DBIA Final Exam Review

DBIA Document 580 - Teaming Agreement - Between Design-Builder and teaming party Components of Teaming Agreement - qualifications, insurance, matrix of responsibilities, confidentiality and exclusivity, payment of stipend/honoarrium URS CORP v TRANSPO - does teaming agreement waiver survive if subcontract supersedes teaming agreement? - yes. subcontract was silent, waiver in prime flowed down. Common Procurement Challenges - - conducting proprietary meetings - handling alternative technical concepts - evaluating non-price factors - consideration of all proposal information - use of work product fo unsuccessful proposers Standard form contracts - - reflect industry consensus on risk allocation - predictable judicial interpretation - convenient and cost effective Current US Standard Form Contracts - - DBIA (2010/2016) - Consensus Docs (2016) - AIA (2014) - EJDC (2016) DBIA OWNER/DESIGN-BUILDER AGREEMENTS - - 520 Preliminary Agreement - 525 Lump Sum - 530 Cost Plus Fee with Option for GMP - 535 General Conditions - 545 Progressive Design-Build Contract for the Water/Wastewater Sector Contracting Approaches - - Lump Sum - Cost Plus - GMP - Unit Prices - Target Pricing LUMP SUM (DBIA 525) - - single price regardless of actual cost - no meaningful opportunity for Owner to be involved in subcontractor procurement - no transparency into lump sum price - limited audit rights - undisclosed contingencies COST PLUS/GMP (DBIA 530) - - compensation based on actual cost plus fee up to GMP - owner had broad audit rights - owner has ability to be more involved ins subcontractor procurement - most contingencies are transparent - savings needs to be addressed - administratively more complex GMP PROCESS ISSUES - - Timing of the GMP - Assumptions (schedule) - Contingency - Savings - Line item guarantees; not contemplated, general conditions could be capped Progressive Design-Build (PDB) - - Design-builder retained by Owner early in projects's life primarily, if not exclusively, on qualifications - Final project cost and schedule commitment is not established as part of the selection process - Two phases of work: preliminary services, & final design and construction, once the parties have agreed on price and other commercial terms - GMP contract is often used PDB Process - - Design-builder collaborates with Owner during Phase 1 to create or confirm project's BOD - Formal commercial proposal for Phase 2: "appropriate" level of definition often at 40-60% design; dependent on amount of control Owner desires to maintain over design definition and contingency - Phase 2 initiated upon acceptance of commercial proposal PDB Two-contract approach - - parties first enter into a preliminary agreement, such as DBIA 520 (Preliminary Agreement) - if commercial proposal is accepted, parties then enter into a full design-build contract such as DBIA 530 (Cost-plus with GMP) PDB Single contract approach - - parties enter into a full design-build contract (DBIA 530) or for water/wastewater, DBIA 545 - these contracts establish the GMP after contract award Progressive Design-Build Issue - Deciding what happens if relationship ends and the "off-ramp" is exercised: - owner's right to use work product - owner's ability to use the designer without the builder OWNER'S REVIEW OF DESIGN SUBMISSIONS (DBIA 535) - §2.4.1 On or about the time of the scheduled submissions, Design- Builder and Owner shall meet and confer about the submissions, withDesign-Builder identifying during the meeting, among other things, the evolution of the design and any significant changes or deviations that have taken place from previous design submissions. §2.4.3 Neither Owner's review nor approval of any interim design submissions, meeting minutes, and Construction Documents shall be deemed to transfer any design liability from Design-Builder to Owner. ADVANCETEC V WOHLSEN (2017) - "Though Plaintiff may have made clear that it 'intended that Wohlsen's rights to use the [IOS] would terminate if AdvanceTEC was not selected as the subcontractor' and that it desired to retain the rights to the IOS until construction was complete, the Court finds that there is nothing in the Executed LOI to demonstrate that those intentions were ever perfected in the resulting document." DBIA Ownership of Work Product - ▪ Work Product is property of design-builder ▪ Owner given limited license to use documents conditioned on ▪ Payment of monies due under agreement ▪ Indemnity to design-build team ▪ No indemnity if design-builder in default ▪ Agreed-upon premium to design-builder if: ▪ Preliminary agreement does not result in contract ▪ Owner terminates for convenience ▪ Parties can agree that Owner will have greater property rights ▪ Unique architectural and other design elements and specifications ▪ Full ownership of everything EXECUTION TECHNIQUE - The design -builder and its team should (a) establish a trend system early in the design development process to identify, track and evaluate any potential changes before they adversely impact the project's cost or schedule; (b) clearly, thoroughly, and contemporaneously communicate to the Owner the information derived from the trend system; and (c) maintain the trend system throughout the construction process until it is no longer needed. Incentives - ▪ Cost sharing on GMP or "gainshare" on target priced contract ▪ Early completion bonus ▪ Award Fee program ▪ Contingency pool Disincentives - ▪ Liquidated damages for schedule delays ▪ Liquidated damages for performance ▪ Buy-downs of performance guarantees to a specific level ▪ Set fee for noncompliance (e.g., key personnel being relocated) ▪ Disincentives are enforceable only if they meet liquidated damage prerequisites Mediation - non-binding Arbitration/litigation - binding DBIA 535 approach