrift. • Never give contract negotiation short shrift. 43
CONTROL THE NARRATIVE • “Those skilled in war bring the “Those skilled in war bring the enemy to the field of battle, and enemy to the field of battle, and are not brought there by him.” are not brought there by him.” Sun Tzu Sun Tzu Draft your own contract! Draft your own contract! 44
NEGOTIATIONS • Be specific. Let others review your drafts for • Be specific. Let others review your drafts for content and errors. content and errors. • Better yet, use stock contracts (e.g., AIA). • Better yet, use stock contracts (e.g., AIA). • Read the RFP (or similar documents) closely. • Read the RFP (or similar documents) closely. • Memorialize in writing additions/subtractions. • Memorialize in writing additions/subtractions. 45
Competitive Arousal Competitive arousal is the visceral urge in negotiating to “win,” rather than get the best deal. 46
Confirmation Bias Confirmation Bias describes the psychological process where we seek information that confirms our beliefs. 47
People infer information that supports their existing beliefs, even if the data support an opposing view. Confirmation bias is a problem to overcome when you need to make a fact-based decision. 48
ANCHORING Anchoring is the tendency to Anchoring is the tendency to become fixed from the first facts/information shared, then jump to conclusions thereafter. 49
THE CURES? 1.Get the opinion of others. 2.Then listen to the voices of dissent. 3.Play “devil’s advocate” and view the deal from the other side. 4.Work to build empathy and relationships then share WHY you need certain language. 50
THE PANDA EATS SHOOTS AND LEAVES. 51
CRITICAL CONTRACT CLAUSES A. A. Detailed Scope of Work Language. Detailed Scope of Work Language. B. B. Construction Administration Language. Construction Administration Language. C. C. Indemnity Clauses. Indemnity Clauses. D. Standard of Care. D. Standard of Care. E. E. Miscellaneous. Miscellaneous. 52
SCOPE OF WORK • From a prominent A/E insurance carrier re: • From a prominent A/E insurance carrier re: Scope of Work claims/lawsuits: Scope of Work claims/lawsuits: “ Failure to manage the owner’s “ Failure to manage the owner’s expectations; failure to explain the expectations; failure to explain the scope of work and exclusions thereto .” scope of work and exclusions thereto .” • This must be started during negotiations. • This must be started during negotiations. 53
SCOPE OF WORK 54
SCOPE OF WORK Should always be Exhibit A to your contract. GOOD!! UH…NOT GOOD 55
SCOPE OF WORK 56
SCOPE OF WORK 57
CRITICAL CONTRACT CLAUSES A. A. Detailed Scope of Work Language. Detailed Scope of Work Language. B. B. Construction Administration Language. Construction Administration Language. C. C. Indemnity Clauses. Indemnity Clauses. D. Standard of Care. D. Standard of Care. E. E. Miscellaneous. Miscellaneous. 58
CONSTRUCTION ADMINISTRATION Construction observation is the periodic observation of completed work to determine general compliance with the plans, general compliance with the plans, specifications and project documents. IT IS NEVER AN INSPECTION OR GUARNATEE 59
CUSTOM AND PRACTICE • Observation is the visual observation of the • Observation is the visual observation of the engineering system for general conformance engineering system for general conformance with the approved plans and specifications. with the approved plans and specifications. • Inspection is the monitoring of materials and • Inspection is the monitoring of materials and workmanship that are critical to the integrity workmanship that are critical to the integrity of the project to ensure compliance with the of the project to ensure compliance with the approved plans, specifications and applicable approved plans, specifications and applicable laws. laws. 60
61
SAMPLE PROBLEM: Contractor contract language “best modern practice… highest, best and first class quality.” 62
Same Project…Architect’s Contract… What does the owner reasonably expect if he expects the contractor to deliver the “highest, best and first class quality?” 63
SAMPLE PROBLEM • “[Design Professional] shall make…periodic • “[Design Professional] shall make…periodic on-site observations, not less than weekly…. on-site observations, not less than weekly…. Observations shall be conducted Observations shall be conducted deliberately and thoroughly ...” deliberately and thoroughly ...” • “Observations shall be for the purpose of • “Observations shall be for the purpose of ascertaining…that the …quality and detail ascertaining…that the …quality and detail of construction…complies with…the of construction…complies with…the contract documents.” contract documents.” 64
