MOST CONTRACTS for larger projects are written using standard form documents, such as AIA or EJCDC forms, or forms that are derived from them. Nearly all these forms — with the notable exception of AGC — call for oversight during construction by an independent architect or engineer. These contracts anticipate that the A/E will be involved in:
- Observing or inspecting the work or tests;
- Reviewing shop drawings and submittals;
- Responding to RFIs, issuing supplemental drawings or sketches;
- Issuing changes or change-order directives;
- Approving payment applications;
- Inspecting for substantial and final completion;
- Reviewing claims and giving opinions; and
- Conducting warranty walk-throughs.
On virtually all public, institutional and large commercial work, however, some or all these functions are instead performed by someone other than the designer. It’s often someone either on staff at the owner, independently hired by the owner, or performed jointly by the owner’s rep and the design professional. For example:
- Most school districts and other governmental entities have a director of construction.
- Lenders frequently require that their own construction consultants review the work and determine how much money is to be paid on progress billings.
- Construction managers are hired to oversee the work of the contractors.
- Large hotel and retail chains have their own in-house architects who review questions about their canned designs.
If the contract allows the owner to have someone perform these functions, what difference does that make to the contractor which one it is?
It could make a lot of difference. First of all, it probably violates the terms of the contract that said the work would be done by the A/E. If someone other than the person specified in the contract sends a letter of termination or rejects work, that could be the basis for a court overturning a decision with serious financial consequences to the owner. When an owner decides to vary from the terms of the contract that his own lawyers probably wrote, an owner takes a great risk that his own words will be used against him.
Second, it could leave the owner with no final point of responsibility.
I was involved some years back in a project where the university owner had hired a construction manager to oversee multiple trade contracts. When the electrician defaulted after being paid 95% of its contract funds, it was discovered that its work was only 50% complete. The electrician’s surety complained that the owner had breached the contract by overpaying the contractor. The owner was perplexed because it required its own facilities management department, the architect of record and the construction manager to all sign off on all pay apps. Unfortunately, each of them assumed that one of the others was actually inspecting the work. The surety didn’t pay the owner.
Even aside from the contractor’s objection, there are many things that state law won’t let an owner take away from the designer and delegate to others.
As a result of the tragic Hyatt Regency skywalk collapse in Kansas City in 1980, the Missouri Court of Appeals ruled that the responsibility for review of design cannot be delegated. The licensed designer of record must do it.
Just as often as an owner hires someone else to do the A/E’s job without the contractor’s agreement, thereby taking work out of the A/E’s scope, an owner contracts with a contractor to have the A/E do things that the owner neglected to put in the A/E’s contract, thereby increasing the A/E’s scope. It is not uncommon for owners to tell contractors that:
- The A/E will be the “final judge” of disputes;
- The A/E will supervise safety;
- The A/E will preside at weekly/bi-weekly/monthly jobsite meetings;
- The A/E will make multiple inspections of work;
And make a host of other commitments, sometimes without telling the A/E. Most of these commitments either add to the A/E’s risk on the job, which its professional liability insurance might not cover, or add to its costs.
It is unwise for an owner to make any commitments or representations as to what the A/E will do, without getting an agreement from the A/E in advance. If the A/E can’t or won’t deliver, the owner will find itself faced with a choice of being in breach of contract with the contractor, or having to pay more money than anticipated to the A/E to secure performance.
The lesson here — the same lesson I have been trying to teach for lo, these many years — is that standard form contracts need to be read before they are used. If you are not going to run your project the way the drafter of that form assumed you would, for Pete’s sake, change the form to reflect the deal you have made.
Susan McGreevy is a partner at Husch & Eppenberger, Kansas City, Mo., 816/421-4800, e-mail to [email protected].