By far, the majority of the claims we see arise from the Contract Administration (“CA”) phase of a project. Even if a design is flawless, the owner and the contractor are likely to include the architect in claims for delays and cost overruns, as well as seeking to hold the architect liable for construction defects arising from means and methods.
Why are Contract Administration Claims Dangerous?
CA claims against design professionals are difficult to avoid and hard to defend because of the fluid nature of construction which often features significant non-written communication between the members of the project team. And, unlike claims arising from the design plans, it is difficult to determine the standard of care the design professional is expected to meet in the performance of his CA duties. As a result, CA litigation is often lengthy, messy and expensive. Obviously, it pays to take steps to avoid it in the first place.
Who Can Make a CA Claim Against a Design Professional?
State law varies, and this article is not meant to be taken as a definitive statement of any state’s law, but CA claims may generally be made by almost anyone working on the project. Obviously the project owner who hires the design professional can make a claim arising from the contract for the design professional’s work on the project (see the “CONTRACTS” section of this website for more information on ways a design professional can minimize exposure to the owner arising from a contract). However, the mere existence of a contract between the owner and the design professional, in most states, no longer protects the design professional from CA claims by contractors, sub-contractors, suppliers and others who provide labor or material to the project. The only difference is that the owner’s claim will be made in “contract,” and the non-owner claims will be made in “tort.” While there may be fine distinctions between a CA claim made in contract and a CA claim made in tort, the bottom line for the design professional is that he can be sued by different parties claiming to have been damaged by the same alleged faulty provision of CA services by the design professional.
What can a Design Professional do to Help Avoid a CA Claim?
Allegations of faulty CA services fall into some general categories, many of which have produced a great amount of the CA litigation against design professionals in recent years. It should be noted that rarely does a CA claim feature just one of these categories. In fact, it is not uncommon to find most or all of them thrown together, which may be more a reflection of the plaintiff lawyer’s imagination than what actually happened during the project. Nonetheless, addressing these potential claim areas before the project starts (or as part of a regular litigation avoidance program) may help the design professional avoid a CA claim, or at least make the claim easier to defend if it cannot be avoided.
Potential Claim Areas
1. Shop Drawing Review.
Owners and contractors often seek to hold the design professional responsible for flawed shop drawings. These types of claims are inconsistent with most standard construction documents. For example, AIA A-201 (§ 3.12.4) states that “Shop Drawings, Product Data, Samples and similar submittals are not contract documents. The purpose of their submittal is to demonstrate for those portions of the work for which submittals are required by the contract documents the way by which the contractor proposes to conform to the information given and the design concept expressed in the contract documents.” In other words, at least according to the AIA, shop drawings are the contractor’s responsibility. This is further reflected in § 3.12.6 of the A-201: “By approving and submitting Shop Drawings, Product Data, Samples, and similar submittals, the Contractor represents that the Contractor has determined and verified materials, field measurements, and field construction criteria related thereto, or will do so, and has checked and coordinated the information contained within such submittals with the requirements of the Work and of the Contract Documents.” Under these provisions, the contractor seems to have an affirmative duty to check and coordinate submittals before sending them to the architect. Clearly then, step one of avoiding CA claims arising from shop drawing review is to try to include the AIA A-201 (or similar provisions) in both the design professional/owner agreement and the construction contract. Step two is conducting shop drawing review in the manner set out in A-201. That being said, the greatest contract language in the world is of little value if the design professional does not follow it, either by doing more than the contract requires or by doing less. Many contractor-generated shop drawing review claims amount to little more than allegations that the design professional did not respond promptly or failed to keep track of submittals. An organized and consistently followed submittal tracking process with effective follow-up can do a great deal to blunt these claims.
2. Requests for Information.
Contractors often claim to have been delayed or impeded by a design professional’s failure to respond promptly (or at all) to an RFI. Plaintiff lawyers will prepare charts tracking unanswered RFIs and/or delayed RFI responses. The design professional’s reaction is often that the RFIs were excessive and caused either by the contractor’s incompetence or his ethics (much has been written about contractors using the RFI process to create change orders) or both. While that may turn out to be true, after much litigation, it is far easier to defend an RFI claim if the design professional has carefully tracked RFIs and implemented a system to ensure that they are responded to in some manner—even if it is nothing more than to inform the contractor that its request seeks information the contractor is supposed to provide itself.