EXPECTATIONS • 1. • 1. Understand what the law in your Understand what the law in your state/locale requires. state/locale requires. • 2. • 2. Understand the local customs and Understand the local customs and practices. practices. • 3. • 3. Define your duties and rein in client Define your duties and rein in client expectations. expectations. 65
CRITICAL CONTRACT CLAUSES A. A. Detailed Scope of Work Language. Detailed Scope of Work Language. B. B. Construction Administration Language. Construction Administration Language. C. C. Indemnity Clauses. Indemnity Clauses. D. Standard of Care. D. Standard of Care. E. E. Miscellaneous. Miscellaneous. 66
INDEMNITY DESIGN PROFESSIONAL OWNER INDEMNITY CLAUSE 67
INDEMNITY INDEMNITY ≈ ≈ INSURANCE INSURANCE • "An indemnity contract resembles an insurance • "An indemnity contract resembles an insurance agreement.” (MacDonald & Kruse v. San Jose Steel agreement.” (MacDonald & Kruse v. San Jose Steel (1972) 29 Cal.App.3d 413, 420.). (1972) 29 Cal.App.3d 413, 420.). 68
INDEMNITY • PURPOSE: Indemnity, like insurance, • PURPOSE: Indemnity, like insurance, seeks to shift all or part of the risk of loss seeks to shift all or part of the risk of loss from Player A to Player B. from Player A to Player B. • Usually insurance clauses are strictly • Usually insurance clauses are strictly construed against insurers….not construed against insurers….not necessarily indemnity clauses. necessarily indemnity clauses. 69
INDEMNITY • Insurer’s business model is to collect • Insurer’s business model is to collect premiums and spread risk. Insurance works premiums and spread risk. Insurance works by receiving more premiums than the by receiving more premiums than the company pays out in benefits. You do not company pays out in benefits. You do not work this way. work this way. 70
INDEMNITY What to look What to look for….and for….and why to look why to look for it? for it? 71
INDEMNITY DEFINITIONS: DEFINITIONS: • Indemnitee : The beneficiary of the indemnity • Indemnitee : The beneficiary of the indemnity agreement. Like an owner or winner. agreement. Like an owner or winner. • Indemnitor : The person who agrees to defend • Indemnitor : The person who agrees to defend or indemnify the other person. Like a design or indemnify the other person. Like a design professional or loser. professional or loser. 72
INDEMNITY • Passive negligence has been found from the failure to • Passive negligence has been found from the failure to discover a defective condition created by others, failure to discover a defective condition created by others, failure to exercise a right to inspect certain work or a failure to exercise exercise a right to inspect certain work or a failure to exercise a supervisory right. a supervisory right. • Normally an omission. Think construction administration. • Normally an omission. Think construction administration. Rossmoor Sanitation v. Pylon (1975) 13 Ca1.3d 622, 630 (citations omitted). Rossmoor Sanitation v. Pylon (1975) 13 Ca1.3d 622, 630 (citations omitted). 73
INDEMNITY • Active negligence has been found in actively • Active negligence has been found in actively doing something which later caused an injury, doing something which later caused an injury, knowingly supplying a product which did not knowingly supplying a product which did not meet the requirements, creating a perilous meet the requirements, creating a perilous condition, or failing to install safety items in condition, or failing to install safety items in violation of a contract. violation of a contract. • Normally a commission, or an omission where a • Normally a commission, or an omission where a duty exists. Think a flawed design. duty exists. Think a flawed design. Rossmoor Sanitation v. Pylon (1975) 13 Ca1.3d 622, 630 (citations omitted). Rossmoor Sanitation v. Pylon (1975) 13 Ca1.3d 622, 630 (citations omitted). 74
