Design-Assist Collaboration/Follow-Up Post

John P. Ahlers | Ahlers Cressman & Sleight

Shortly after posting the blog article “Design-Assist an Ambiguous Term Causing Conflict in the Construction Industry,” I received an email from Brian Perlberg, the Executive Director and Senior Counsel for ConsensusDocs. He brought two ConsensusDocs forms to my attention:  ConsensusDocs 541 Design Assist Addendum and ConsensusDocs 300 Integrated Form of Agreement (IFOA). In the ConsensusDocs model of “design-assist,” the lead design professional retains design responsibility but benefits from input and consultation from the construction team during design development. By contrast, in the design-build project delivery method, the constructor assumes design responsibility and liability for either the entire project design (design-build) or just a component of the design (delegated design).

The ConsensusDocs 541 document goal is to provide “accurate information concerning program, quality, cost, constructability and schedule from all parties.” It provides a range of standard and optimal services during design development that essentially shifts the curve of selecting the construction manager (CM) and most importantly, special trade contractors, to much earlier in the process, perhaps as soon as the owner’s program is developed. This opens a world of possibilities for the design and construction team to collaborate early and often. The design professional, however, does not abdicate its design responsibility or authority in this process. The ultimate goal is to end the all-too-common wasteful cycle of design and redesign that is common in construction projects.[1]

The ConsensusDocs 541 explicitly states at §2.3: “[W]hile retaining overall responsibility for the project design, Design Professional shall work collaboratively with other members of the project team drawing on the respective expertise in order to achieve the project objectives.” Thus, to the extent design build trade packages or other delegated design may occur during the collaborative process, such shifting of responsibility is done explicitly in a collaborative and intentional fashion in ConsensusDocs 541. In other words, stated simply, if a contractor is to assume design responsibility, that design responsibility is explicitly and unequivocally delegated to the contractor so that there is no misunderstanding of when or if the design work is handed off.

Design-Assist is not IPD (Integrated Project Delivery —a multi-party contract in which the contractual risk is shared in a shared risk pool.) At §2.3, the ConsensusDocs 541 form affirmatively states: “[t]he Parties acknowledge this addendum is not an Integrated Project Delivery agreement or design build agreement and that each party remains responsible for its own errors, omissions or construction defects to the extent provided in the underlying agreements.”

The ConsensusDocs 300 provides a much deeper level of risk-reward sharing that includes contractual privity among the owner, design professional and constructor, a limitation of liability among the core group and a shared risk pool where the parties’ compensation rises and falls together with the success of the project, akin to IPD.

Comment: Design-Assist is an option for owners who wish to incorporate a collaborative design process into projects and the ConsensusDocs makes it clear that the design responsibility remains with the design professional unless components of the design are specifically delegated to the contractor. Using the phrase “design assist” without the clarification recommended in the ConsensusDocs 541, that the design professional retains overall responsibility for the project, can cause conflicts when design issues arise during construction.

[1] How Design-Assist Moves the Needle on Collaboration and How it Differs From Design-Build and IPD, Leon and Pearlberg Design Cost Data, January-February 2020.

Circumstances in Which Design Professional has Construction Lien Rights

David Adelstein | Florida Construction Legal Updates

If you are a design professional (architect, landscape architect, interior designer, engineer, surveyor, or mapper) you have construction lien rights in the event you are not paid.   This does not mean your lien rights are absolute so it is important to understand the circumstances which allow you to record a construction lien on a project.  These circumstances are contained in Florida Statute s. 713.03:

(1) Any person who performs services as architect, landscape architect, interior designer, engineer, or surveyor and mapper, subject to compliance with and the limitations imposed by this part, has a lien on the real property improved for any money that is owing to him or her for his or her services used in connection with improving the real property or for his or her services in supervising any portion of the work of improving the real property, rendered in accordance with his or her contract and with the direct contract.

(2) Any architect, landscape architect, interior designer, engineer, or surveyor and mapper who has a direct contract and who in the practice of his or her profession shall perform services, by himself or herself or others, in connection with a specific parcel of real property and subject to said compliances and limitations, shall have a lien upon such real property for the money owing to him or her for his or her professional services, regardless of whether such real property is actually improved.