3. Site Visits—Frequency and Documentation.
A frustrating area of litigation for design professionals and their attorneys is site visit claims. Here, an owner may allege the contractor’s work was faulty and that the designer is responsible for somehow failing to prevent that. Even worse, a contractor may claim that the design professional should have kept it from its own faulty performance. The design professional’s first line of defense is the design contract. The AIA A-201 (§ 4.2.2) provides that site will be visited “at intervals appropriate to the stage of the Contractor’s operations (1) to become generally familiar with and to keep the Owner informed about the progress and the quality of the portion of the Work completed, (2) to endeavor to guard the Owner against defects and deficiencies in the Work, and (3) to determine in general if the Work is being performed in a manner indicating that the Work, when fully completed, will be in accordance with the Contract Documents.”
Key portions of this provision are:
It should go without saying that the design professional that conducts a site visit should not write internal memoranda or e-mails that contradict his report. For a broader discussion of the effect of e-mails in construction litigation please go the FILE MANAGEMENT section of this website.
4. Change Orders.
The design professional is ordinarily not a party to the construction contract and should not have the authority to agree to a change order on behalf of the owner. Generally, an architect’s signature on a change order indicates merely that he knows about it and accepts it as a legitimate change in the scope of the contractor’s work (as opposed to a change directive or a minor change in the work that does not affect the contract sum or time). To alter the terms of the construction contract, the change order still must be signed by the owner. Where a proposed change is excessively priced or is not a legitimate change, the design professional that declines to accept it faces possible litigation with the contractor who will claim that the design professional committed malpractice by “wrongfully” failing to approve the change. If the design professional does accept it and recommends the owner’s approval of a change order that is excessive or within the contractor’s original scope, then he faces a breach of contract claim from the owner. While the horns of this dilemma cannot always be avoided, the design professional can lessen the impact of a potential claim either way by establishing an effective tracking mechanism for proposed change orders, carefully evaluating each proposed change and thoroughly documenting her decision-making process. A proposed change order that should be rejected can turn into a legitimate delay claim by the contactor if the design professional does not process it promptly.
5. Payment Applications.
Claims arising from owners and contractors alleging, alternatively, that a design professional should (or should not have) approved an application for payment are similar to change order claims (see CHANGE ORDER above) in that the design professional finds himself caught between the owner and the contractor. As with change orders, the design professional’s first line of defense is a tracking system that ensures a prompt response—whatever that may be—and thorough documentation of the designer’s decision process. Although owners may dispute this after the fact, the design professional cannot compel the owner to pay the contactor on an application the owner believes is excessive or unjustified. Therefore, correspondence from the design professional should not be so strong that it sounds like more than the designer’s opinion and recommendation. The final decision is up to the owner.
6. Field Disputes.
Construction disputes often arise in the field when a contractor or owner’s representative confronts the designer with an alleged error or omission in his work. The best reaction is to avoid conceding any error, promise to look into it and then do just that. However, too often, design professionals will simply “promise to fix the mistake”—before they really know that they have made one. Later, after having a chance to review the project file, the designer realizes there was no error or omission in the first place. Unfortunately, damage has already been done, as the owner/contractor will not allow the designer to retract his previous admission of culpability. An admission like this is a far easier way for the plaintiff attorney to establish malpractice than actually proving the designer made a mistake. Another reaction to a field dispute that should be avoided is the writing of an internal memorandum or e-mail admitting that “we screwed up,” or words to that effect. This kind of self-flagellating internal correspondence is quite likely to become the plaintiff attorney’s most damning piece of evidence that the designer erred and knew it, and is now simply trying to rationalize his mistake. For more information on internal correspondence, see the File Management section of this website.
Why are Contract Administration Claims Dangerous?
CA claims against design professionals are difficult to avoid and hard to defend because of the fluid nature of construction which often features significant non-written communication between the members of the project team. And, unlike claims arising from the design plans, it is difficult to determine the standard of care the design professional is expected to meet in the performance of his CA duties. As a result, CA litigation is often lengthy, messy and expensive. Obviously, it pays to take steps to avoid it in the first place.
Who Can Make a CA Claim Against a Design Professional?
