Design/Build Subcontracts– A Design Perspective

Structuring the Contractual Relationships Among the

Design/Build Team Members: An Architect’s Perspective on Contract Terms in the Design Subcontract

Introduction.
The Architect’s job is to provide design services. This is true whether working directly under contract to the Owner or working as a design subcontractor to a Design/Builder. What difference does it make if the Architect is working for a Design/Builder instead of an Owner? The answer is it can be substantially different. Architects taking on the role of a design subcontractor to a Design/Builder need to adjust their approach throughout the process. From client and project identification and selection, to teaming, proposing, contracting, and performing – all require different considerations in the Design/Build delivery system.

Client & Project Selection.

Not every project is a good match for Design/Build delivery. If the Owner will want to have a say throughout the project in the project’s appearance, the specific fixtures and materials to be used, or the specific construction delivery methods to be employed, Design/Build project delivery may not be the way to go. A successful Design/Build project requires the Owner to decide up front what building elements are and are not important, and draft the Design/Build criteria accordingly. After the project is awarded to the Design/Builder, the Owner will need to take a limited role in the development of the design, leaving the Design/Builder to use whatever means and materials that it deems appropriate, so long as the final product meets the requirements of the Owner’s program. Therefore, it is important for the Owner to understand the dynamics of a Design/Build project.

In the Design/Build delivery system, a single entity is responsible for performing architecture/engineering and construction under a single contract. The Owner’s requirements are usually expressed in terms of an acceptable performance standard or expected outcome. An Owner insistent on approving each and every drawing, method, and material will quickly negate the schedule and cost efficiencies which can be achieved in a successful Design/Build project. More fundamentally, excessive interference by the Owner may ultimately result in an unhappy Owner and claims by or against the Design/Build team. An Architect faced with an Owner who does not understand the dynamics of a Design/Build project should carefully consider the risks before proceeding.

An Architect that is not comfortable with the role that the designer plays on a Design/Build project should also carefully consider before going forward. The Architect’s design staff may have to readjust their attitude as they shift from a design-bid-build delivery to a Design/Build one. On a design-bid-build project, the Architect answers to the Owner and must put the Owner’s interests first, consistent with the Architect’s professional responsibility. On a Design/Build project, the Architect serves the Design/Builder, and ultimately its design is subject to the desires of the Design/Builder, provided that those desires are consistent with code and the Architect’s professional responsibility.

The cohesiveness of the Design/Build team is also important to success. Teaming with an experienced Design/Build partner can make the difference between a successful Design/Build team and an unworkable one. The Design/Builder and Architect need to agree on the Architect’s role in the project and both parties need to understand how that role is different from the Architect’s role in the traditional design-bid-build project. (Again, the Design/Build process is primarily a “builder-led” effort rather than a designer or Owner led one.)

Finally, a successful Design/Build team needs to focus as a single entity on a common goal – successful project delivery, on schedule, on budget. This requires setting aside or working against the traditional tensions between the contractor and designer. The members of the Design/Build team will need to work collaboratively during the design phase and thereafter to identify potential problems early in the process to keep costs down and to prevent undue delays. Early resolution of contract terms, and a mutual understanding of roles and responsibilities can go a long way toward building a successful team.

Drafting the Memorandum of Understanding

Customarily, the parties enter into a Memorandum of Understanding or Teaming Agreement (MOU)¹ prior to proposing together as a Design/Build team. The MOU usually covers the anticipated scope of services, sharing of proposal and marketing costs, and whether or not the arrangement is to be an exclusive one. Less often the terms and conditions of the future subcontract are included. The failure to outline the terms and conditions of the future subcontract in the MOU is unfortunate, as pre-proposal is the best time to discuss and, where feasible agree to, appropriate contract terms; it is also the best time to reach agreement on how project risks will be allocated.

Discussing anticipated terms and conditions helps set the expectations of both parties, even if all of the matters discussed are not memorialized in the MOU. Is the Architect expected to redesign without compensation in order to help the Design/Builder meet its budget? Are liquidated damages going to be flowed down? Is the Architect expected to meet the same indemnity obligations as the Design/Builder even if the indemnity is not based on negligence and is more appropriate for a contractor than for an Architect? What is the Design/Builder’s obligation to assist the Architect at the early stages of the project with constructability reviews or other input? The resolution of these terms can have a material impact on whether or not the Architect can perform successfully. If the parties wait until the project is awarded and the Design/Build Agreement signed before discussing these issues, the parties may find that they teamed and submitted a proposal with entirely different understandings of their respective roles.