The first circumstance pertains to design professionals that do NOT have a direct contract with the owner of the property.  In this circumstance, you have lien rights for your services “used in connection with improving the real property” or your services “in supervising any portion of the work of improving the real property” that you perform under your contract and with the direct contract, presumably between the owner and your client.  The important, operative word in this circumstance involves improving the real property.

The second circumstance pertains to design professionals hired directly by the owner.  In this circumstance, you have broader lien rights as you have lien rights for your services “regardless of whether such real property is actually improved.”  Hence, improving the real property is of no moment.

A design professional does not need to serve any preliminary notice (such as a notice to owner) in order to preserve their lien rights.  However, a design professional still needs to record a construction lien within 90 days from their final furnishing date.

A construction lien from a design professional is less common than a lien from a contractor, subcontractor, or supplier. Nonetheless, design professionals do have construction lien rights that an owner should be cognizant of and a design professional should understand in furtherance of best ensuring payment.

Design-Build Lite – Construction Contracts with D-B Components

Colm Nelson | Ahead of Schedule

For most in the industry, when we think about a standard construction contract, we envision the construction documents being drafted by the architect and other design consultants.  We tend to view the project as design-price-build, unless an alternative procurement mechanism has been selected such as design-build.  Consistent with this design-price-build model, the contractor’s review of the design is ordinarily not to identify errors and omissions or violations of law in the design, but purely to review the design from a contractor’s constructability standpoint.  Many contractors doing this work don’t carry professional liability insurance, because they don’t view themselves as designers.

But the market has changed a lot over the last ten years.  Nowadays, when owners and contractors drill down with their lawyers to discuss risk, they often realize that, in fact, the contractor is performing  a lot of design work.  For instance, it is not uncommon for the contractor, through its subtrades, to design the mechanical, electrical, and plumbing systems to performance standards created by the owner and/or provided by code.  In fact, fire sprinkler systems have been designed by the trades for a long time.

In addition, there is a certain amount of design work involved in the construction process itself.  For instance, designs of shoring and forming systems may involve a professional design component.  Taken together, for larger projects, a significant amount of design risk may actually be assumed by the prime contractor.  In light of this, the parties should consider a number of factors when negotiating a standard construction contract.  Some questions to consider are as follows:

  • If the contractor is performing design work, should the contractor’s review of the Architect’s design be held to a higher professional standard, at least with respect to those systems being designed by the contractor?
  • What type of insurance is in place to cover the risk associated with defects in the designs provided by the contractor, potentially including errors and omissions (E&O) and owner’s protective professional indemnity (OPPI) coverages.
  • Who owns the drawings and/or who has a license to use them, and when?
  • Is the project owner entitled to bring design claims directly against the subcontractor and, if so, what is the effect, if any, of the liability limitation/consequential damages waiver in the subcontract?

Asking these questions before the contract is negotiated will often help the parties understand their risk and shift as much of that risk as possible onto the appropriate party (usually the party that controls the risk) and their insurance company.

Beware of the Risks! No Ownership, No Lien

Andrew Atkins, Peter Marino and Patrick Wilson | Smith Anderson

A recent North Carolina Court of Appeals decision reiterates the importance of knowing who you are dealing with when undertaking work or selling materials in connection with any construction or development project in our state. In Davis & Taft,1 the Court of Appeals found that the design firm that performed design services for a prospective property purchaser could not properly assert a lien on the property, given the design services were never actually used to improve the property. While this case involved a design firm, the lesson of this case extends to any party providing labor or materials on any type of construction or development project in the state.

N.C. Gen. Stat. § 44A-7(6) defines the owner of real property as a “person who has an interest in the real property improved and for whom an improvement is made and who ordered the improvement to be made.” N.C. Gen. Stat. § 44A-7(3) defines an improvement as, among other things, an “improvement upon, connected with, or on or beneath the surface of any real property, . . . .” In Davis & Taft, the Court noted that the terms “labor” and “improve” contemplate actual work upon the subject property performed by the person claiming the lien. 