to dispute resolution - ▪ Negotiations between field level representatives ▪ Negotiations with senior representatives ▪ Mediation ▪ Arbitration with litigation as option DBIA Subcontract Agreements - ▪ Design-Builder and Designer (540) ▪ Design-Builder and General Contractor: Cost plus fee (550); Lump sum (555) ▪ Design-Builder and Design-Build Subcontractor: Cost plus fee (560); Lump sum (565) ▪ Design-Builder and Trade Subcontractor (570) Commercial General Liability (CGL) - Covered Risks: - risk of liability to third parties - bodily injury/property damage - completed operations CGL other considerations - - defense outside of limits - negligence-based liability - generally occurrence-based CGL KEY exclusions - - losses caused by professional services - economic losses from insured's own defective product or other failures to do work properly: cost overruns, repair costs to own work, financing costs, business interruptions, etc. - damage to own work - damage to own property Professional Liability (E&O) Insurance - - obtained by A/E - claims made vs. occurrence - renews yearly - covers risk of liability for negligent act, E or O in performance of professional services, economic losses and BI/PD, legal defence - contractors's contingent and project policies also available - erosion of policy limits for prior claims and attorneys' fees Professional Liability may cover - - 3rd party damages as result of negligence - economic losses - redesign - correction of defective work - cost overruns - delays - business interruption and/or los of use Builder's Risk ("All-Risk") - - first-party coverage against physical damage to project during construction - can be obtained by Owner or design-builder Potential Builder's Risk policy revisions for DB - - design-related exclusions - all members of design-build are named as insured - waiver of subrogation among the design-build team Other Insurance - - workers' compensation: risk of liability due to injuries to workers, varies by state - employer's liability: risk of liability to Owner from employee injuries caused by occupational diseases - Auto liability: risk of liability to 3rd parties for BI/PD cause by vehicle accidents in connection with the project Surety Bonds - - payment and performance bonds required for public works contracts - guarantee, not an insurance policy: credit instrument backed by collateral - DBIA forms do NOT contain an exclusion for design services - Performance bond for benefit of Owner if contractor defaults; (owner must ensure deign and construction are covered) - Payment bond is for benefit of subcontractors and suppliers Requirements for a valid contract - - offer - acceptance - consideration - capacity - authority OACCA Offer - - made with intention that it will become binding upon acceptance - RFP response is an example - varying/additoinal terms and counteroffers can nullify Acceptance - - direct acceptance - course of conduct Oral contracts can be valid if - - material terms are clearly established - parties demonstrate intention to be bound by those material terms Oral contracts are not valid if - - public sector contracting rules make it very difficult - Statute of Frauds governs: certain types of contracts must be written (e.g., that are impossible to complete within a year) Promissory Estoppel - - protects someone relying on a party's actions - examples: subcontractor bids, teaming relationships Elements of Promissory Estoppel - - promise - reasonably expected to induce action - detrimental reliance - justice requires promisor to be bound Breach of contract remedies - ▪ Expectation Damages: Award what was reasonably expected from the contract ▪ Rescission Damages: When expectation damages not available, award what party would have had if contract had not existed ▪ Specific Performance and Injunctive Relief: If contract's subject is unique, a court may order that the breaching party perform its obligations under that contract (specific performance) or stop doing something (injunction) ▪ Quantum Meruit: Award of a reasonable sum of money (i.e., "what the claimant deserved") Contract damages limitation examples - ▪ Liquidated damages ▪ Limitations of liability ▪ Improper default terminations that are converted to terminations for convenience ▪ No damages for delay ▪ Waivers of consequential damages Direct v Consequential Damages - - depends on facts of each case - consequential are often "big" and harder to prove and involve 3rd parties - substantial financial exposure without a a waiver for consequential damages Types of Law - - Contract law - Torte law - Statutes and regulations - Common law: based on precedent; arbitration and mediation don't provide direct precedent Torte Law - A legally created remedy for someone who has been wrongfully harmed by another. Professional negligence - - need to prove professional did not meet ordinary standard of care - damages recoverable limited by betterment theory: owner cannot be put in a better position than if breach had not occurred - owner needs to pay once for items negligently omitted - limitation of liability may impact recovery Intentional Tortes - - misrepresentation - Interference with contract - fraud - defamation Economic Loss Doctrine - ▪ Privity of contract needed to sue a party for economic losses (e.g., delay damages, cost to correct defects) ▪ Application: Determined on a state-by-state basis (not valid in all states); Can lead to challenges if the "chain of privity" is broken ▪ Some states find "special relationships" that allow suits even if no contractual privity ▪ Doctrine inapplicable to personal injury SPEARIN DOCTRINE (US v Spearin 1918) - When Owner hires designer, it provides, as a matter of law, contractors with the following implied warranties: ▪ Plans and specifications furnished