A surprisingly large proportion of construction contracts unique to certain project owners do not explicitly identify the owner’s consultants, such as the design professional, third-party construction manager as advisor (CMa), or owner’s program manager. Failure to identify the owner’s consultants by name in the construction contract is more than just a minor oversight or the absence of a contractual nicety. Rather, it has real potential to increase such entities’ risk with no associated benefit to anyone, including the owner.
Although the construction contract for design-bid-build, construction manager-as-advisor, construction manager at risk, and owner-build project delivery is between the owner and contractor, such construction contracts impart both risk and certain risk management protections to the owner’s consultants. Therefore, it is very important that such entities be expressly indicated by name and role in the construction contract.
How and Where to Identify the Owner’s Consultants
Construction documents typically use generic roles for the project’s principal participants, such as “Owner”, “Contractor”, and the owner’s various consultants, such as “Architect,” “Engineer,” “Consultant,” or “Design Professional,” “Construction Manager,” or others. Use of generic role names requires that the entity serving in that role be identified by name only once in the construction contract documents.
Because the owner and contractor are identified by name in the owner-contractor agreement, the agreement is also the most-appropriate location to identify the owner’s consultants, as recommended in AIA A512/EJCDC N-122—2012, Uniform Location of Subject Matter. Where the owner-contractor agreement form is unique to the owner and does not identify the owner’s consultants, such provisions may instead be included in either the project’s supplementary conditions or the project’s specifications Section 01 11 00 – Summary of Work, or Section 01 12 00 – Multiple Contract Summary, as applicable. The entity indicated as the owner’s design professional is not necessarily the same as the entity that prepared the construction documents; rather it is the entity fulfilling that role for the project’s construction phase.
AIA A101—2017, Standard Form of Agreement Between Owner and Contractor (Stipulated Sum), identifies the architect, in the preamble, as follows:
“The Architect:
“(Name, legal status, address and other information)
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EJCDC C-520—2018, Agreement between Owner and Contractor for Construction Contract (Stipulated Price), includes:
“ARTICLE 3 - ENGINEER
“Guidance Notes—If an entity or individual other than the design engineer will serve as Owner’s representative during construction, then make appropriate revisions and additions to this Agreement, the General Conditions, the Supplementary Conditions, and other Contract Documents regarding the construction-phase roles and duties of the design engineer and such other entity or individual. Such revisions may include using a designation other than “Engineer” for the representative named in Paragraph 3.01 below, and expressly naming the design firm (for example, “ABC Engineering, Inc.”) instead of referring to “Engineer” in Paragraph 3.02.
“3.01 The Owner has retained [insert name of engineering firm] (“Engineer”) to act as Owner’s representative, assume all duties and responsibilities of Engineer, and have the rights and authority assigned to Engineer in the Contract.
“3.02 The part of the Project that pertains to the Work has been designed by [insert “Engineer” if an entity has been identified as such in Paragraph 3.01, and that same entity prepared the design; or indicate by name the entity other than Engineer that prepared the design].”
Similar language may be used to identify the project’s CMa and owner’s program manager, if any. Others retained by the owner relative to the project, such as owner-hired special inspectors and testing entities, should be identified by name in the Project’s specifications Section 01 11 00 or 01 12 00, as applicable, and included as additional insureds on contractor-furnished insurance and included in other relevant risk management provisions.
The entity’s full, legal-contractual name should be used; optimally, the entity’s name should be the same as that indicated in the associated owner-consultant agreement for services on the project. The owner’s consultant’s project office address should also be indicated.
Why Identifying the Owner’s Consultants is Important
Among other provisions, construction contracts for design-bid-build typically assign to the architect or engineer various responsibilities that directly affect the contractor, such as:
- Impartially interpreting the contract documents.
- Evaluating differing site conditions and rendering an opinion on changes to the contract, if any.
- Reviewing and approving, or taking other appropriate action, on contractor-furnished submittals.
- Observing the work at appropriate intervals to determine quality, compliance with the contract, and progress, and rejecting defective work.
- Determining entitlement in contractor change proposals or claims and preparing contract modifications relative to the design, quality of work, and acceptability of the work.
- Processing the contractor’s applications for payment in a proper and timely manner.
- Determining when the work is substantially complete and ready for final payment and issuing appropriate written notices.
- Other responsibilities.
