General Practice, Solo & Small Firm DivisionBest of ABA Sections

FALL 1997

Construction Law

Project Counsel: An Alternative Paradigm for Construction Law Services

Christopher L. Noble

In a remarkable address at the December 1995 Construction Superconference, Steven Halverson of the M.A. Mortenson Company surveyed the major directions that he identified in the U.S. construction industry:

• "Construction litigation as we have known it is dead."

• "While there is a declining need for litigators, there will be a rising need for people who can structure the increasingly complex transactions that will prevail in the construction industry."

• "I see this as a substantial market for construction lawyers. In a sense, it is reminiscent of the merchant banking tradition of times past, where trusted advisors saw the opportunities in a global sense and acted as an honest broker to a combination of firms brought together to perform the task at hand."

Lawyers as "merchant bankers?" "Honest brokers?" What is the construction bar to make of these provocative comments?

 

Industry Trends: The Role of Construction Lawyers. The construction industry has traditionally been a large and profitable market for legal services, but there are signs that this may be changing. The growth of ADR has been spurred in no small part by the desire of industry participants to reduce their legal bills, and anecdotal evidence indicates that they have been successful. At the same time, the proliferation of delivery systems on a project-by-project basis has made it more difficult and expensive to provide competent documentation of agreements between and among owners, designers, contractors, project/program/construction managers, and subcontractors. One would have thought that lawyers would benefit from this latter trend, but cost-conscious clients have increasingly turned to supposedly less expensive sources of advice and assistance, such as program mangers, civil engineers, born-again claims consultants, and (in the case of our design professional clients) insurance companies and their agents. These nonlegal advisers often claim that they can design, document, and administer construction industry business relationships more cheaply and efficiently than lawyers.

Lawyers are seen by many as part of the problem with the construction industry, not part of the solution. We are being called upon to demonstrate that our contribution to the construction process is commensurate with our cost.

It would be premature to declare that the adversary system has been banished from the construction industry or that there is no longer a need for zealous advocacy of the parties’ interests. However, construction lawyers should be at least as perceptive and nimble as many general contractors have been in identifying and seizing opportunities to offer services to a changing market. One such service might be Project Counsel.

 

Project Counsel: The Concept. Project Counsel would be engaged to improve the process of project delivery and not necessarily to advance the immediate interest of any particular project participant.

At the earliest possible time, Project Counsel would work with the owner and any of the other project participants who may then be on the scene, to identify their goals, objectives, financial resources, management, and technical capabilities, etc. On the basis of this analysis, Project Counsel would help to select a delivery system for the design and construction of the project.

Project Counsel would advise the owner on procedures for selecting other project participants that would be appropriate for and coordinated with the recommended project delivery system. Project Counsel services would include developing selection criteria, drafting RFQs and/or RFPs, and administering the selection process.

On the basis of information developed during the initial phases of service, Project Counsel would produce an integrated, project-specific set of draft contracts for all of the key project relationships. These draft contracts would embody the principles of consistency, fairness, and equity. They would incorporate proposed financial incentives and risk allocation provisions with the goal of maximizing the success of the project as a whole. Ultimately, they could be produced with the assistance of appropriate document assembly software, to enhance the efficiency and effectiveness of Project Counsel’s services.

Project Counsel would participate in an interactive team-building process that would combine the current elements of contract negotiation and Partnering. Using lawyers’ mediation skills and the skills of experienced Partnering facilitators, Project Counsel would help to guide the parties through procedures that would result in both an affirmation of their relationship and a set of enforceable agreements. This would take the place of the current bifurcated process, in which lawyer-assisted parties first go through an intensive, adversary contract negotiation, followed by a lawyerless Partnering retreat in which the parties try to build productive "off-contract" working relationships.

Project Counsel would work with the parties to develop a projectwide conflict resolution system that could be administered, if appropriate, by Project Counsel. The system would involve the establishment of channels of communication, standardized claim documentation, step and/or facilitated negotiation, mediation, standing neutrals, binding arbitration, and/or other binding and non-binding elements. This is one of the most important ways in which the legal and facilitation skills of Project Counsel would be placed at the service of the project participants, since it would integrate their informal conflict resolution efforts with more formal ADR and legal procedures.

Project Counsel would seek to harmonize the contractual and administrative structure of the project with insurance, bonding, and other risk management devices. Ultimately, any software that was developed for contract drafting could be coordinated and integrated with the various risk management documents.

Project Counsel might have a particularly important role in the project closeout process, facilitating and documenting the efficient resolution of any open issues that have not been settled during design and construction. The goal would be to close out the project on a positive note and to avoid an end-of-project blowup.

Project Counsel would be available to address postconstruction disputes arising out of building failures. There could even be a role for Project Counsel in the resolution of third-party claims such as personal injury suits or indoor air quality claims. Project Counsel’s familiarity with the design and construction of the project, combined with a history of scrupulous neutrality, could be an important resource for the resolution of any disputes relating to the project.

 

Project Counsel: The Threshold Issues. I am not proposing that construction lawyers abandon their traditional client-centered role or that they transform themselves en masse from advocates into facilitators. I am proposing that we begin to evaluate the Project Counsel concept by addressing its threshold issues.

How would compensation for Project Counsel services be defined and structured? Alternatives would include traditional time charges, monthly retainers, lump sum or percentage fees, and various contingent and/or incentive compensation arrangements. To what extent might it be possible to identify offsetting savings in the form of reduced overall legal costs and insurance premiums? How should the responsibility to pay for Project Counsel services be allocated among the various project participants?

How can construction lawyers perform Project Counsel services in a manner that is consistent with their obligations under codes of ethics and rules of professional conduct? Do the services necessarily establish lawyer-client relationships, and if so, with whom?

What are the liability risks of Project Counsel services? How can they be insured? Can they be managed through waivers or limitations of liability?

It is difficult for individual construction lawyers to deal on their own with such broad and challenging issues. However, as members of the construction law community, we can draw upon our cumulative experience, and we can determine whether the Project Counsel concept is a feasible, marketable, and effective contribution.

Christopher L. Noble is a member of the Boston law firm of Hill & Barlow.

 This article is an abridged and edited version of one that was originally presented at the Forum’s Annual Meeting in New Orleans, Louisiana, April 24, 1997.

Back to Top

< /