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May 17, 2017 Articles

The Contractor’s Emerging Exposure for Design Responsibility

The best course of action to prevent a contractor from being saddled with design responsibilities that could erode its Spearin rights is to be vigilant and proactive up front during the contract negotiation

by Jennifer S. Lowndes

On a design-bid-build construction project, it is the owner who is often stuck between a rock and a hard place when defects emerge during the build. For starters, the owner has the difficult task of proving whether the problem is due to defective design or defective construction. Pursuing a claim against a design professional carries a host of problems for an owner. Not only must an owner pass the higher hurdle of proving professional negligence against architects or engineers, but architect/engineer contracts are tight on limitations of liability. The contractor, on the other hand, is usually protected by what is known as the Spearin doctrine; a century-old policy shielding the contractor from defective construction when the owner-provided plans and specifications are followed without deviation. The result of this liability gap for the owner has been an emphasis on contractual risk shifting to the contractor, especially in the area of design responsibilities where a contractor’s Spearin defense is on more precarious ground.

Over the last handful of years, a large and growing number of disputes have arisen on construction projects litigating responsibility as between the design and construction teams. Shop drawings, attempted design delegation, and scope that includes installation of specialty or engineered systems are just a few ways in which contractors have seen their design-related responsibilities— and the potential for corresponding liability—expand. This article briefly examines the traditional protections for contractors and highlights potential ways in which contractors can expose themselves to design liability.

Traditional Protections for Contractors

In the traditional design-bid-build scenario, where the owner solicits the design from a separate professional, the contractor has long been protected by what is commonly known as the Spearin doctrine. Arising from a U.S. Supreme Court decision in 1918, the Spearin doctrine holds that if the contractor is required to build according to plans and specifications prepared by the owner, then the contractor will not be responsible for any defects in following those plans and specifications. United States v. Spearin, 248 U.S. 132, 136–67 (1918). When a contractor is not allowed any discretion in the manner in which a project is to be constructed, the Supreme Court has held, the contractor should not assume any liability for a design that proves defective during the course of construction.

Spearin is well-settled law when it comes to the federal courts and government contracts, and the majority of states have similar protections for contractors when it comes to design liability. Some states, such as Louisiana, have codified the protection by statute. La. Rev. Stat. § 9:2771. Other states, such as Mississippi, may not have adopted the doctrine by name but in practice recognize the owner’s implied warranty of the sufficiency of plans and specifications. Havard v. Bd. of Supervisors, Humphreys Cty., 220 Miss. 359, 364 (1954). This brings us to the typical lawyerly disclaimer and word of caution—not all state jurisdictions follow this contractor-friendly principle. Texas, for example, remains committed to the Lonergan rule, which stems from a case decided prior to the U.S. Supreme Court’s Spearin decision. This rule remains on solid footing in Texas today. Interstate Contracting Corp. v. City of Dallas, 407 F.3d 708, 720–21 (5th Cir. 2005). Under the Lonergan approach, even if an owner has a separate design professional execute the drawings, the contractor will bear the brunt of any deficiencies that come to light during the execution of that design. Lonergan v. San Antonio Loan & Trust Co., 101 Tex. 63 (1907). Of course, nothing is absolute, and even in Texas parties may include language in the contract that either specifically shifts the risk of provided plans and specifications to the owner or includes provisions that grant a contractor relief in the face of inaccuracies due to the owner’s information.

If you are advising a contractor-client on the front end with contract review and negotiation, be mindful of the jurisdiction of the project and the corresponding governing law. Know whether the traditional protections of Spearin are in play prior to reviewing the contractor’s duties and obligations—especially as they relate to design. This will allow a contractor to be proactive in including limitations on its liability. Which brings us to some of the trending ways in which owners are seeking to hold contractors accountable for design elements on projects.

Shop Drawings

Perhaps one of the more routine roles of a contractor that can present exposure to design liability is that of submittal of shop drawings. The standard American Institute of Architects (AIA) A201 form includes the following language in section 3.12.6:

By submitting Shop Drawings, Product Data, Samples and similar submittals, the Contractor represents to the Owner and Architect that the Contractor has (1) reviewed and approved them, (2) determined and verified materials, field measurements and field construction criteria related thereto, or will do so and (3) checked and coordinated the information contained within such submittals with the requirements of the Work and of the Contract Documents.

