This article reviews some of the issues addressed in a standard Owner/Design Professional Agreement, outlines concerns from the Design Professional’s perspective, and discusses how the Design Professional can reduce liability on a project and ensure equitable adjustments to the contract price and schedule for changed or additional design services. The agreement contemplated by this article is one to be used as part of a traditional design-bid-build approach.
Standard of Care
When trying to hold a Design Professional liable for negligence, one of the first legal considerations is the standard of care owed. Absent an express contractual warranty, the law does not require the Design Professional to guarantee that the design will be perfect. Rather, the standard of care that the courts will typically apply is that degree of care which a reasonably careful architect/ engineer would use under like circumstances. However, nothing prevents an Owner from seeking contractual language that increases the typical standard of care owed by the Design Professional to the level of an express warranty of the design; in fact, Owners frequently attempt to do so in their proposed agreements – and courts will enforce such language. This is a danger to the Design Professional, as it is possible that the increased standard of care could go beyond professional liability insurance coverage available to the Design Professional. Thus, the Design Professional should insist on the deletion of any such guarantee as unreasonable.
Similarly, a Design Professional should insist on the deletion of any proposed language that attempts to establish a fiduciary duty between the Design Professional and the Owner, as such language also results in an increased standard of care owed on the Project.
Owner’s Project Criteria
Before commencing with design services, the Design Professional should insist upon a well-defined project criteria from the Owner, upon which it may rely for establishing the overall parameters of the project. The agreement should expressly state that the project criteria furnished by the Owner describes all of its program requirements and objectives for the project, including use, space, budget, time, site, maintenance requirements, and expandability requirements, as well as submittal requirements and other requirements governing the Design Professional’s performance of the work on the project. Ideally, the Owner’s project criteria includes conceptual documents, design criteria, performance requirements and all other Project-specific technical materials and requirements needed by the Design Professional to commence work without further information gathering after the contract is executed.
Any language that requires the design documents to reflect the Owner’s “intent” or other such wording should be deleted (as mind reading should not be a contractual requirement). The Design Professional should insist on express contractual language that states that if the Owner seeks to supplement or change the project criteria after the contract price is established or after the Design Professional commences work, then the Design Professional is entitled to an equitable adjustment to the contract price and schedule as a condition precedent to performing any such additional work.
Similarly, to the extent that the Owner changes the project budget, there should be contract language entitling the Design Professional to an equitable adjustment in the contract price and schedule, to be reflected in an executed change order, for all resulting value-engineering needed to reach the revised budget. However, if value engineering is needed because the bids from all contractors exceed the project criteria’s budget (possibly resulting from inaccurate pricing estimates by the Design Professional), then the contract should include language that states whether a Design Professional must perform that value engineering work without additional compensation. Perhaps the contract states that the Design Professional is only required to do so if the lowest responsive and responsible bid exceeds the budget by some threshold percentage. Regardless, the Design Professional should expressly limit any liability for any claims or damages sought by the Owner arising from the cost of the work exceeding the project criteria’s budget.
This has been an excerpt of the December 2013 issue of ProNetwork News. Download the full PDF version of this newsletter to continue reading. You can visit the a/e ProNet website for free access to the full library of this risk management publication. For early access to these excellent newsletters, or if you have questions about what you’ve read here, contact your local a/e ProNet broker today.
About the Author
Frank L. Pohl, Esq. and James C. Washburn, Esq. are partners in the law firm of Pohl & Short, P.A. in Winter Park, Florida. Pohl & Short, P.A. represents architects, engineers and other participants in the construction industry throughout Florida. Mr. Pohl has been advising clients involved in all aspects of real estate development for over 30 years. Mr. Washburn has focused his practice in construction law for over 15 years and is Board Certified in Construction Law by The Florida Bar. Additionally, the law firm’s attorneys practice in the following four main areas of business law: commercial litigation, real estate law, corporate law and trusts and estates. Further information about the law firm can be obtained by visiting its website at www.pohlshort.com, by calling the office at (407) 647-7645 or via e-mail at email@example.com.