The game of risk-shifting on design-build projects is changing again. Where the shift once was from owner to the design-build contractor, designers and contractors now are shifting risks to subcontractors. But a growing body of case law suggests that all parties can better forecast the outcome of contract disputes in litigation than other forms of dispute resolution.
Michael C. Loulakis, president of the law firm Wickwire Gavin PC, Vienna, Va., told the Design-Build Institute of Americas annual conference in Las Vegas Nov. 8-10 that many owners seek to limit their liability by assigning single-source responsibility to a design-build contractor. But issues can arise with warranty claims, ambiguous contract language, scope and failed attempts to use commercial general liability insurance. To protect themselves, design-builders should budget higher fees than at-risk construction managers, he advised.
Design-build does not offer some of the same protections against owner errors that contractors have in design-bid-build project delivery, noted Loulakis. Design-build contractors may find themselves having to fixat their own expenseowners errors in requests for proposals or in code-noncompliant bridging documents, he said. Many contractors now ask owners for post-award scope reviews based on complete drawings to ensure that the project is on track.
Prescriptive design and performance specifications can present other potential liabilities. "The prescriptive design and performance labels alone do not create, limit or remove a contractors obligations," said Loulakis. "It is not uncommon for a contract to contain both design and performance characteristics." He said that courts often will strictly enforce the contract terms.
As time goes on, that body of law has grown to the point where the parties know where they stand in court, Loulakis said. "The expansion of case law gives the industry a unique opportunity to im-prove itself," he explained. "There is a need for smart risk al-location and design-build teams need to be aware of risks."
The main question is, "Are we sharing risk, or are we dumping risk," said James W. Wright, chief engineer, Naval Facilities Engineering Command. "Our claims have been greatly reduced with design-build and we are seeing more repeat business from quality contractors."