State law varies, and this article is not meant to be taken as a definitive statement of any state’s law, but CA claims may generally be made by almost anyone working on the project. Obviously the project owner who hires the design professional can make a claim arising from the contract for the design professional’s work on the project (see the “CONTRACTS” section of this website for more information on ways a design professional can minimize exposure to the owner arising from a contract). However, the mere existence of a contract between the owner and the design professional, in most states, no longer protects the design professional from CA claims by contractors, sub-contractors, suppliers and others who provide labor or material to the project. The only difference is that the owner’s claim will be made in “contract,” and the non-owner claims will be made in “tort.” While there may be fine distinctions between a CA claim made in contract and a CA claim made in tort, the bottom line for the design professional is that he can be sued by different parties claiming to have been damaged by the same alleged faulty provision of CA services by the design professional.
What can a Design Professional do to Help Avoid a CA Claim?
Allegations of faulty CA services fall into some general categories, many of which have produced a great amount of the CA litigation against design professionals in recent years. It should be noted that rarely does a CA claim feature just one of these categories. In fact, it is not uncommon to find most or all of them thrown together, which may be more a reflection of the plaintiff lawyer’s imagination than what actually happened during the project. Nonetheless, addressing these potential claim areas before the project starts (or as part of a regular litigation avoidance program) may help the design professional avoid a CA claim, or at least make the claim easier to defend if it cannot be avoided.
Potential Claim Areas
1. Shop Drawing Review.
Owners and contractors often seek to hold the design professional responsible for flawed shop drawings. These types of claims are inconsistent with most standard construction documents. For example, AIA A-201 (§ 3.12.4) states that “Shop Drawings, Product Data, Samples and similar submittals are not contract documents. The purpose of their submittal is to demonstrate for those portions of the work for which submittals are required by the contract documents the way by which the contractor proposes to conform to the information given and the design concept expressed in the contract documents.” In other words, at least according to the AIA, shop drawings are the contractor’s responsibility. This is further reflected in § 3.12.6 of the A-201: “By approving and submitting Shop Drawings, Product Data, Samples, and similar submittals, the Contractor represents that the Contractor has determined and verified materials, field measurements, and field construction criteria related thereto, or will do so, and has checked and coordinated the information contained within such submittals with the requirements of the Work and of the Contract Documents.” Under these provisions, the contractor seems to have an affirmative duty to check and coordinate submittals before sending them to the architect. Clearly then, step one of avoiding CA claims arising from shop drawing review is to try to include the AIA A-201 (or similar provisions) in both the design professional/owner agreement and the construction contract. Step two is conducting shop drawing review in the manner set out in A-201. That being said, the greatest contract language in the world is of little value if the design professional does not follow it, either by doing more than the contract requires or by doing less. Many contractor-generated shop drawing review claims amount to little more than allegations that the design professional did not respond promptly or failed to keep track of submittals. An organized and consistently followed submittal tracking process with effective follow-up can do a great deal to blunt these claims.
2. Requests for Information.
Contractors often claim to have been delayed or impeded by a design professional’s failure to respond promptly (or at all) to an RFI. Plaintiff lawyers will prepare charts tracking unanswered RFIs and/or delayed RFI responses. The design professional’s reaction is often that the RFIs were excessive and caused either by the contractor’s incompetence or his ethics (much has been written about contractors using the RFI process to create change orders) or both. While that may turn out to be true, after much litigation, it is far easier to defend an RFI claim if the design professional has carefully tracked RFIs and implemented a system to ensure that they are responded to in some manner—even if it is nothing more than to inform the contractor that its request seeks information the contractor is supposed to provide itself.
3. Site Visits—Frequency and Documentation.
A frustrating area of litigation for design professionals and their attorneys is site visit claims. Here, an owner may allege the contractor’s work was faulty and that the designer is responsible for somehow failing to prevent that. Even worse, a contractor may claim that the design professional should have kept it from its own faulty performance. The design professional’s first line of defense is the design contract. The AIA A-201 (§ 4.2.2) provides that site will be visited “at intervals appropriate to the stage of the Contractor’s operations (1) to become generally familiar with and to keep the Owner informed about the progress and the quality of the portion of the Work completed, (2) to endeavor to guard the Owner against defects and deficiencies in the Work, and (3) to determine in general if the Work is being performed in a manner indicating that the Work, when fully completed, will be in accordance with the Contract Documents.”
