Construction-Manager-As-Constructor Recognized as an Acceptable Project Delivery Method in Federal Contracts

Jamie Furst | Alston & Bird

On December 19, 2019, the U.S. General Services Administration (“GSA”) issued a final rule which amends the General Services Administration Acquisition Regulation (“GSAR”) regarding project delivery methods for construction.[1] This rule, effective January 21, 2020, adopts the Construction-Manager-as-Constructor (“CMc”) project delivery method, one of the three most common construction services delivery methods. By adding the CMc delivery method in the GSAR as an alternative to design-bid-build and design-build, the Government is making it easier to comply with contracting requirements and to conduct business with the Government.

Specifically, the final rule amends 48 C.F.R. parts 536 and 552 to provide definitions and guidelines for the CMc project delivery method and to account for it in the parts governing solicitation provisions and contract clauses. As defined in the newly-added Code of Federal Regulations § 536.102, CMc is the “project delivery method where design and construction are contracted concurrently through two separate contracts and two separate contractors.”  Under the CMc delivery method, the Government awards a separate contract to a designer (i.e., architect-engineer contractor) and to a construction contractor (i.e., CMc contractor) before the design documents are complete. The Government retains the CMc contractor during design to work with the architect-engineer contractor to provide constructability reviews and cost estimating validation. The CMc’s design phase services are at a firm-fixed-price and the contract includes an option for construction at a guaranteed maximum price (“GMP”).  The amendments also provide a cost incentive through shared savings that are split between the CMc constructor and the Government under the CMc contract, which is intended to promote CMc constructor innovation and efficiencies.[2]

The aim of CMc is to create value by getting the contractor on board early on during the design phase to collaborate with the architect-engineer, the goal of which is to reduce cost growth, reduce schedule growth, and achieve administrative savings. During the design phase, the CMc contractor will provide constructability reviews and cost estimating validation. Additionally, under the CMc delivery method, construction can begin before the full completion of the design, which in theory reduces the total project schedule. It is long overdue that GSA recognized and formally adopted this delivery method for government construction.

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[1] General Services Administration Acquisition Regulation (GSAR); Adoption of Construction Project Delivery Method Involving Early Industry Engagement—Construction Manager as Constructor (CMc), 84 Fed. Reg. 69627 (December 19, 2019).
[2] See 48 C.F.R. § 536.7105-5.

Design Professional Best Practices for Successful Project Delivery and Loss Prevention

Jason Ebe | Snell & Wilmer | September 25, 2018

I frequently speak to architects and engineers on best practices for successful project delivery and loss prevention. The following is a brief refresher on some of those best practices.

Site Investigations

The design professional may want to consider recommending to the owner/client an appropriate scope for site investigation. If scope is limited due to budget, that should be documented. The design professional may want to consider providing all backup data along with a summary characterization report, to allow the contractor to draw its own conclusions from the data. The design professional may want to consider allowing the contractor reasonable access and opportunity to conduct its own pre-bid site investigation, but should not rely upon the contractor to do so.

When peer review is available, you may want to consider using it. You may want to exercise caution with absolutes (“always”, “never”) and vague terms, for example, what does “generally consistent” mean to you? 51%? 90+%? Perspectives will differ. The design professional may expect the contractor to rely on the language used. The design professional may want to exercise caution when assuming contract disclaimers will necessarily provide protection from claims.

Design Specifications

The design professional may want to exercise caution when allocating unresolved design issues to the contractor’s “means and methods.” If there are components of the design that are intended to be delegated or deferred, the design professional may expressly call those out to the owner and contractor to avoid surprise and confusion as to the shared design responsibility.

The design professional does not intend or achieve perfection in its services, so it should recognize the contractor is not perfect either, and there may be a need and justification for variances and construction tolerances.

The design professional may want to consider seeking construction industry feedback on constructability, pricing and other facets of the design. But, the design professional should be careful not to run afoul of procurement restrictions on communications with bidders. And, if feedback is obtained, the design professional may be served well by documenting in the design file what consideration the design professional gave to the feedback in refining and finalizing its design.