Further, once the Design/Build Agreement terms are set, the Design/Builder will often refuse to give the Architect terms different that those in the Design/Build Agreement. The Architect may find that it is forced to live with contract terms which are wholly inappropriate for design services – specifically, contract terms that expose the Architect to liability beyond that which it would bear on a design-bid-build project without additional compensation for taking on the additional risk. At the other end of the spectrum, if the design subcontract is negotiated in a vacuum, without any consideration of the terms of the Design/Build Agreement, there can be a disconnect between the proposal, Design/Build Agreement, and design subcontract – the kind of disconnect that most often comes to light as the parties bring claims based on their respective positions and proceed toward litigation.

Issues to discuss at the MOU stage.

An open and frank discussion of the project risks and rewards and the allocation of those risks and rewards among the project participants sets the stage for a collaborative Design/Build process. Some of the key topics for discussion are set forth below.

Mutual agreement to proceed. Often the Architect and Design/Builder agree to team together and enter into an MOU before the Owner has issued a Request for Proposal. In that instance, the MOU will be based on the parties’ general understanding of the project based on the information known to date. The Request for Proposal, once issued, may or may not meet the parties expectations in a number of areas, including project size, schedule, construction budget, and terms and conditions. Due to this uncertainty, the MOU should include a provision that allows either party to withdraw from the teaming arrangement if the party does not want to proceed based on the terms of the Request for Proposal.

Where the Owner uses a two stage process, such as a Request for Qualifications (from which a short list of Proposers is named) followed by a Request for Proposal, the Architect should seek a provision requiring that the parties mutually agree to proceed at each stage of the process. Thus, if the terms of the project and contract as offered by the Owner at the second stage of the process are not acceptable to the Architect or Design/Builder, neither is obligated to proceed.

Reimbursement for pre-proposal design costs. Frequently, the Architect will have invested considerable time and resources in the design of a project before the proposal is submitted or the project bid or awarded. The Architect should discuss up front the scope of the expected pre-design effort and the compensation for that effort (taking into account any Design/Builder contributions such as estimating, bidding, and proposal production). Possibilities for compensation to the Architect may include payment of a flat fee, payment at standard hourly rates, or reimbursement of direct costs, with or without overhead or profit. Where the Architect agrees to compensation on the basis of reimbursement of direct costs without overhead and profit, it is often with the agreement that overhead and profit will be paid to the Architect in the event the project is ultimately awarded to the Design/Build team. Many Owners include a stipend as part of the incentive to encourage Design/Build teams to bid on their projects. In such a case, the parties should clarify whether the full stipend will be paid to the Architect or whether the parties will share the stipend and if shared, the basis for that sharing.

Payment if the Design/Builder withdraws unilaterally. The parties should discuss what happens if the Design/Builder unilaterally withdraws its proposal. If the Design/Builder withdraws after the Architect has spent significant resources on pre-proposal design, the withdrawal deprives the Architect of any client paid stipend as well as the possibility of receiving full compensation for its effort in the event of award. In that case, the Architect should obtain the agreement of the Design/Builder to compensate the Architect for its pre-proposal design services. The MOU should reflect the Design/Builder’s agreement to pay the Architect if the Design/Builder unilaterally withdraws, and specify the basis for that compensation.

Limit of liability. The MOU should contain provisions regarding the liability of each party (or lack thereof) in the event that the project is not awarded to the Design/Builder. A mutual general waiver of consequential damages for liability arising out of the MOU may also be included. If the parties agree at the MOU stage to include a mutual waiver of consequential damages in the design subcontract, that may be included as well.

Fee. It is usually too early to come to agreement on the design subcontract fees at the MOU stage. Nonetheless, the MOU may set a target range or method of calculation for the design fee, such as a percentage of the construction cost. In addition, the MOU may address anticipated fees for additional services using an hourly rate structure, or as a lump sum for performance of specific tasks.