“Except to the extent of Contractor’s sole “Except to the extent of Contractor’s sole negligence or intentional misconduct, and negligence or intentional misconduct, and without regard to any negligence or fault on without regard to any negligence or fault on the part of Consultant, Consultant agrees to the part of Consultant, Consultant agrees to defend and indemnify …Contractor from and defend and indemnify …Contractor from and against any and all claims, demands, losses, against any and all claims, demands, losses, damages, … and/or liabilities …, arising out of, damages, … and/or liabilities …, arising out of, resulting from, or occurring in connection with resulting from, or occurring in connection with (a) the materials and services provided, (b) the (a) the materials and services provided, (b) the performance or failure in performance of the performance or failure in performance of the work, (c) Consultant's contractual obligations, work, (c) Consultant's contractual obligations, and/or (d) …. and/or (d) …. 75
“Except to the extent of Contractor’s sole “Except to the extent of Contractor’s sole negligence or intentional misconduct....” negligence or intentional misconduct....” This is red flag language in any indemnity This is red flag language in any indemnity clause. clause. It is a sure sign of trouble. It is a sure sign of trouble. 76
“ and without regard to any negligence “ and without regard to any negligence or fault on the part of Consultant” or fault on the part of Consultant” “Consultant agrees to indemnify …, “Consultant agrees to indemnify …, arising out of, resulting from, or occurring in arising out of, resulting from, or occurring in connection with…” connection with…” This is not normally insurable. You do not This is not normally insurable. You do not have to be negligent to trigger the indemnity have to be negligent to trigger the indemnity obligations. obligations. 77
“Consultant agrees to defend and “Consultant agrees to defend and indemnify …Contractor from and against any indemnify …Contractor from and against any and all claims, demands, losses, damages, … and all claims, demands, losses, damages, … and/or liabilities….” and/or liabilities….” Normally, the duty to defend is very broad and Normally, the duty to defend is very broad and also not insurable. In some states the duty to also not insurable. In some states the duty to defend is automatically triggered by an defend is automatically triggered by an indemnity obligation. indemnity obligation. 78
INDEMNITY • The Consultant will indemnify the Client for actual • The Consultant will indemnify the Client for actual damages for which the Client becomes liable if the damages for which the Client becomes liable if the damage upon which the liability is based was damage upon which the liability is based was caused by the proven active negligence of the caused by the proven active negligence of the Consultant. Consultant. • If the Client is determined to be liable for damage • If the Client is determined to be liable for damage caused by the proven active negligence of the caused by the proven active negligence of the Consultant, the Consultant will reimburse the Consultant, the Consultant will reimburse the Client for the reasonable value of the defense costs Client for the reasonable value of the defense costs insured to defend against the damages caused by insured to defend against the damages caused by the Consultant’s proven negligence. the Consultant’s proven negligence. 79
INDEMNITY Suppose your Client insists that you defend it if Suppose your Client insists that you defend it if it is sued. Then, use: it is sued. Then, use: Consultant has no obligation to pay for Client’s Consultant has no obligation to pay for Client’s defense costs until there is a final determination of defense costs until there is a final determination of liability . Consultant’s obligation to reimburse Client’s liability . Consultant’s obligation to reimburse Client’s defense cost shall be limited to the Consultant’s defense cost shall be limited to the Consultant’s percentage of liability based upon Consultant’s percentage of liability based upon Consultant’s comparative fault. comparative fault. 80
Endowment Effect or Overconfidence Bias Bias This bias is the tendency to place too much emphasis on your knowledge, abilities and negotiation skills. 81
Know Your Limitations 82
CRITICAL CONTRACT CLAUSES A. A. Detailed Scope of Work Language. Detailed Scope of Work Language. B. B. Construction Administration Language. Construction Administration Language. C. C. Indemnity Clauses. Indemnity Clauses. D. Standard of Care. D. Standard of Care. E. E. Miscellaneous. Miscellaneous. 83
STANDARD OF CARE • As a general rule, NEVER, ever, agree to • As a general rule, NEVER, ever, agree to contract language that alters the standard contract language that alters the standard of care. of care. 84
