August 09, 2016

Project Counsel in an Online Construction Industry

In the 1990s the concept of Project Counsel was introduced as a way for construction lawyers to maintain their relevance in an industry that was then just beginning to depart from the traditional styles of contracting in exchange for more collaboratively designed methods of project delivery. 1 With the subsequent proliferation of today’s Internet-era, this industry-wide trend towards collaboration has only continued to flourish and the opportunity for construction lawyers to expand their legal services into the collaborative framework has never been greater.

The Evolution of Collaborative Project Delivery

Traditional Design-Bid-Build (DBB) contracting models serve as some of the simplest forms of project delivery2 and have dominated the American construction industry for more than the past century.   The basic framework of DBB provides each principal party3 to a construction project with their own separate two-party agreement that is intended to define the specific duties and obligations to be performed and upheld throughout the duration of the project.  From a macro perspective, this linear contracting approach is inherently problematic for the project parties, and equally opportunistic for construction lawyers, because the execution of multiple mutually exclusive agreements results in a sequentially fragmented project that provides little in terms of flexibility for unanticipated modifications and disruptions in the work.  This by default creates an adversarial vacuum where each party, only being concerned with the terms of their own individualized agreement, is instinctively at the ready to recover any unanticipated damages they happen to incur throughout the course of the project.  Rather than focusing on what is best for the project, parties instead focus only on the enumerated parameters of their contract(s).  In an industry constantly under pressure to maximize efficiency while preserving profits, it seems only natural to see the emergence of other alternative approaches to project delivery.

One of the fastest growing project delivery methods in use today is also one of the most ancient; the Design-Build (DB) model.4  DB steps away from the traditional framework of DBB by introducing to the project delivery equation a collaborative entity known as a design-builder who performs both the design and construction functions of a project.  Bringing together these two aspects of delivery equips the design-builder with the ability to recognize any concerns of actual construction well before any disruption in the work actually occurs and to respond accordingly by adjusting the project’s design plan.   Being able to formulate a comprehensive long-term approach at the project’s outset also affords the design-builder with the opportunity to implement cost and time saving techniques such as “fast track” construction.5  But any such collaborative advantages of DB are still hampered, if not completely negated, by the persistence of an adversarial relationship between an independent owner and a profit-driven design-builder.  This inherent drawback, along with the ever-expanding capabilities being afforded by 21st century technology, provides considerable encouragement for the industry to continue exploring even more collaboratively designed forms of project delivery.

The modern Internet has without question shifted the global paradigm for communicative processes by establishing a virtual platform where individuals can quickly and easily interconnect to share information.  Nearly every facet of today’s construction industry has become infused with digital “online” characteristics, but this process has by no means happened overnight. First came the simple ability to exchange email correspondence, then came online planning rooms where project documents could be hosted and accessed, and only now is the industry beginning to realize the full capabilities of the online interactive environment with building information modeling (BIM) software platforms.6  These innovations in technology, coupled with the financial motivations of the project parties to refrain from costly litigious behavior, represent a solid motivation for the industry’s development of an “integrated” business philosophy that wholly departs from the traditional adversarial approaches to contracting.

Integrated Project Delivery (IPD) is an amorphous concept that departs from the objective definitions of previous delivery systems and in exchange attempts to capture a truly collaborative philosophy by embodying principles of teamwork and cohesion into the project.7  Suitable for uniquely complex projects, IPD agreements are not confined to written contracts as the sole mechanism available for enforcing performance.  Rather, each individual participant customarily holds some form of personal interest in the project’s success, which serves as the basic motivation for the collective accomplishment of mutually shared project goals. This dissemination of an ownership-styled interest to each of the project parties serves as the final step in achieving total collaboration. Having wholly integrated parties affords the project with the opportunity to clearly establish unified project-wide procedures regarding cooperation and conflict resolution. Today’s online digital platforms facilitate the collaborative framework by offering unprecedented degrees of cooperation in the submission, dissemination and accessing of pertinent project information,8 while Alternative Dispute Resolution techniques have become standard procedure to adjudicate any and all project issues in the most efficient fashion possible.9  

Project Counsel: Evolving Towards Collaborative Construction Legal Services

Construction lawyers have traditionally served the industry by responding to an individual client’s request for representation in light of a dispute.  The attorney’s role is to investigate the facts and serve as a zealous advocate for whatever position the client believes is in its best interests.  Such a responsive nature of traditional legal services, as you might assume, fits well with the traditional adversarial methods of project delivery and it is common to find that each principal party to the project has their own separate legal counsel.  In fact, the attorney’s ethical code of conduct for avoiding conflicts of interests often times demands it.  But with the burgeoning use of collaborative delivery methods, traditional construction lawyers are being presented with a unique opportunity to change gears and reestablish themselves as quasi-independent parties who can contribute directly to the project delivery process. 

