Nearly forty years after the catastrophic collapse of two walkways at the Kansas City Hyatt Regency Hotel in 1981, the disaster still resonates throughout the construction industry. It remains an indelible example of the pitfalls of delegated design and highlights the importance of contractually allocating design responsibility and liability. The fallout of that disaster, however, has not curtailed the practice of delegating design. In fact, design delegation is a thriving practice in certain types of construction, driven by the desire to build faster, at lower costs and with fewer schedule constraints.

 

Delegated design is the relatively common practice of reallocating design responsibilities, traditionally within the scope of the architect of record, to a contractor or subcontractor.  This delegation is usually accomplished by specifying performance and/or design criteria in the contract or subcontract documents. Delegated design should not be confused with a contractor’s means and methods, nor should it be confused with design assist, which is generally provided by a specialized consultant to the architect of record.  More importantly, delegated design should never be used as a tool for filling in the gaps of a design that were incomplete due to budget or schedule constraints. This article discusses how design responsibility, along with the attendant liability, should be addressed in complex construction agreements, including a discussion of the pitfalls of failing to address certain salient considerations when utilizing the delegated design approach to construction.

 

To be effective as a collaborative tool, delegated design requires clear and unequivocal language in the contract documents reflecting the intent to transfer design responsibility from the architect of record to the contractor or subcontractor for a specific portion of the contracted work.  When done correctly, the owner will likely enjoy benefits of the contractor’s or subcontractor’s participation in the design decisions, permitting a smoother construction process with fewer cost and schedule overruns. As a tool, design delegation is especially useful for complex project systems that are engineered and fabricated by the contractor (or subcontractor) that is ultimately responsible for installation.

 

The practice of delegating design was informally employed in the construction industry for decades.  It was not until 1997, however, that the practice was formally incorporated by the American Institute of Architects into its A201 General Conditions of Contract for Construction. Prior to 1997, the standardized documents required the “contractor to produce the result ‘intended’ by the contract documents,” including the project drawings, specifications, and addenda.  When compared to the provisions contained in the current version of the AIA A201 document, the previously utilized language clearly leaves room for different interpretations regarding who bears responsibility for faulty design or resultant injury. That, in turn, led to substantial litigation over liability. The current AIA documents contain express provisions permitting the design professional of record to delegate specific aspects of the design to a contractor. The AIA A201 provides that the owner and architect shall specify “all performance and design criteria that the contractor’s professional services must satisfy where the contract documents specifically require the contractor to provide professional design services or certifications related to systems, materials or equipment.”  The AIA A201 also entitles the contractor to “rely on the adequacy and accuracy of the performance and design criteria provided in the contract documents.”

 

Despite the architect of record’s responsibility to review the design specification, the AIA A201 document narrows the scope of the architect’s overall responsibility.  In that regard, the AIA A201 requires the architect to review and approve of the contractor’s delegated design, but only “for the limited purpose of checking for conformance with information given and the design concept expressed in the contract documents.” Moreover, the AIA A201 expressly confers liability on the contractor for any deviations from the contract documents that occur without the prior approval of the project architect.  The contractor may avoid this liability only if the architect provides written approval of the specific deviation as a “minor change in the work,” or a change order is issued authorizing the deviation from the contract documents.  Even so, the contractor remains responsible and liable under the AIA A201 for any errors or omissions in its submittals to the project architect.

 

Despite the revisions to the AIA A201 document and the industry’s efforts to address this issue, litigation continues to ensue where the contract documents are unclear and poorly worded design delegations create a black hole of responsibility and liability for the design.   To avoid this contractual no-man’s land, it is critical that the contract language clearly set forth both the responsibilities and liabilities of all involved parties, including but not limited to owners, project architects, specialty designers, general contractors and subcontractors. Coordination among all contract documents is crucial. So, for example, the contract should include clear and concise language narrowly defining the scope of a specialty designer’s responsibilities, and the project’s description of the architect’s scope of services should be narrowly tailored to avoid overlap with the specialty designer’s responsibilities.  The failure to avoid such overlap would muddy the waters around responsibility and provide the basis for a dispute over liability in the event of impacts stemming from a faulty design or a related injury on site.  Those drafting contract language should keep in mind that project architects, general contractors and design subcontractors frequently have overlapping responsibility for the design and the approval process for any secondary designs on the project.  These processes tend to expose all the project participants to a portion of the risk associated with the secondary design.