Key portions of this provision are:
- That the design professional will visit the project at appropriate intervals to the stage of the Contractor’s operations. Too often design contracts specify a both a particular number of site visits (beyond which the site visit is an additional service) and/or a particular interval (e.g., monthly). Some owner’s attorneys will argue that it is malpractice for an architect to even agree to a limited number of visits at specified intervals because the architect’s standard of care cannot be discharged unless she is free to determine when and how often she will visit the project. The fact that it was the owner that insisted on these limitations in the first place will often be lost in the ensuing litigation. Efforts by the owner to place these kinds of limits on the designer’s site visits should be resisted.
- The design professional will become generally familiar with the work. In other words, the design professional will observe construction, not inspect or supervise it any way. This is a critical difference when an owner or contractor is trying to hold a design professional responsible for faulty means and methods after the fact. Of course the value of this distinction is lost if the design professional undertakes to direct construction in any manner.
- The design professional will keep Owner informed about the progress and quality of the portion of the Work completed. The site observation report should be just that—a factual recitation of what the design professional observed about the quality and progress of the work that was actually done. Too often, design professionals vary from “just the facts” into conclusions, opinions and conjecture, which then becomes the basis of a claim by the contractor that his work was interfered with or that his relationship with the owner was impaired. It can also be used by the owner to establish that the design professional, despite the restrictive language of the design contract, actually did stray into directing means and methods and thus should be held accountable for the result.
It should go without saying that the design professional that conducts a site visit should not write internal memoranda or e-mails that contradict his report. For a broader discussion of the effect of e-mails in construction litigation please go the FILE MANAGEMENT section of this website.
4. Change Orders.
The design professional is ordinarily not a party to the construction contract and should not have the authority to agree to a change order on behalf of the owner. Generally, an architect’s signature on a change order indicates merely that he knows about it and accepts it as a legitimate change in the scope of the contractor’s work (as opposed to a change directive or a minor change in the work that does not affect the contract sum or time). To alter the terms of the construction contract, the change order still must be signed by the owner. Where a proposed change is excessively priced or is not a legitimate change, the design professional that declines to accept it faces possible litigation with the contractor who will claim that the design professional committed malpractice by “wrongfully” failing to approve the change. If the design professional does accept it and recommends the owner’s approval of a change order that is excessive or within the contractor’s original scope, then he faces a breach of contract claim from the owner. While the horns of this dilemma cannot always be avoided, the design professional can lessen the impact of a potential claim either way by establishing an effective tracking mechanism for proposed change orders, carefully evaluating each proposed change and thoroughly documenting her decision-making process. A proposed change order that should be rejected can turn into a legitimate delay claim by the contactor if the design professional does not process it promptly.
5. Payment Applications.
Claims arising from owners and contractors alleging, alternatively, that a design professional should (or should not have) approved an application for payment are similar to change order claims (see CHANGE ORDER above) in that the design professional finds himself caught between the owner and the contractor. As with change orders, the design professional’s first line of defense is a tracking system that ensures a prompt response—whatever that may be—and thorough documentation of the designer’s decision process. Although owners may dispute this after the fact, the design professional cannot compel the owner to pay the contactor on an application the owner believes is excessive or unjustified. Therefore, correspondence from the design professional should not be so strong that it sounds like more than the designer’s opinion and recommendation. The final decision is up to the owner.
6. Field Disputes.
Construction disputes often arise in the field when a contractor or owner’s representative confronts the designer with an alleged error or omission in his work. The best reaction is to avoid conceding any error, promise to look into it and then do just that. However, too often, design professionals will simply “promise to fix the mistake”—before they really know that they have made one. Later, after having a chance to review the project file, the designer realizes there was no error or omission in the first place. Unfortunately, damage has already been done, as the owner/contractor will not allow the designer to retract his previous admission of culpability. An admission like this is a far easier way for the plaintiff attorney to establish malpractice than actually proving the designer made a mistake. Another reaction to a field dispute that should be avoided is the writing of an internal memorandum or e-mail admitting that “we screwed up,” or words to that effect. This kind of self-flagellating internal correspondence is quite likely to become the plaintiff attorney’s most damning piece of evidence that the designer erred and knew it, and is now simply trying to rationalize his mistake. For more information on internal correspondence, see the File Management section of this website.
