Design-Build (DB) Professional Liability Risks and Risk Management - - PowerPoint PPT Presentation
Design-Build (DB) Professional Liability Risks and Risk Management Profitable Practice For Engineers in Design-Build ACEC/MA October 25, 2017 David J. Hatem, PC Donovan Hatem LLP Boston | New York Presentation Overview Design-Build (DB):
Profitable Practice For Engineers in Design-Build ACEC/MA October 25, 2017
David J. Hatem, PC
Donovan Hatem LLP
Boston | New York
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Design-Build (DB): Professional Liability Risks and Risk Management
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DB: Roles and Risks for Consulting Engineers Consulting Engineer as Owner’s Consultant Primary Risk Factors:
Design-Builder
responsibility
design development
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professional responsibility for design adequacy
practice performance realities: legal implications
Reference: Hatem, D., “Diverse and Bifurcated Design Roles: Distinguishing Design Responsibility and Design Risk Allocation.” Design and Construction Management Professional Reporter, Donovan Hatem LLP (Dec. 2016)
DB: Roles and Risks for Consulting Engineers Consulting Engineer as Owner’s Consultant
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Primary Risk Factors:
– Will not cover all risks – Gaps in coverage
Reference: Hatem, D., “Design and Construct Integration: Design-Build Team Structure, Design Risk and Professional Liability Insurance Implications.” E&C Risk Management Conference (June 2015)
DB: Roles and Risks for Consulting Engineers Consulting Engineer as Member of Design-Builder
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Primary Risk Factors:
mandatory design criteria / standards
DB: Roles and Risks for Consulting Engineers
Consulting Engineer as Subconsultant to Design-Builder
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control pressures and challenges
DB: Roles and Risks for Consulting Engineers
Consulting Engineer as Subconsultant to Design-Builder
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– Substantive comments – Intrusion / interference – Preferences / imposing judgments – Delays / disruption in review process
References: Hatem, D., & Gary, P., Public-Private Partnerships and Design-Build: Opportunities and Risks for Consulting Engineers, ACEC (2017); and Disputes Review Board, “Report and Recommendations – Disputed Change Notices 53, 53A, 62, 65, 74 and 76,” Port of Long Beach Gerald Desmond Bridge Replacement Project, Contract No. ND-7962, July 12, 2014
DB: Roles and Risks for Consulting Engineers
Consulting Engineer as Subconsultant to Design-Builder
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Consulting Engineer Contractual Terms
8. Construction Phase Services
9. Defense and Indemnification
Damages/Limitation of Liability
Design, Information and Reference Documents
Allocation
Insurance
DB: Roles and Risks for Consulting Engineers
Design Development Risk Defined as the professional liability risk associated with cost or time increases (a) above “bid” or prime DB contracting price or cost terms and (b) attributable to the process of design development
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DB: Roles and Risks for Consulting Engineers
Consulting Engineer as Subconsultant to Design-Builder
Design Development Risk
risk
professional liability exposure for design professionals in DB
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DB: Roles and Risks for Consulting Engineers
Consulting Engineer as Subconsultant to Design-Builder
The professional liability claims experience for Consulting Engineers in DB
What are the sources of professional liability claims against consulting engineers on DB projects?
70% 30%
construction start and based on services performed prior to construction start
defects in completed project work
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DB: Roles and Risks for Consulting Engineers
Consulting Engineer as Subconsultant to Design-Builder
Design Development Risk
A = Actual cost of design and construction B = Design-Builder’s bid assumption based on conceptual design C = Difference – i.e., the foundation of a professional liability claim by the Design-Builder against the Consulting Engineer
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DB: Roles and Risks for Consulting Engineers
Consulting Engineer as Subconsultant to Design-Builder
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Transformed Projects
same project-specific scope.
Risk) and subsequently transform to design-build (or a public-private partnership)
– Design Responsibility – Professional Responsibility – Degree of Design Development – Prescriptive and Mandated Design – Interface and Coordination of Design Components – Third-party Reliance/Third-Party Beneficiary
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What accounts for Transformed Projects?
Schedule
Others
What Are Relevant Risk Factors for Design Professionals in Transformed Projects
delivery approach
Transformed Projects
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Design-Bid-Build (CM-At-Risk) Design-Build (Public-Private Partnership) Roles, Responsibilities and Risks Design Characteristics
– Conceptual – 30+% – “100% Complete” (for all or only a portion of the project design)
Transformed Projects
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Design-Bid-Build (CM-At-Risk) Design-Build (Public-Private Partnership) Roles, Responsibilities and Risks
Contractual and Legal Issues
* Hatem, D., Diverse and Bifurcated Design Roles: Distinguishing Design Responsibility and Design Risk Allocation,
Design and Construction Management Professional Reporter (Donovan Hatem LLP (Dec. 2016).
Transformed Projects
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Design-Bid-Build (CM-At-Risk) Design-Build (Public-Private Partnership) Roles, Responsibilities and Risks
Design Professional Teams
Owner’s Design Professional Team Design Professional Subconsultants of Design-Builder
Transformed Projects
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Design-Bid-Build (CM-At-Risk) Design-Build (Public-Private Partnership) Roles, Responsibilities and Risks Professional Liability Insurance
Transformed Projects
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practice management
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Enabling, equipping and acculturating Consulting Engineers to successfully practice in DB
Key initiatives:
Scope of services and fee negotiation skills Importance of pre-award agreements with clearly defined scopes Adherence to contractual scope in actual service performance Timely notification and documentation regarding claims for additional compensation or time extensions Development of effective quality control procedures to address the accelerated pace and compressed cycle of design development in DB and P3s Timely addressing fee payment withholding Holding your “independent professional judgment” ground in the design submittal review process
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development risk
professional standard of care application
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Design Development Risk
Design-Build Institute of America recommendations: “3. The contracts between the design-builder and its team members should
address the unique aspects of the DB process. In furtherance of this practice, the following implementing techniques apply: … b. The design-builder and its designer(s) should develop an understanding, at the outset of their relationship, of the key commercial aspects of their relationship, including: … (d) the designer’s right to use project contingency for its execution-related problems, and capture these understandings in the written teaming agreement.” Design-Build Done Right, DBIA (2014)
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Risks in Design-Build Projects, NCHRP 24-22 (12-1-17)
these issues
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roles and risks of Consulting Engineers
Reference: Hatem, D., “Project-Specific Insurance Advisory: Recent Problematic Trends in Project-Specific Professional Liability Insurance Programs.” Design and Construction Management Professional Reporter, Donovan Hatem LLP (Feb. 2010)
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David J. Hatem, PC
dhatem@donovanhatem.com 617-406-4800
Donovan Hatem LLP
Exchange Place 53 State Street Boston, MA 02109
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