Standard of care. In a Design/Build job, as in a design-bid-build job, the Architect should be responsible for providing services using the standard of care and skill ordinarily applied by members of the design profession performing the same or similar services under the same or similar conditions in the locality of the project. Stated another way, the Architect should not be responsible for increased costs of construction that result from the level of errors and omissions that would customarily be expected on a project of similar size and scope in the same location – i.e., if the Architect met the standard of care.

This can be a difficult concept for a Design/Builder. A Design/Builder whose prior experience has been primarily as the construction contractor on a design-bid-build project may be accustomed to seeking compensation from the Owner for increased costs and delays resulting from every coordination issue, dimensioning error or inconsistency in the plans and specifications, even where the Architect’s performance met the standard of care. In a Design/Build structure, the Owner will expect the Design/Builder to bear this risk, and the Design/Build team will need to create a design contingency or other plan to handle the expected costs associated with design errors and omissions.

Warranty. Some Design/Builders seek to have the Architect comply with warranty provisions in the prime agreement or require the Architect to agree that its services and resulting plans and specifications will be free from error or defect. As noted above, Architects meet their professional obligation by performing to the standard of care, not by being perfect. As a result, the Architect should never agree to provide a warranty that its work will be error free. Further, most professional liability policies expressly exclude claims brought against architects based on breach of warranty, providing an additional incentive to avoid agreeing to a warranty clause. It is customary, however, for the Architect to agree to correct (i.e., redraw) any errors or omissions in the plans and specifications at no cost to the Design/Builder.

Indemnity. While the Architect may seem the logical source to recover all costs resulting from errors and omissions in the design documents, an Architect cannot reasonably be expected to do so. On a purely mathematical basis, there is not enough fee in the Architect’s compensation in most Design/Build jobs for the Architect to pick up the liability for non-negligent errors and omissions (which, depending on the nature of the project, may be in the range of two to five percent of construction cost – far more than the Architect’s profit, and in some cases approaching the amount of the Architect’s fee). For these reasons it is particularly important that the MOU and subsequent subcontract clearly delineate the Architect’s liability for errors and omissions. The Architect should be responsible only for damages or losses caused by its negligent acts, errors, or omissions.

The indemnity should also clearly address proportional responsibility. An indemnity that is too broad may require the Architect to cover damages caused by the acts or omissions of the Design/Builder, other project participants, or third parties. A clause in the design subcontract that clearly limits the Architect’s liability to the extent of its negligent acts, errors or omissions makes it clear that the Architect is only responsible for damages it causes. Because of the possibility that the acts of the Design/Builder or its other subcontractors will result in impacts to the Architect, best practice is to have a mutual indemnity under which the Architect agrees to indemnify the Design/Builder to the extent of the Architect’s negligent acts, errors, or omissions, and the Design Builder agrees in return to indemnify the Architect for the Design/Builder’s negligent acts, errors, and omissions.

Contingencies. Design errors and omissions are inevitable and will result in increased project costs. Contingencies are one way of covering a portion of those costs. In some cases, the Design/Builder establishes a design contingency, to be available to cover additional construction costs incurred by the Design/Builder as a result of errors and/or omissions in the design services. In this case, the design contingency and the rules regarding its use should be discussed and agreed to early in the negotiations. Ideally, the contingency specifically allocated to the Architect for errors and omissions should be reasonably related to the percentage of design errors and omissions that would be expected on a Design/Build project of similar size and scope. Any amount, however, is better than no contingency at all.

One way to encourage a reasonably sized design contingency is to provide that at the end of the project, unused contingency will be split in some fashion between the Design/Builder and the Architect. The added value of this type of split is that it creates an incentive for the success of the team as a whole and for the Design/Builder to be judicious in the matters it claims as design errors, and in the pricing of those matters.

Of course, part of the reluctance of many Design/Builders to set up substantial contingencies is the impact of those contingencies on the Design/Builder’s overall fee. In some circumstances, the parties may work with the Owner to establish a contingency that, to the extent unused, would be shared between the Architect, Design/Builder, and Owner. In that case, the overall contingency might be available to address the risk of subsurface or other unforeseeable conditions, design errors or omissions, or other types of potential unanticipated costs.