While parties are always free to tweak the terms on the AIA standard forms, and many advisably do so to favor their position, the shop drawing provision is not one of the usual suspects that raises an immediate flag for potential change. A contractor may not even view the contractor’s role as it pertains to the creation and submittal of shop drawings as even sticking a toe into the design pool. The purpose of shop drawings is for the contractor to take the general design provided by the architect or engineer and supply any needed detail to indicate how the contractor will be constructing the design.

When, then, does the potential for design liability commonly arise in this situation? The short answer is that whenever the shop drawing deviates in any manner from the owner-supplied drawings or specifications, the contractor has opened itself up to design liability. And the central issue will be whether the shop drawing truly reflects a change or not. If a contractor is in a position where it feels alterations to the originally provided drawings or specifications are necessary in order to construct the project, it is therefore advisable to try to bring the owner and its architect/design team into the discussion.

In fact, section 3.12.8 of AIA’s A201 form points to ways in which a contractor can secure an affirmation from the architect with the result that design liability stays firmly with the design professional:

The Work shall be in accordance with approved submittals except that the Contractor shall not be relieved of responsibility for deviations from requirements of the Contract Documents by the Architect’s approval of Shop Drawings, Product Data, Samples or similar submittals UNLESS the Contractor has specifically informed the Architect in writing of such deviation at the time of submittal and (1) the Architect has given written approval to the specific deviation as a minor change in the Work, or (2) a Change Order or Construction Change Directive has been issued authorizing the deviation.

(Emphasis added.)

Once again, during up-front contract negotiations, a contractor may attempt to tweak the language above—such as eliminating the deviation needing to be a “minor” change in the work. The important thing to look for is that there remain ways in which the contractor can inform the owner and its architect of the need to alter previous designs without accepting any resulting design liability. If the shop drawings need to reflect a change in design in order to achieve the contractor’s scope of work, a constructive change directive or change order is the appropriate vehicle and will serve to protect the contractor from added design responsibility.

Manufactured/Engineered Systems

Paralleling the rise of modular construction in the past decade has been the increased use of manufactured or engineered systems by contractors in lieu of constructing solely from the ground up with on-site assembly of materials. As with all things modular, the incorporation of these already assembled systems can add a great deal of efficiency to the build. More often than not, however, the specific system will not be noted in the owner-provided design, leaving the manufacturer or supplier selection to the discretion of the contractor. It is this discretion that opens the door to potential design liability for the contractor.

Manufactured systems are becoming increasingly common across all types of builds—industrial, institutional, commercial, and residential—regardless of the size or value of the project. One of the trickier issues related to these systems involves the manufacturer representations that accompany them. For example, if a manufacturer represents that a panel or window system “ensures a continuous vapor and air barrier” or “total air and moisture control,” what does that mean for the contractor installing it vis-à-vis the standard of care owed to the owner? Contractors are not subject to the professional standard of care owed by designers and engineers. Yet, now they are selecting and installing an engineered system that carries its own guarantees.

The best solution for the contractor is for the owner or architect to specify any required systems in the plans and specifications up front and, preferably, for the owner/architect to mandate a specific manufacturer or supplier of the system, creating a potential sole-source situation absolving the contractor from any liabilities related to the design of the system or even delays resulting from late deliveries or procurement problems. Of course, the best-case scenario is rarely, if ever, what construction attorneys encounter when our services are enlisted. If the contractor has chosen a particular manufacturer to supply a window system or paneling installation, for example, then the next step is to ensure any warranties or guarantees provided by the manufacturer flow through to the owner and that the contractor receives indemnification from the manufacturer, should a problem with the design result. This should serve to cut off the owner’s argument that the warranty or guarantee constitutes a performance specification on the part of the contractor.