Occasionally an owner will create a single construction contract from two separate design professionals’ drawings and specifications. In such cases, it is very important to distinguish which design professional has which responsibilities. Many times, it may be appropriate for one firm to serve as the “lead” design professional for construction, as the contractor’s principal point-of-contact, with all communications between the contractor and second firm being routed through the first firm. In such cases, both firms should be expressly identified in the construction contract.
The construction contract documents typically expressly provide certain protections to the architect or engineer, and other owner’s consultants, such as:
- Allocating solely to the contractor responsibility for complying with the contract times; for construction means, methods, procedures, techniques, and sequences; and for safety and protection at the site. Not only is this appropriate, but it is also critical for the owner’s, design professional’s, and other owner’s consultants’ risk management.
- Including the owner’s consultants and their subconsultants and subcontractors, together with the owner, in the contractor’s indemnification obligations, as additional insureds on contractor-furnished liability insurance (except workers’ compensation and professional liability insurance), and in provisions requiring the builder’s risk insurance carrier to waive its subrogation rights. Including the owner and its consultants in such provisions is critical to properly manage such entities’ construction stage risks for matters over which they have no control.
- Allocating only to the owner the right to accept defective work, to stop or suspend the work, and to terminate the contractor’s performance. Although the owner should consult with its design professional before accepting defective work, the decision to accept defective work should never be delegated to an owner’s consultant. When the owner exercises its rights to order the work stopped or suspended, or terminated, claims and counterclaims often ensue. Therefore, the owner should never delegate such responsibilities to its consultants, nor should owner-hired consultants be required to exercise such rights on behalf of the owner.
For the contractor to have full knowledge of the responsibilities of the owner’s consultants as they pertain to the contractor’s responsibilities, and for the owner’s consultants to receive critical risk management protections under the contract, it is essential that the owner’s consultants be expressly identified by name and, preferably, address, in the construction contract. Lack of clarity in such matters has potential for a court, arbitrator, or insurance carrier to deny such protections to an owner’s consultant.
In many cases observed by this writer, non-standard (unique to the owner) construction contracts omit identifying the owner’s consultants, with such identification perhaps made orally at the preconstruction conference or merely implied by the engineer’s or architect’s logo on the construction drawings.
Worse, some construction documents entirely, or nearly so, omit the design professional and any other owner’s consultants. Such contracts may entirely deprive bidders and the contractor clarity on how the project’s construction will be administered and, as indicated above, possibly deprive the design professional and other owner’s consultants certain, basic risk management protections normally provided by other, widely-used standard construction contracts, such as those of the Engineers Joint contract Documents Committee (EJCDC) and American Institute of Architects (AIA).
When the design professional or owner’s other consultants are either “invisible” in the construction contract or are not expressly identified by name, it is easy to imagine an attorney representing the contractor or its insurance carrier arguing that the design professional or other owner’s consultant is not included in the contractor’s indemnification obligations, is not actually an additional insured, or is liable to be included in a subrogation suit by the contractor’s insurance carrier; or that the design professional or CMa had some responsibility for the contractor’s construction means and methods or safety and protection programs; or other matters.
Such positions may be held merely because the design professional or other owner’s consultant had some involvement in the project’s construction stage and the construction contract was largely silent on their responsibilities and limits of authority. No owner’s consultant wants to learn of such denials, on the grounds of a technicality, when the required risk management protections are most needed.
Conclusion
The identification of the owner’s consultants should never be left to the imagination and should be clearly and explicitly indicated in the construction documents. Failure to heed this advice may have substantial and possibly far-reaching effects.
Copyright 2021-2022 by Kevin O’Beirne
The content of this blog post is by the author alone and should not be attributed to any other individual or entity.
The author of this blog post is not an attorney and nothing in this blog post constitutes legal advice. Readers in need of legal advice should consult with a qualified, experienced attorney.
Kevin O’Beirne, PE, FCSI, CCS, CCCA is a professional engineer licensed in NY and PA with over 30 years of experience designing and constructing water and wastewater infrastructure for public and private clients. He is the engineering specifications manager for a global engineering and architecture design firm. He is a member of various CSI national committees and is the certification chair of CSI’s Buffalo-Western New York Chapter. He is an ACEC voting delegate in the Engineers Joint Contract Documents Committee (EJCDC) and lives and works in the Buffalo NY area. Kevin O’Beirne’s LinkedIn page.