March 9, 2022

By: Brian Perlberg, Executive Director & Senior Counsel ConsensusDocs Coalition.

While traditional contracting or design-bid-build is still the most prevalent project delivery method in the United States construction market, the design-build project delivery method has risen in usage significantly over the past 20 years to become a well-established contracting vehicle by private and public owners alike for all types and sizes of construction projects. The ConsensusDocs design-build standard contract documents are some of the most used in the United States. A comparison of the ConsensusDocs design-build contracts as compared to the American Institute of Architects (AIA) and Design-Build Institute of America (DBIA) can be found here.

Design liability has become a hot-button issue for builders, and potential design liability risks for general contractors and trade contractors alike are significantly raised when contracting under the design-build project delivery method. Builders are typically, but not always, the lead party to contract with an owner for design-build projects. Even when a builder subcontracts out design services to a licensed architect or engineer, the design-builder is still ultimately responsible to the owner for meeting the standard of care for providing design services. Choosing a design-build contract that delineates one standard of care for design services and another for providing construction work is critical. If done incorrectly, a design-builder will be subjecting themselves to a higher standard is basically a strict liability standard if something goes wrong on a project, which is appropriate for product liability and not construction.

General Contractors and trade contractors must perform their services in conformance with the contract documents. Work not in conformance with the contract documents is considered defective. Design professionals are typically held to a different professional standard of care in performing design professional services. The ConsensusDocs 240 Standard Owner Design Professional agreement defines the design professional standard of care at section 2.1 as, “Services shall be performed in accordance with the standard of professional skill and care required for a project of similar size, location, scope, and complexity, during the time in which the Services are provided.” This allows for a certain level of imperfection in their work so long as it is a “non-negligent error.” Dodge Data did a study that concluded that design imperfection should be expected and should assign a design contingency to correct such imperfections.

The ConsensusDocs standard design-build agreements include the ConsensusDocs 400 Preliminary Design-Build Agreement, the ConsensusDocs 410 Design-Build Agreement Cost of the Work with a GMP, and the ConsensusDocs 415 Design-Build Lump Sum Agreement. The 400 must be used in conjunction with the 415, but when using the 410, the 400 is optional. ConsensusDocs design-build agreements separate the standard of care for providing design work and construction services. This is more typical and consistent with common law precedence. Also, using the ConsensusDocs 400 preliminary design-build agreement is appropriate to implement a progressive design-build approach. Progressive design-build streamlines an owner’s ability to bring a design-build under contract in a phase one contract approach. More contractual details and services are developed and negotiated later in the ConsensusDocs 410 which would serve as a phase two agreement.

Conversely, the AIA design-build agreement defines Work to include BOTH design services and construction work. Moreover, a design-builder must warrant that such work is free of defects Consequently, AIA A141 design-build agreement creates a heightened liability standard for the design-builder which is assumed by contract and is uninsurable. Significantly, Exhibit A to AIA A141 at section 5.6 states, “The Design-Builder accepts the relationship of trust and confidence established by this Agreement and covenants with the Owner to exercise the Design-Builder’s skill and judgment in furthering the interests of the Owner.” This likely creates a fiduciary duty for the owner design-builder to give to the owner.  Moreover, the AIA B143 Standard Design Services Agreement does NOT flow heightened standard of care or fiduciary obligations to the design professional in its contract with the design-builder. Consequently, using unmodified AIA design-build agreements will leave the design-builder holding liability gaps. This is an unenviable position that should be avoided.