Project Counsel fits into the framework of collaborative delivery systems by redefining the basic characteristics of construction legal services.  Rather than advocating for the best interests of an individual project participant, the aim of Project Counsel is to aid the entire collaborative project team in realizing their shared objective of only doing what is best for the project itself.  Collaborative design systems can quickly be cast by the wayside if they are not developed in a legally acceptable and enforceable manner, posing a potentially fatal weakness in the collaborative framework that becomes especially vulnerable to the unscrupulous advocacy-oriented mindset of the traditional construction lawyer.  Furthermore, it is simply wishful thinking for a collaborative team to believe that a complex construction project can be completed without first executing thorough written documents that describe in relative detail the specific aspects of each party’s performance.10  Therefore, the principal responsibility of Project Counsel is to prepare, execute and enforce the legal documentation necessary for successfully completing a construction project that remains consistent with the project parties’ collective interests. 

It’s natural for collaborative parties to be reluctant in retaining Project Counsel services because of the long-standing perception that legal costs equate to irrecoverable sunk costs, which ultimately lower the project’s bottom line.  While true in part, it is equally important to recognize from a larger perspective that the legal costs for the services of a single Project Counsel is likely a fraction of the amount that would be spent if each party retained counsel as needed throughout the course of the project; this is especially the case in the event of a dispute.  An effective Project Counsel who is brought on board at a project’s inception can serve as the designated team navigator as they embark on their joint venture through the unknowns of a project by enforcing pre-established dispute resolution measures while providing conscientious legal advice aimed at keeping the project on time and within budget.

Providing legal advice to multiple contracting parties is usually an immediate cause for concern to a licensed attorney who is legally bound by their professional duty to uphold the attorney-client privilege and avoid conflicts of interest.  However, the American Bar Association’s Model Rules of Professional Conduct and the legal practices of other industries suggest that an attorney practicing in a collaborative context is permissible.  Model Rule 2.4: Lawyer Serving As Third Party Neutral suggests that the collaborative attorney can assist “two or more persons who are not clients of the lawyer to reach a solution of a dispute or other matter that has arisen between them.” 11 12   To remain compliant the attorney must ensure that, prior to any form of performance, each party first signs some form of waiver, release, or acknowledgement that both clearly explains the attorney’s relationship to the project and expressly discloses that the attorney is not representing them as an individual client and consequently is afforded none of the customary privileges.13 14  As an example, entertainment lawyers practicing in the motion picture industry occasionally find themselves in a very similar role known as Production Counsel.  Retained for the full duration of the project, Production Counsel is responsible for addressing all of the interrelated legal needs for the film’s production and for offering the producer advice on project-related legal and business matters.15 

Conclusion

Just as the greater industry has been slowly transitioning towards full collaboration, so too has the role of the construction lawyer.  Taking on clients as a party advocate in an adversarial context equips the lawyer with gainful insights into the unique perspectives of each individual project participant.  Many experienced construction attorneys carry these insights forward into the Alternative Dispute Resolution arena as party-neutral adjudicators, where private-practicing legal professionals routinely deliver binding decisions in lieu of a court of law.  Therefore, it seems only natural for experienced attorneys to establish themselves as principal parties to the collaborative delivery framework in the holistic role of Project Counsel, where essentially all legal aspects of a construction project are executed in an amicable in-house fashion. 

Endnotes

1. See Christopher L. Noble, Friend of the Project – A New Paradigm for Construction Law Services in a “Partnered” Construction Industry, 15 Int’l Const. L. Rev. 78 (1998).  Mr. Noble has authored several visionary articles outlining the concept of Project Counsel as well as other various aspects of collaborative project delivery.  The author wishes to acknowledge with great appreciation that the central thesis of this paper is premised from his earlier written work.

2. The term project delivery system refers to the abstract method employed by the separate parties of a construction project to structure the dynamics of their working relationships.  Essentially the human element to a project, the type of project delivery system implemented plays a significant impact on the subsequent processes of construction.  For a solid introductory explanation on project delivery systems, refer to Const. Mgmt. Ass’n of Am., An Owner’s Guide to Project Delivery Methods (2012). 