are accurate ▪ Plans and specifications are suitable for intended purpose SPEARIN DOCTRINE in practice - ▪Doctrine is judicially recognized at both state and federal level ▪Disclaimer language generally ineffective ▪ Key principles: - Contractor must reasonably rely upon what Owner furnished - Defects that are obvious (i.e., patent) in bid documents must be raised by bidders during procurement How courts interpret ambiguous contracts - ▪ Course of Performance: what the parties do during the performance of this contract ▪ Course of Conduct: what the parties do during the performance of other similar contracts ▪ Terms of Art: the use of a word in a specific industry Types. of Constructive changes - Can be by implication ▪ Defective specifications (Spearin) ▪ Disputes over contract interpretation ▪ Superior knowledge ▪ Breach of implied duties of good faith, fair dealing, and cooperation ▪ Constructive acceleration Examples of Breach of Implied Duties - ▪ Failing to manage multiple prime contractors ▪ Overzealous inspections: Use of subjective standards; Inspectors taking over supervision of work and making work more expensive ▪ Using undue leverage in a negotiation position Differing Site Conditions (DSC) - ▪ Site condition risk is one of the major risks on projects ▪ Full knowledge of all site conditions is never known ▪ Owners generally bear this risk of unforeseen site conditions through a differing site conditions clause What happens if contractor required to assume DSC risk? - ▪ Extensive site examinations ▪ Contingencies in their bids ▪ Decision to "no bid" ▪ Likelihood of conflict Types of Differing Site Conditions - Type 1: Subsurface or physical conditions at the site that differ materially from those indicated in the Contract Documents Type 2: Unknown physical conditions at the site, of an unusual nature, that differ materially from those ordinarily encountered and generally recognized as inhering in the work of the character provided for in the contract Elements of Constructive Acceleration - ▪ Contractor entitled to an excusable delay ▪ Contractor gives Owner timely notice of the delay and a proper request for a time extension ▪ Time extension postponed or refused ▪ Order by Owner (either by coercion, direction or some other manner) that the project be completed within its original performance period ▪ Contractor actually accelerates its performance, thereby incurring excess costs Remedies for Project Delays - - right to time extensions (enumerated events, "beyond reasonable control" standard) - common procedural hurdles (notice, documentation, critical path delay, non-concurrent delay, inability to overcome delay) - design-builder's damages for delay (no damages fro delay, site overhead, home office overhead) - owner's damages for delay (actual and liquidated) Key Factors in Team Alignment - 1. Early Involvement 2. Qualifications-Based Selection 3. Cost Transparency 4. Fostering an Environment of Trust Key players during early involvement - ▪ Owner ▪ Lead design-builder ▪ Key specialty contractors ▪ Design and engineering professionals The most successful projects engage core team members in the design process, before advancing beyond schematic design Project Delivery methods - - design-bid-build - multi-prime - CMAR - Design-Build what is design-build? - single-contract between design-builder and owner DB Done Right - - qo best practices in 3 areas: 1. Procuring 2. Contracting 3. Executing Delivery Why should owners use design-build? - increases probability for success Establishing Design Excellence - - includes A/E - needs to be defined in the RFP - DB teams working together collaboratively Cost-Influence Curve - earlier we can get all key players to the table, higher probability to impact the outcome. shift curve to the left. more opportunities for betterment 3 tenants - - pick the right team - performance based requirements - balance risk with reward. contract incentives successful attributes - - trust - team concept - flexibility - speedy decision-making - excellent communications - fair risk sharing - clear scope definition owner concerns - - unfamiliarity - loss of design control - indirect relationship with A/E - developing clear & concise requirements - procurement challenges: public sector used to low bid Practitioners concerns - - unfamiliarity - risk: changes in , standards; differing site conditions, Issuance of permits, easements, right of ways, concealed conditions - Owner involvement (control freaks or indecisive) - E&O risk assumed by Design Builder (designer of record) Benefits of DB - - facilitates fast-track (safety challenges) - Owner can monitor design/price development: opportunity to optimize life cycle - enhanced quality, opportunity for design excellence - reduced owner liability for design errors - collaborative vs adversarial relationships Benefits - - Collaboration -Integration (collective knowledge and problem solving) Design Build to Budget (design and cost integration) - - Design-Bid-Build establishes design first - Design-Build establishes cost first Which deliver model is best? - - impact on stakeholders - can owner make mental shift? - market conditions - owner profile - schedule requirements Which project delivery for Fast food franchise: -new facility - standard design - prescriptive specs - Design-Bid-Build best for this one. Process industry. rebuild after fire, upgrade facility, market timing critical*** project delivery for fastest design and construction?: - DESIGN-BUILD Owner new to D&C, owner heavily involved, wants price competition, wants GMP before construction commitment - CMAR: Construction Management at Risk. A/R still works for the owner. Can compete packages to the subtrades. If owner can't get to GMP, can complete the design and bid as typically would.