Acme Sheet Metal had bid an HVAC system for a new shopping center. The bid package required that the HVAC subcontractor design a system that would meet air circulation, temperature, and other general criteria, but the bidders were granted flexibility as to the type of equipment to be utilized and the design of the distribution system.
Having reviewed the general criteria, Acme personnel concluded that the shopping center could most effectively be heated and cooled with multiple rooftop units and a relatively simple air-distribution system.
Under tremendous time pressure, Acme called in a mechanical engineer from a small firm who quickly looked over the plans and signed-off on them. The plans were submitted to the architect, Acme’s bid was accepted, and its work commenced. While Acme had not focused heavily on the contract documents (which looked very typical), it later discovered that it was operating under AIA A201-1997 General Conditions.
Construction on the center was completed in mid-summer of the next year. As retail tenants moved into their spaces, numerous complaints were received by the owner as to temperature variations, inadequacy of cooling in certain areas, and the inability of tenants to adjust for variations in temperature within particular spaces.
Tenants along the west-facing side of the building reported particular problems with cooling. Confronted by irate tenants, the owner brought an action against the general contractor for breach of contract based upon inadequacies in the HVAC system. The general contractor immediately asserted the same claim against Acme.
When Acme contacted the mechanical engineer that had reviewed the plans, it was informed that the engineering firm was going out of business and had minimal insurance. When Acme had its original plans reviewed by another mechanical engineering firm, it was informed that the design criteria were so broad and general, that the fight with the owner and general contractor would likely relate not to the number of air exchanges per hour, CFMs, or other normal objective design criteria. The issue would come down to whether the system adequately heated or cooled the shopping center, which it obviously did not.
Acme was also informed by its insurance agent that its contractor’s liability coverage did not extend to design work. By this time, management personnel at Acme and its law firm had developed more than a working familiarity with the new A201-1997 form and the company ultimately learned a very hard lesson about what can happen when a subcontractor blindly stumbles into the area of design services. Without insurance and with no one to claim against, the "buck" stopped right at Acme’s door.
Contract Bulletins #15 and 16 addressed the updated AIA A201-1997. One of the more significant changes concerns the potential delegation of responsibility for design to the contractor or subcontractors. The relevant language is contained in Paragraph 3.12.10 of the A201-1997. No equivalent provision appeared in the A201-1987.
Historically, contractors (or subcontractors) endeavored to avoid design responsibility, due, in part, to the accompanying risk of design liability. However, the A201-1997 acknowledges the current reality that a contractor or subcontractor may be asked to design, as well as install, a system that will meet project criteria. The parties participating in the development of the A201-1997 obviously decided that it was necessary to address the design delegation issue directly.
The design delegation language in Paragraph 3.12.10 actually incorporates a number of concepts that work to protect a contractor (or subcontractor) that is required to perform design services. Among these concepts are:
1. That the contractor is not responsible for work constituting architectural or engineering services unless the contract specifically provides that the contractor is to provide those services or unless the contractor needs to provide the services in order to carry out its responsibility for construction means, methods, techniques, sequences, and procedures.
2. That the contractor is not required to provide professional services in violation of applicable law.
3. That the owner and architect still bear responsibility to specify performance and design criteria if the contractor is to be called upon to provide professional design services or certifications as to a system, materials, or equipment.
4. That the contractor is not responsible for the adequacy of the performance or design criteria specified in the contract documents, but only for meeting those criteria.
At the same time, the new language poses some very real challenges for the contractor in its ventures into design work. For example, if the contractor is required to provide professional design services or certifications, the contractor will be required to procure the services of a properly licensed design professional and the design professional will be required to sign off on all of the applicable plans and specifications. The sign-off must occur before the materials are to be submitted to the architect and the owner and architect are legally entitled to rely upon the adequacy, accuracy, and completeness of the services, certifications, or approvals.
While the architect will review the submittals, the review is to be limited to checking for conformity with the information given and the design concept expressed in the contract documents. The architect is not required to confirm the adequacy of the design.
The shift of design responsibility and potential liability to the contractor (or subcontractor) presents several additional issues. First, it imposes upon the contractor the need to select and supervise design professionals and to be responsible for their work.
Second, it requires that the contractor (and the design professionals) very carefully evaluate the design criteria and obtain clarification from the owner or contractor as to any matters that are not clear.
Third, the contractor takes on additional coordination responsibility since its design, as well as its work, must now fit within the overall plan of the project. Coordination with the owner or general contractor and the architect becomes all the more essential.
Fourth, the contractor must make certain that its design professionals are properly insured and that it obtains its own insurance that will cover design liability. In fact, the issue of design responsibility should be one of the items that the contractor discusses with its insurance agent at the onset of any project.
Finally, the contractor’s undertaking of design responsibility could potentially pose licensing issues under the law of a particular jurisdiction. Many states require that engineers or architects be licensed in the particular state in which their work is to be performed. If the contractor is deemed to be providing the design services, the contractor may find itself lacking the licenses necessary for the delivery of its work product.
This could have an impact not only on any liability claims against the contractor, but may also affect the enforceability of the contract itself. The applicable licensing requirements will depend upon the jurisdiction, as well as the scope and type of design work to be performed.
The notion of "design/build" is becoming an increasingly more frequent element in construction. The A201-1997 attempts to deal with that reality. However, the contractor must operate with knowledge of the new General Conditions and how its construction practices must be adapted to meet the new requirements.