STANDARD OF CARE “A [professional] is negligent if he/she fails to use “A [professional] is negligent if he/she fails to use the skill and care that a reasonably careful the skill and care that a reasonably careful [professional] would have used in similar [professional] would have used in similar circumstances. This level of skill, knowledge, circumstances. This level of skill, knowledge, and care is sometimes referred to as “the and care is sometimes referred to as “the standard of care.”” standard of care.”” Cal. Jury Instruction 600 Cal. Jury Instruction 600 85
STANDARD OF CARE GOOD! UH…NOT…GOOD! Best means better than everyone else . 86
STANDARD OF CARE • Perfection is not required. • Perfection is not required. • HOWEVER, you are generally held to a • HOWEVER, you are generally held to a higher standard when performing higher standard when performing inspections. inspections. • Explain in your contract that perfection • Explain in your contract that perfection is not the standard. is not the standard. 87
STANDARD OF CARE Any blanket promise to correct defects may alter the standard of care. Are you insured for this? 88
STANDARD OF CARE • Beware of warranties, guarantees, and • Beware of warranties, guarantees, and certifications which effectively turn the certifications which effectively turn the Standard of Care into a promise of Standard of Care into a promise of perfection. perfection. • You normally do not have insurance • You normally do not have insurance coverage for such warranties, guarantees, coverage for such warranties, guarantees, and certifications. and certifications. 89
CRITICAL CONTRACT CLAUSES A. A. Detailed Scope of Work Language. Detailed Scope of Work Language. B. B. Construction Administration Language. Construction Administration Language. C. C. Indemnity Clauses. Indemnity Clauses. D. Standard of Care. D. Standard of Care. E. E. Miscellaneous. Miscellaneous. 90
THIRD PARTY BENEFICIARY • The Architect’s services under this Agreement • The Architect’s services under this Agreement are being performed solely for the Client's are being performed solely for the Client's benefit , and no other party or entity shall have benefit , and no other party or entity shall have any rights or a claim against the Architect …. any rights or a claim against the Architect …. • This provision may be waived only by express • This provision may be waived only by express written consent of the Architect. written consent of the Architect. 91
NON-ASSIGNMENT • Neither the Client nor the Architect shall • Neither the Client nor the Architect shall assign this Agreement without the express assign this Agreement without the express written consent of the other. written consent of the other. 92
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MISCELLANEOUS 1. Billing and Payment Provisions : Payment terms, interest, 1. Billing and Payment Provisions : Payment terms, interest, attorney fees and collection cost provisions. Terms for attorney fees and collection cost provisions. Terms for suspension or termination for non-payment. suspension or termination for non-payment. 2. Certifications, Guarantees & Warranties: Delete whenever 2. Certifications, Guarantees & Warranties: Delete whenever possible. Delete an agreement for code compliance or that possible. Delete an agreement for code compliance or that construction will be pursuant to “all laws, regulations and construction will be pursuant to “all laws, regulations and codes.” Some state laws define “certify” for architects and codes.” Some state laws define “certify” for architects and engineers to mean only an expression of opinion, not a engineers to mean only an expression of opinion, not a warranty or guarantee. warranty or guarantee. 3. Arbitration and Dispute Resolution: Generally avoid 3. Arbitration and Dispute Resolution: Generally avoid mandatory arbitration provisions. Other forms of dispute mandatory arbitration provisions. Other forms of dispute resolution are acceptable. resolution are acceptable. 94