3. Owner(s), Designer(s), Builder(s) and any other principal project participant.

4. The Design-Build project delivery system is structurally identical to the now antiquated concept of the Master Builder.  The Master Builder method of building served as the predominant form of project delivery for the majority of recorded human history, allegedly beginning in Ancient Greece and used worldwide up until the late 19th century.

5. “Fast track” construction is the commencement of construction on a project before its design has been completed.  This method has become particularly attractive to commercial owners who place the highest priority on opening the facility as early as possible.

6. BIM is defined as “the process of creating and managing a dynamic, three-dimensional, computer-generated model for the design, construction, and operation of a building or project.  The virtual model details the physical and functional characteristics of the building, such as the structure’s geometry, spatial relationships, geographic information, and the quantities and properties of components.” Atul Khanzode et al., Transcending the BIM Hype, 2, (DPR Construction 2009).  Focusing on the collaborative aspects of BIM, The American Institute of Steel Construction adds that “shared data and collaboration by different stakeholders are basic premises of BIM.  Collaboration and sharing of data is accomplished through interoperability across a variety of platforms.  Sharing of data allows for coordination of not just 3D building elements, but scheduling and maintenance data as well.”  Building Information Modeling (BIM), Am. Inst. of Steel Const., https://www.aisc.org/content.aspx?id=26038 (last visited November 3rd, 2015).

7. The American Institute of Architects defines Integrated Project Delivery as “a project delivery approach that integrates people, systems, business structures and practices into a process that collaboratively harnesses the talents and insights of all participants to optimize project results, increase value to the owner, reduce waste, and maximize efficiency through all phases of design, fabrication, and construction.”  Am. Inst. of Architects, Integrated Project Delivery: A Guide, 2, (2007).

8. BIM has become the principal format for enabling cooperative functions on a construction project.  An industry-wide study analyzed in McGraw-Hill’s 2012 SmartMarket Report found that in 2007 28% of all construction projects incorporated some form of BIM software system.  By 2012 BIM was present in 71% of all construction projects.  Stephen A. Jones & Harvey M. Bernstein, The Business Value of BIM in North America: Multi-Year Trend Analysis and User Ratings (2007-2012), SmartMarket Report, 4 (2012).

9. The term Alternative Dispute Resolution refers to any legally recognized method of resolving disputes that does not entail litigation in a court of law.  Some common methods employed in the construction industry include mediators, arbitrators, Dispute Review Boards, and other variations of third-party neutrals.  Customarily viewed as a cost and time saving technique, multiple ADR practices can be strategically layered to formulate a tiered system of non-binding and binding procedures.

10. Industry leaders have made attempts to capture the concept of IPD in a standardized all-inclusive agreement, but many critics have rightly pointed out the discontinuity of the two distinct concepts.  As an alternative to standardized forms, Allen Overcash posits five considerations when drafting a collaborative agreement: 1. Recognize the importance of current industry changes, 2. Recognize that the initial contract cannot build the project, 3. Integrate the contract and the project, 4. Abolish limits on the relevant evidence of the parties’ relationship, and 5. Rethink the function of lawyers.  Allen L. Overcash, Will the New Contract Forms for Integrated Project Delivery Make Conflict Obsolete? (Or are We Still Lost in Our Contract Obsession?), 3(1) Am. Coll. of Const. Law. J. 19 (2009).

11. Model Rules of Prof’l Conduct R. 2.4.

12. The author recognizes that there is currently no official record demonstrating that Project Counsel falls within the scope of a third-party neutral.  However, the ABA’s comments on Model Rule 2.4 suggest that “in the arrangement of a transaction” an attorney can serve as a facilitator, evaluator or decisionmaker depending on the particular process selected by the parties.  Model Rules of Prof’l Conduct R. 2.4. cmt 1.  Thus, in a collaboratively delivered project it becomes conceivable to recognize Project Counsel, equipped with only non-binding authority in the project’s dispute resolution procedures, as being a facilitative role.

13. Id.

14. Perhaps the most effective way an attorney practicing in a collaborative setting can avoid any ethical concerns is to form a legally recognized business entity composed of the individual parties at the project’s outset.  This would allow the attorney to be clearly recognized as either a full-fledged partner to the project or as the entity’s personal legal counsel.

15. For more information on Production Counsel, consider Susan Rabin, The Role of Production Counsel in Independent Film Production, 31-OCT L.A. Law. 8 (2008).