Construction Administration and Management

The design professional may want to consider clearly defining in its contracts the scope of its construction administration and management, then follow that scope, and document changes to avoid scope creep. If, during on-site observations, the design professional observes an issue of concern, even if that issue was not part of what the design professional was there to observe, the design professional may want to consider making an appropriate reporting. Follow the maxim “if you see something, say something.” But, the design professional may want to exercise caution and not cross the line of directing the contractor’s means and methods.

Daily progress reports are usually the key to proving what happened during construction. Memories fade, and testimony varies, but the documents last forever and are typically the most credible. Accompanying photos and video are golden. The design professional may want to consider following contract reporting requirements and provide “just the facts, ma’am” without editorialization. Objective reporting is the most credible. Meeting minutes are nearly as valuable as daily reports. Audio records can and should be made, with knowledge of all participants, and retained in the event there are disputes or follow up needed regarding the minutes.

With respect to emails and other project communications and documentation, you may want to exercise caution when using inside jokes, emotional or angry venting, and really anything that you would not want your mother or a judge to see. And think twice before hitting “send”, both as to content and recipients.

When evaluating changes and claims, the design professional may want to consider being objective and act in good faith. The design professional may want to exercise caution when taking a position it can’t maintain on the witness stand. The design professional may want to consider documenting the support for its position, for later third-party scrutiny. Some claims will be legitimate and will cost the owner money. Some claims will be the result of errors and omissions. In such instances, the design professional may want to consider discussing with its legal / risk management team before memorializing its position. The design professional should also recognize when reconsideration of a prior position is warranted.

Partnering is open, frank and respective dialogue, focusing on the issue, not the person, and seeking to resolve issues with a win-win, not a win-lose outcome. However, partnering is not acquiescence to an unreasonable participant’s demands. The design professional should understand the difference.

Many public owners have administrative claims procedures which are required to be exhausted before litigation. The design professional may want to consider making a checklist at the start of the contract, and follow it precisely to avoid loss of a claim, or to defend against a claim.

Claims Avoidance and Mitigation

Causes of action against the design professional may include, but are not limited to, professional negligence, negligent misrepresentation, fraud, fraudulent concealment, breach of contract, breach of the covenant of good faith and fair dealing, breach of warranty, interference with contract, and indemnity. Professional liability errors and omissions insurance may provide a defense to some but not all of these claims. Relief against the design professional may include compensatory damages, disgorgement of fees, punitive damages, attorneys’ fees, experts’ fees, litigation costs, and interest. Damages may include increased direct costs of construction, cumulative impact or disruption of premium costs, time driven delay costs, liquidated damages, and increased administrative / management / inspector / owner costs. Again, professional liability errors and omissions insurance may provide indemnity for some but not all of this relief.

Defenses to the foregoing claims may include, but not be limited to, claims that the services performed met the standard of care; the services not performed were not within the scope of contract or duty; the errors and omissions did not rise to negligence standard; the interference to contractor resulting from construction administration was proper in light of the design professional’s duty to the owner; a lack of causal connection between breach and damages; insufficiency of proof of damages; betterment; contractual limitations on liability and waivers of consequential damages and other relief; joint versus several liability; and non-parties at fault. Experienced counsel can help evaluate the claims and defenses and recommend options and the best path forward for a given dispute scenario. Counsel may also recommend engagement of experts, including as to standard of care, scheduling and delays, and damages.

When to Seek Input from Legal / Risk Management (Before the Lawsuit)

Best opportunities to engage with legal counsel and risk management before the lawsuit include review of the prime contract and subconsultant contracts; periodically during project performance; in the event of escalated tension among other project participants (for example, if the design professional’s client’s lawyer drafts letters for the design professional’s signature, if the design professional is invited to participate in a mediation without being a party to the mediation, and if the design professional is involved in documenting a settlement between the owner and contractor); and finally, and most certainly, in the event of a claim by the owner or contractor of negligence, errors, omissions or other fault or wrongdoing, even if no relief is being sought at that time.

By following the foregoing best practices, the design professional can better position itself for a successful project delivery and prevent loss to the project and itself.