Understanding Design Responsibilities:
The Devil Is in the (Contract) Details
Courtesy of the American Subcontractors Association, Inc.

The last thing that a construction subcontractor wants to find out is that their claims for extra work are denied because of a legal interpretation of wording in the subcontract document, plans or specifications. It's not a pleasant experience to dedicate hundreds of extra hours and thousands of dollars of materials and equipment to making the work come out right, only to discover that it will not be paid for. Unfortunately, this scenario plays out over and over across the country, with subcontractors losing millions of dollars each year. One of the main reasons behind this phenomenon is design delegation terms that shift more design responsibilities to subcontractors than they anticipate.

When handled properly, design work can be an opportunity for subcontractors that want to provide profitable, new services to clients. Some subcontractors bid work knowing that they will be responsible for completing certain aspects of design. Subcontractors can appropriately bid such work if it is (a) specifically required in the contract documents, and (b) all performance and design criteria are provided to the subcontractor. This is the approach taken in the American Institute of Architects (AIA) A401-1997, which allows A201 design delegation terms to be flowed down to the subcontract, and the Associated General Contractors of America (AGC) 650 (1998) and other AGC subcontract forms, which contain their own design delegation terms.

Unfortunately, not all subcontract agreements handle design delegation responsibly, resulting in a disconnect between the subcontractor's expectations and its contractual obligations. Typically, problems arise when the subcontract agreement delegates design work to the subcontractor in an open-ended or general manner. The American Subcontractors Association's (ASA) white paper, "Design Risk: Express Delegations," describes an example: a legal case concerning a Florida elementary school project that was decided in 2003. In this case, the written subcontract was for "a complete electrical package," and stated that the prime contractor, a design-builder, "will furnish to the Subcontractor such additional information and Plans as may be prepared by the Architect to further describe the Work to be performed by the Subcontractor and the Subcontractor shall conform to and abide by same insofar as they are consistent with the purpose and intent of the Plans and Specifications." The subcontractor's claims for over $100,000 in "extra" work were denied on the grounds that the work, which resulted from the completion and correction of the bid plans, wasn't "extra." The scope of work already included any "additional information and Plans as may be prepared by the Architect*."

ASA's white paper offers tips for subcontractors, including:

-- Beware of subcontract terms shifting broad responsibility to discover design errors.

-- If a prime contractor insists on using flow-down terms that pass more general forms of design obligations from the prime contractor to the subcontractor, object that the offending terms amount to design-build warranties.

-- Include a "scope letter" or other statement in bid packages disclaiming design responsibilities on design-bid-build projects, with the exception of items specifically delegated for design by the subcontractor.

For more information, visit ASA's Web site at www.asaonline.com and click on "Stand Up! for Subcontractors," or call ASA at (703) 684-3450.

© 2004 American Subcontractors Association, Inc. This article may be reproduced in construction and business media and media databases. ASA reserves all other rights.