By Roger A. Lenneberg, AttorneyThis article originally appeared in the Daily Journal of Commerce Oregon.
It is old news that construction is all about time and managing risk. The contracting parties have always used contracts to allocate the risks of unexpected cost associated with construction. Historically, an owner would hire a design professional who furnished plans and specifications to the contractors who “built per plans and specs.” Through the contracting process, the price for the work shown on the plans was agreed upon and the risk of loss for over budget costs and cost overruns was transferred to the subcontractor by holding them responsible for the "means, methods, and costs associated with the contractor’s scope” as long as the design did not change. For example, a framing contractor was always responsible for planning and staffing its work, purchasing the supplies, and completing the work required on time. If it cost more than expected, the subcontractor paid the difference under traditional “bid build” contracts.
Things Have Changed. More and more often subcontractors and contractors, in the private sector, get a contract by submitting proposals for partially designed scope of work at an agreed price. Depending on the project or the designers, the extent of undersigned detail and loosely defined criteria can be small or extensive and DELGATED DESIGN is born. Of course, the devil is in the details. While it is easy to overlook the significance of this change when pricing the work, Delegated Design changes the allocation of risk, making the subcontractor the designer.
What Is Delegated Design. Delegated Design is the transfer of responsibility, and all associated risk, for the design of a component system or element of a project to someone other than an Architect/ Engineer/Design Professional of Record. In other words Delegated Design focuses on specialty systems and is similar to design-build but, as applied, transfers far more risk to the subcontractor.
The Contract Does Not Say Delegated Design. Contracts rarely use the term delegated design and a contractor needs to pay careful attention to understand the scope of delegation. Typically, the provisions that describe Delegated Design include phrases like “scope of work includes, design, delivery and installation of a functioning building system, consistent with the intent of the contract documents. Subcontractor's proposal includes construction details and specifications omitted, or not shown, but inferable from or necessary for, a fully integrated system, compliant with local building codes and all other building systems.” In other words, the plans and specs are not final, may or may not be complete, and may or may not represent the expectations of the owner. Nonetheless, cost of completing the design both on paper and on the project is included in the price.
Six Tips For Limiting Delegated Design Risk. Delegated design and related concepts are here to stay and the risks cannot be eliminated. However, there are certain questions or requests that can limit or expose the extent of the risk:
Review all design documents for completeness before submitting a price. You can only accurately price what you know.
Limit the scope of design duties to design services "typically performed by trade contractors" or list the design duties specifically.
Exclude design interface with other building systems installed by other trades.
Verify your insurance includes coverage for professional and design services.
Require all design documents that must be stamped are also stamped by the Designer of Record for the Project.
Exclude design of aesthetic elements.