MISCELLANEOUS 4. Job Site Safety: You should not be responsible (directly or 4. Job Site Safety: You should not be responsible (directly or indirectly) for job site safety. You should not be responsible indirectly) for job site safety. You should not be responsible for construction means and methods. Ensure language that for construction means and methods. Ensure language that keeps these responsibilities with contractor or owner. keeps these responsibilities with contractor or owner. 5. Liquidated Damages: Liquidated damages provisions 5. Liquidated Damages: Liquidated damages provisions should not be included in your contract. There are too many should not be included in your contract. There are too many variables not in your control as the designer. variables not in your control as the designer. 6. Limitation of Liability: Where possible insert limitation of 6. Limitation of Liability: Where possible insert limitation of liability clause or some type of cap on damages. Be willing to liability clause or some type of cap on damages. Be willing to receive a lower fee to obtain this protection. Try to limit receive a lower fee to obtain this protection. Try to limit damages to “available insurance limits” or similar insurance damages to “available insurance limits” or similar insurance limitations. limitations. 95
MISCELLANEOUS 7. Attorney Fees & Costs: Generally delete all such clauses 7. Attorney Fees & Costs: Generally delete all such clauses where possible. Or, limit the clause to very specific disputes, where possible. Or, limit the clause to very specific disputes, such as fee disputes. such as fee disputes. 8. Insurance Requirements: Assure yourself that the owner 8. Insurance Requirements: Assure yourself that the owner agrees to what insurance is needed for a project (and make agrees to what insurance is needed for a project (and make sure you AND subs comply). Many policies do not cover sure you AND subs comply). Many policies do not cover certain contractual risk assumptions. certain contractual risk assumptions. 9. Shop Drawing Review: Define shop drawing review 9. Shop Drawing Review: Define shop drawing review responsibilities. Ensure non-responsibility shop drawings responsibilities. Ensure non-responsibility shop drawings and that review is only for general plan conformance. Make and that review is only for general plan conformance. Make sure owner and contractor know the scope of your review. sure owner and contractor know the scope of your review. 96
INSURANCE Errors & Omissions Insurance is always “claims Errors & Omissions Insurance is always “claims made,” meaning coverage is triggered by the date made,” meaning coverage is triggered by the date of a claim or suit —not the project date. of a claim or suit —not the project date. Claims made policies almost always have declining Claims made policies almost always have declining policy limits . Attorney fees and litigation costs policy limits . Attorney fees and litigation costs reduce the policy limits. reduce the policy limits. Consider “project insurance” which covers a specific Consider “project insurance” which covers a specific project rather than specific insureds. project rather than specific insureds. 97
INSURANCE • Be aware: High deductibles = fool’s gold. • Be aware: High deductibles = fool’s gold. Deductibles must be paid by you first before the Deductibles must be paid by you first before the insurer will participate . insurer will participate . • Some carriers offer programs to spread out your • Some carriers offer programs to spread out your deductible over time, such as a 20%/80% split or deductible over time, such as a 20%/80% split or “first dollar defense” with the payment of the “first dollar defense” with the payment of the deductible later. deductible later. 98
INSURANCE • Make sure your subconsulting contracts comply • Make sure your subconsulting contracts comply with insurance provisions of the prime contract. with insurance provisions of the prime contract. • Someone in your office must be responsible for • Someone in your office must be responsible for obtaining Certificates of Insurance from subs. Get obtaining Certificates of Insurance from subs. Get renewal certificates. renewal certificates. • Have your insurance company review your • Have your insurance company review your contracts for coverage issues. contracts for coverage issues. 99
Sun Tzu “The natural formation of the country is the soldier’s best ally.” The law (statutes, regulations, codes, etc.) are “formations of the country” to be used during negotiations. negotiations. “We shall be unable to turn natural advantage to our account unless we make use of local guides.” Local “guides”…..hmmm…..like perhaps a skilled attorney? Just sayin. 100
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