 

Contract documents should also specifically address which party bears the duty of professional care when design responsibility is delegated to a party other than the architect. For example, in the design-bid-build paradigm, the architect of record often assumes a duty of professional care that extends beyond project architecture, which the architect satisfies through the use of engineers. A poorly drafted contract that fails clearly to bridge the gap between the architect’s scope of work, the scope of work delegated to its engineers, and the contractor’s scope of work for a particular system (e.g., curtain wall, deep foundation, shoring, MEP, etc.) could leave open the question of which party would be held liable for defective design. The resulting confusion could have significant cost and time impacts on the project or, worse, lead to litigation.

 

In addition, those drafting contract language should be well versed in and cognizant of the state laws governing the delegation of design to contractors, including those that mandate that certain liabilities remain with the project architect as a matter of law.  For example, New York Regulations set forth, in pertinent part, that delegated design does not constitute unprofessional conduct where: i) the delegated design work is limited to “ancillary project components;” ii) the project architect specifies in writing all the parameters the design must satisfy; iii) the delegated design’s function performs in accordance with the specifications established by the architect; iv) the contractor is licensed, or otherwise legally authorized, to perform the design work involved and signs and certifies any designs prepared; v) the architect reviews and approves in writing the contractor’s designs, noting their conformance with the established specifications; and vi) the architect is required to determine, in writing, that the contractor’s design conforms to the overall project design and can be integrated into such design.  See N.Y. Comp. Codes R. & Regs. tit. 8, § 29.3 (West, 2018).

 

Similarly, the Florida Administrative Code specifically sets forth a project engineer’s responsibilities when delegating any portion of its responsibility to a contractor. In that regard, the project engineer is required to communicate in writing the engineering requirements to the delegated contractor.  The project engineer must also require the contractor to submit any delegated engineering plans and must review the submitted plans for compliance with his written engineering requirements to confirm that: i) the delegated engineering documents have been prepared by an engineer; ii) the delegated engineering documents conform with the intent of the project engineer and meet the written criteria; and iii) the effect of the delegated engineer’s work generally conforms with the project engineer’s design intent.  The Florida Administrative Code also sets forth the framework that governs professional responsibility where multiple engineers share related design functions.  See Fla. Admin. Code Ann. R. 61G15-30 to R. 61G15-34 (2003).  Where state laws such as these govern the parties’ responsibilities, specific reference to the applicable laws should be included in the contract documents to ensure that each of the contracting parties is aware of its statutorily prescribed responsibilities and liabilities.

 

Other issues merit the attention and consideration of the drafting parties. For example, some local jurisdictions require the submission of shop drawings stamped by a professional engineer in connection with permitting. In those instances where permitting is contemplated to occur before the contract is awarded or before the selection of subcontractors, suppliers and fabricators to whom ultimate responsibility for the design may be delegated, a heightened level of coordination and foresight on the part of the drafting party will be required.  Similarly, the sufficiency of insurance coverages merits attention if a contractor to whom design responsibility is delegated does not ordinarily carry professional liability insurance.  The contractor who retains a licensed professional to perform the delegated design work will need to secure appropriate coverage, and the owner will need to make sure that any potential gaps in coverage are closed as part of the contract requirements. The owner may also require the retention of professionals for testing on critical project systems for which design is delegated to provide an added layer of protection and quality control. The costs of such testing should be clearly addressed and assigned to one or more parties under the contract documents.

 

Design delegation is common in the construction industry thanks, in large part, to the potential benefits it provides, including lowering costs, improving coordination, and cutting time. The attendant risks can be high, however, if the contract documents do not define clearly the responsibilities and liabilities of each contracting party. Drafters of contract documents should also be familiar with and take care to address statutorily mandated responsibilities and liabilities, so that every contracting party is fully aware of its duties under governing law. Ultimately, the best approach to avoiding the pitfalls of delegated design starts at the beginning of the project with a clear vision, cooperation and communication between all of the project’s participants.