Preconstruction Services

More and more general contractors are selling “preconstruction services” as part of their offerings. These services can be offered as a distinct phase of work, or they can be incorporated through contract language requiring essentially that the same preconstruction scope be executed under the main contract. Often these duties may appear to include design services provided by the contractor or its subs, such as identifying issues and recommending alternative solutions whenever the design details adversely affect budgets, schedules, or construction feasibility. The most obvious way to ensure anything offered preconstruction does not bleed into a contractor’s main scope of work and corresponding obligations is to offer the services as a separate contract with a definite end point that occurs prior to a contractor beginning its construction responsibilities. In addition, contractors should be careful to disclaim throughout these service provisions that anything undertaken is done in their role as a contractor and not as a design professional. That is, the contract should expressly state that the contractor is not the designer and that any services provided are done solely for purposes of constructability review.

Design Delegation

Apart from more affirmative actions that contractors may take—such as revising an owner’s plans through shop drawings or providing preconstruction services—there are a host of contract provisions that can more subtly shift design responsibility.

For example, a normal catchall clause found in AIA A201 section 1.2.1 states the following:

The intent of the Contract Documents is to include all items necessary for the proper execution and completion of the Work by the Contractor. The Contract Documents are complementary, and what is required by one shall be as binding as if required by all; performance by the Contractor shall be required only to the extent consistent with the Contract Documents and reasonably inferable from them as being necessary to produce the indicated results.

(Emphasis added.)

On its face, this provision could lend itself to an owner arguing that a contractor has the added responsibility of participating in adjusting the design in order to achieve the end result—a result the contractor must infer from the plans and specifications. More often than not, this clause will be used by owners in an attempt to expand a contractor’s specific scope, which theoretically could include an attempt to expand the design responsibilities. However, given the broad language and general placement within the contract, such an argument would be a tough battle for the owner.

Another provision to be mindful of is found in AIA A201 section 3.2.2, which speaks to a contractor’s obligation to report any errors, inconsistencies, or omissions it has discovered in the plans and specifications:

These obligations are for the purpose of facilitating coordination and construction by the Contractor and are not for the purpose of discovering errors, omissions, or inconsistencies in the Contract Documents; however, the Contractor shall promptly report to the Architect any errors, inconsistencies or omissions discovered by or made known to the Contractor as a request for information in such form as the Architect may require. It is recognized that the Contractor’s review is made in the Contractor’s capacity as a contractor and not as a licensed design professional, unless otherwise specifically provided in the Contract Documents.

(Emphasis added.)

This provision is a bit more explicit than the catchall responsibility for the contractor to “infer” what is necessary to get the job done. For that reason, it is no surprise that similar language has served as the basis for legal decisions noting that contractors will remain liable for patent defects in plans and specifications. There is a lot of room, however, between a patent defect and one that should have been identified based on a contractor’s alleged duty to infer the intended result. In practice, contractors should be vigilant about making sure any language about reporting errors or omissions is buttressed with a statement reinforcing that the contractor’s role is not that of a design professional and ensuring that role is reiterated throughout the contract documents to prevent any potential inconsistencies.

Concluding Practice Pointers

As with most vexing issues seen in construction disputes, the best course of action to prevent a contractor from being saddled with design responsibilities that could erode its Spearin rights is to be vigilant and proactive up front during the contract negotiation. Ensure that any broad catchall phrases are limited by clear wording stating the contractor is performing in accordance with its role as the contractor and not as a design professional. A contractor should not be gun-shy about participating in value engineering discussions, reviewing designs for errors or omissions, or otherwise working with the owner’s selected design team. A frank discussion at the outset of the project of the roles and expectations of the parties, along with clear contract language, will go a long way in avoiding unnecessary litigation over design liability.

Keywords:  litigation, construction, design liability, contractor, shop drawing, manufactured systems, engineered systems, preconstruction services

Jennifer S. Lowndes is special counsel for the Construction Practice Team in the Atlanta office of Jones Walker LLP. This article is adapted from a panel discussion—Are Those Your Fingerprints on the Prints?—at the December 2016 Construction SuperConference in Las Vegas.

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