June 18, 2014

Does Design-Build Provide Risk Relief?


"Design-build" refers to a construction project delivery method by which a single entity provides both design and construction services for a client. The design-build method can be applied to all or any part of a construction project and is a significant departure from traditional construction methods in which design and construction responsibilities are separate. By changing traditional relationships, projects may benefit from increased efficiencies that can result in reduced time and expense for all the parties. Also, project risks will be distributed differently, creating apparent advantages to one or more of the parties, all of which accounts for the growing acceptance and application of the design-build method. In spite of these advantages, the parties to a design-build project should always remember that construction is a risky business and that a risk's reallocation does not equal its elimination.

Typically, the project owner looks for a design-builder who will provide both the design services and the construction services necessary to deliver a complete project. The owner provides or identifies the project site and the criteria against which the completed project will be measured. Project criteria may be in the form of performance specifications or schematic drawings and outline specifications, or some combination of both. The design-builder develops a project design according to the project criteria, often working with the client in the design phase. When the proposal is accepted, the design-builder proceeds to construct the project as designed. If the completed project fails to meet any or all of the operative project criteria, the design-builder will be responsible to the client regardless of whether the failure results from inadequate design or from defective construction.

The design-build method can result in quicker project delivery at lower costs, which can increase the project's value and the contractors' margins. Overlapping the design and construction work can compress project timelines, and the builder's participation in the design can result in practical efficiency and lower costs. The consolidation of responsibility simplifies construction-dispute resolution and reduces the project owner's risks. It also expands the risks of the design-builder and its subcontractors and consultants.

With the design-build method, the project owner loses a degree of control over the project. Typically, the project owner relies on the assistance of its own design professional to provide the investigation and analysis behind the establishment of standards of design and performance appropriate for the owner's needs. With design-build, the project owner must be prepared to create, or to evaluate, such standards early in the budgeting and negotiation process. If the standards are unstated or incomplete, the default will be the minimum standard allowed by law or code. Thus, the risk that the completed project will not meet the owner's expectations increases, along with the substantial risk that the project budgets and deadlines will be blown if the standards are changed during construction.

One criticism of design-build is that the project architect or engineer is no longer an independent agent for the owner. The design professional's charge is to provide the design-builder with a design and technical information to facilitate the design-builder's negotiation and performance of the design-build contract with the owner. The design-builder relies on the design professional's services to complete the work in compliance with the agreement. If the professional services are inadequate, in light of the design-builder's needs, the design professional can be liable to the design-builder for the owner's damages, for breach of the design-build agreement, or for the design-builder's additional costs arising out of defects in the design and construction documents.

The design-builder assumes the risk that it can complete the project in the time allotted and for the price promised to the owner. The design-builder is responsible to complete whatever work is necessary to achieve the standards of size, utility, and quality set out in the agreement. If the design-builder encounters difficulties or conditions that increase that scope, the builder will have to absorb the impacts, unless the changes arise out of modifications or additions to the project performance standards.

When considering the design-build method all interested parties should remember that the familiar risks of any building project — price, time, and quality — may be moved but they will not be removed. The best construction contracts direct the risks to those who can manage them. The best projects avoid losses rather than distributing them.


This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations. For more information on this topic, please contact marketing@jordanramis.com or call (888) 598-7070.

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