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This is the fifth in a six-part series on this blog addressing design professionals’ scopes of services, comprised of: (a) Part 1 – Key Concepts and Source Documents; (b) Part 2 – Elements of Design Professionals’ Scopes of Services; (c) Part 3 – Limitations: Introduction and Essentials; (d) Part 4 – Limitations: Construction Documents; (e) Part 5 – Limitations: Permitting and Disagreements; and (f) Part 6 – Elevated Standard of Care, construction Cost Estimates, and Phased Authorizations.

Limitations Concerning Permitting and Regulatory Approvals

On some projects, the design professional may assist the client in obtaining certain permits, approvals, and sustainability ratings. Certain construction permits, such as a building permit, electrical permit, HVAC permit, or plumbing permit required by the local municipality, or a work permit required by the owner of a transportation facility or right-of-way, are typically the responsibility of the construction contractor. Other permits and approvals, however, are often the responsibility of the project owner, who may retain the design professional for assistance in obtaining such permits and approvals.  

Examples of owner-obtained permits and approvals include: approvals of local planning boards and zoning boards, environmental review processes mandated by laws or regulations, securing coverage for the project under a NPDES general permit for storm water discharges associated with construction activity (in some jurisdictions, this is solely a contractor responsibility and, in others, the owner and contractor must be co-permittees), approvals and permits required by health departments, state or federal environmental regulatory agencies, and owners of affected transportation facilities or waterways, and others. The owner’s desire to pursue obtaining a certain sustainability rating for the project is similar to regulatory permits and approvals. 

Because the time, effort, and cost to prepare and submit such applications for the client may be substantial, it is appropriate for design professionals’ scopes of services to clearly indicate the specific applications for permits, approvals, and sustainability ratings included. Failure to do so increases the design professional’s risk and may increase the potential for disagreements with its client.

Some or all required permits, approvals, and desired sustainability ratings may be unknown at the time the design professional’s scope and budget are prepared. In such cases, rather than simply remaining silent on the matter, the scope of services may either indicate that all such services desired by the client will be additional services authorized by a future amendment, once the required permits and approvals are identified, or the scope may indicate an assumed list of permits and approvals for which the design professional will assist its client. When the latter approach is used, the scope should include language indicating that deviations from the presumed permits and approvals will be the basis for a subsequent amendment.

Regarding permitting, approvals, and sustainability ratings, design professionals should avoid guaranteeing or implying outcomes. Where the design professional’s effort cannot be reasonably estimated in advance, consider expressly indicating in the scope the design professional’s budget limit for certain activities. For example,

•  “[Engineer’s] scope and budget include up to [20] hours to respond to comments from authorities having jurisdiction on permit applications and construction documents approvals required.”. 

Such language reduces the potential for the design professional to become enmeshed in a seemingly never ending maze of regulatory submittals and requests for additional information and documentation, sometimes complicated by competing or conflicting requirements between authorities having jurisdiction. This writer has previously experienced added time and effort on consulting engineer-led projects when regulatory agencies with somewhat overlapping jurisdictions disagreed with each other. Scope language as suggested here may reduce the design professional’s budget and time risk for situations over which the design professional has little or no control.

Similarly, the scope of services should expressly indicate that cardinal changes in the scope or quality of construction, required either by the owner or authorities having jurisdiction, are not part of the design professional’s scope and budget and such services, if necessary, would constitute “Additional Services”.

Limitations on Effects of Disagreements and Other Unpleasantness

Design professionals and construction managers as advisor (CMa) typically have very little or no control over whether one or more bidders on a public contract may be sufficiently aggrieved, either at the outcome of the bidding process or relative to how the bidding process was administered, to file a bid protest. While formal bid protests filed in a court of competent jurisdiction are relatively rare, they are serious matters requiring significant attention and, often, cost to resolve. Informal bid protests, such as a protest letter submitted to the public owner’s department head, chief administrative officer, or elected officials, are more common and can also require considerable time and effort to resolve. Bid protests, whether formal or informal, may have significant associated risk. Therefore, scopes of services for bidding or procurement phase services for public owners should include language such as:

• “[Engineer’s] scope and budget do not include assisting Owner with evaluating or resolving bid protests, whether formal or informal, filed in connection with the Project. Such services, if desired, may be authorized as Additional Services. [Owner] and [Owner’s] legal counsel will have principal responsibility for resolving formal and informal bid protests.” 

Few design professionals and construction managers as advisor (CMa) anticipate or budget for acrimonious relationships with owner-hired contractors and sellers. However, when substantive disagreements resulting in major claims and disputes arise, the owner may expect the design professional or CMa to provide all services necessary to resolve the claim or dispute. Thus, design professionals and CMa’s should clearly indicate in their scope the extent to which their services include such matters. For example:

• “[Architect’s] scope and budget are based on Contractor(s) being competent, cooperative, prompt, and professional. [Architect’s] scope and budget do not include services associated with evaluating or resolving substantive claims and disputes between Owner and Owner-hired Contractor(s). Such services, if necessary, will be Additional Services.” 

A provision like the one above may also expressly exclude design professional or CMa responsibility to assist the client during disputes, such as mediation, arbitration, or litigation. However, construction disputes between the owner and contractor where the design professional and CMa have no role in the dispute are rare. It is relatively common for the design professional to be drawn into the dispute, either by a related claim from its client or, where allowed by case law, directly by the contractor. Each party in a dispute is typically responsible for its own defense costs. The language of the professional services agreement itself, rather than the scope of services, often addresses the parties’ responsibilities and rights in disputes.

Termination of an owner-hired contractor or seller, whether for cause or the owner’s convenience, is rare. Termination for cause is essentially “the nuclear option” and almost always results in claims, counterclaims, and disputes which may take considerable time, effort, and funds to resolve.  No design professional or CMa develops its scope and budget assuming a future termination. Assisting its client in a termination is extremely rare and often lengthy and expensive. Thus, design professionals and CMa’s should consider including the following in scopes of construction stage services: 

• “[Engineer’s] scope and budget do not include services associated with either Owner or Contractor terminating for cause, nor Owner terminating for convenience. Should Owner desire such assistance, such services will be Additional Services.”

Similarly, design professionals and CMa’s should consider including a provision such as:

•  “Subject to the Agreement’s indemnification provisions, [Architect’s scope and budget do not include assisting Owner with resolving disagreements, suits, or other actions by third-parties, whether adjacent property owners or others, unless such disagreement, suit, or other action arose from [Architect’s] performance or negligence. Such services, if desired, will be Additional Services.”

Conclusions

The extent of the design professional’s services for permitting and approvals from authorities having jurisdiction typically cannot be accurately determined in advance. Therefore, scopes of services should be developed with care and incorporate reasonable limitations. Similarly, it cannot be accurately determined in advance whether the project will include bid protests, substantive disagreements on claims, third-party disputes, or termination and, accordingly, scopes of services should clearly address the extent to which services for such matters are included.

The forthcoming sixth and final part of this series will address creating an elevated standard of care, addressing in scopes of services opinions of probable construction cost, and using phased authorizations of professional services.
 
Acknowledgements: The author gratefully acknowledges the assistance of Bruce Firkins, PE, PLS, of Bolton & Menk, Inc., in Minneapolis, MN. Mr. Firkins is the chair of EJCDC’s Engineering (E-Series) Subcommittee and kindly reviewed and commented on drafts of this article.

Copyright 2022-2023 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 35 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 has been 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.