The design firm in the Davis & Taft case contracted with a company interested in buying the subject property. The sale fell through, but before it did, the design firm performed $230,000 in design work, $80,000 of which remained unpaid. The design firm filed a lien on real property and sued to enforce the lien. The trial court dismissed the lien claim at summary judgment, and the Court of Appeals affirmed this decision.

The Court reasoned that since the design services were under contract to a prospective buyer and not an “owner” of the property at issue, and because the design was never actually used to “improve” the property as required by the statute, that no lien on the property was permissible.

A key takeaway for construction and design industry professionals is to ensure the entity that hires you or your company actually owns the subject property. If they don’t, then you may not be able to rely on lien rights as a basis for recovery. Concerned parties can also protect their interests by confirming whether the project is protected by payment and performance bonds.  

This case highlights the risks parties take with respect to contracting with potential future owners and with respect to performing design or construction related activities in connection with a project that never materializes.

1 Davis & Taft Architecture, P.A. v. DDR-Shadowline, LLC, 835 S.E.2d 473, 475 (N.C. Ct. App. 2019).

“Wait! Do You Have All Your Ducks in a Row?” Filing of a Certificate of Merit in Conjunction With a Complaint

Rahul Gogineni | The Subrogation Strategist

In Barrett v. Berry Contr. L.P., No. 13-18-00498-CV, 2019 Tex. LEXIS 8811, the Thirteenth District Court of Appeals of Texas considered, among other things, the procedural timing requirements of filing a certificate of merit in conjunction with a complaint. The court concluded that the proper reading of the statute requires a plaintiff to file a certificate of merit with the first complaint naming the defendant as a party.

In Barrett, after sustaining injuries while working at a refinery, David Barrett (Barrett) filed suit against Berry Contracting, LP and Elite Piping & Civil, Ltd. on July 6, 2016. In Barrett’s first amended complaint, which he filed on August 23, 2016, Barrett added Govind Development, LLC (Govind) as another defendant. Barrett subsequently filed a second amended complaint (omitting Govind) and, on December 27, 2017, shortly before the statute of limitations ran, a third amended complaint (reasserting claims against Govind). On January 28, 2018, after the statute of limitations period ran, Barrett filed a certificate of merit. Govind filed a motion to dismiss the claim, asserting that Barrett violated the statute that required a certificate of merit to be filed with the complaint, Tex. Civ. Prac & Rem. Code §150.002.

Tex. Civ. Prac. & Rem. Code §150.002(a) states,

In any action or arbitration proceeding for damages arising out of the provision of professional services by a licensed or registered professional, a claimant shall be required to file with the complaint an affidavit of a third-party licensed architect, licensed professional engineer, registered landscape architect or registered professional land surveyor…

There is an exception to the requirement that the certificate of merit be filed contemporaneously with the complaint. Specifically, if the complaint is filed within ten days of the expiration of the statute of limitations and the plaintiff specifically pleads that he or she cannot obtain a certificate of merit in such a short period of time, then the plaintiff can supplement his or her pleading with a certificate of merit, so long as it is filed within 30 days of the date of the filing of the complaint. Tex. Civ. Prac. & Rem. Code §150.002(c).

Although the exception exists, in Barrett the court of appeals clarified that §150.002(c) only applies to the first time a defendant is named in a complaint. Accordingly, if a plaintiff names a defendant in a complaint without including a certificate of merit and, subsequently, within ten days of the expiration of the statute of limitations period, files an amended complaint that also names the defendant, the plaintiff is not protected by §150.002(c)’s 30 day-extension period for filing the certificate of merit. Because the court of appeals found that Barrett should have filed a certificate of merit when he first named Govind as a defendant on August 23, 2016, the court upheld the trial court’s dismissal of the claims against Govind.

This case serves as a good reminder that before a lawyer files suit against a professional such as an engineer or architect, the lawyer should review the applicable jurisdiction’s procedural rules for specific certificate of merit requirements. Absent compliance with a jurisdiction’s procedural rules, a lawyer’s temptation to file suit against all parties that may possibly be liable could lead to unintended consequences, including preclusion of a valid claim.