Redesign provisions. The conditions under which the Architect will provide redesign services, and the method of compensation for such services, can determine whether the Architect will or will not show a profit on the project. Is the Architect liable to perform redesign services if the subcontractor bids submitted to establish the Design/Builder’s Guaranteed Maximum Price come in above a specified construction budget? What if the Design/Builder faces increased costs due to construction overruns or increased costs of materials or labor – can it ask the Architect to redesign at no cost?

If the design subcontract requires the Architect to redesign in these types of events without receiving additional fee, the Architect will quickly lose its profit due to matters that it cannot control. Provisions in the design subcontract which set out the circumstances and conditions under which the Architect will perform redesign services can mitigate that risk. Some suggestions:

- The Architect will redesign at no cost only in the event of a design error;

- The Architect will redesign at no cost only in the event that the construction costs at time of bid or GMP are more than ten percent (or some other percentage) above the budgeted construction cost for reasons other than increased costs of material or labor;

- The Architect will redesign once at no cost, and thereafter will redesign at its actual direct labor costs;

- The Architect will perform a value engineering effort at no additional cost;

- The Architect will perform all redesign work at the Architect’s direct cost (i.e., no profit);

- In return for the Design/Builder’s right to ask the Architect to redesign to cost without additional compensation, the Design/Builder will grant the Architect an equity position in the project; or

- The Architect will allocate a certain number of hours (or dollar equivalent) which it will dedicate to redesign without additional compensation.

Value engineering. When project costs escalate or are projected to escalate, regardless of reason, the Design/Builder may perform one or more value engineering reviews in order to attempt to bring down project costs. Such reviews can significantly impact the Architect’s financial success on the project whether it is asked to perform the value engineering itself, or whether it is asked “simply” to review the value engineering exercises performed by the Design/Builder or its other subcontractors. In each of these cases, the Architect may be asked to “be a team player” and perform an unlimited amount of services for the good of the team. While it is important to work with the other project participants to achieve team success, the Architect needs to set limits on the extent of such services. Like the performance of redesign services, limits on the extent or number of value engineering efforts should be agreed to, either in the MOU or in the design subcontract.

Constructability reviews. A successful Design/Build team is able to work together to proactively manage and mitigate risks. It is in the interest of both the Design/Builder and Architect to minimize the occurrence and impact of design errors and omissions. One way to do so is for the Design/Builder to perform a constructability review of the work prepared by the Architect, verify that the materials and process meet the requirements of the Owner’s program, check dimensions, and coordinate construction activity or equipment before proceeding with materials purchases or installation of work. The Design/Builder’s commitment to perform such reviews should be spelled out in the MOU or in the design subcontract. This may be accompanied by a clear statement that the Architect will not be responsible for construction installation or other errors that result from the failure of the Design/Builder to perform such review.

Coordination. As a subcontractor to the Design/Builder, the Architect has very little ability to influence the Design/Builder’s other subcontractors or consultants. Because the Architect cannot influence or control the Design/Builder’s other subcontractors, the Architect can benefit from an express provision in the MOU or design subcontract noting that fact, such as “Notwithstanding any other provision in this Agreement, Architect shall not have control or charge of and shall not be responsible for coordinating the work, or for the accuracy of any design or information provided by the Design/Builder or its subcontractors or other consultants not directly under contract to Architect, nor shall Architect be responsible for the end result or performance of such work.”

This type of provision takes on added importance if there are components of the design that will be performed by others, such as a performance specification for a curtainwall or MEP system. In that case, the Architect may agree to review the subcontractor’s design for compliance with the design intent identified on the Architect’s plans and specifications and with the project requirements, but should avoid responsibility for the design itself, or for any errors or omissions in that design.

Insurance. Often the Design/Builder expects the Architect to carry professional liability insurance for the duration of the statute of limitation or repose (from eight to ten years in most states, and in others fifteen years or longer). This is neither practical nor achievable. A professional liability tail policy is usually no longer than three to five years. The Architect can be expected to continue to carry insurance as an ongoing business for so long as the coverage is commercially available at reasonable rates. If the Architect elects not to continue its professional liability coverage or goes out of business, there is a possibility of tail insurance, again for a period likely not to exceed three to five years at most.

Perhaps the most important thing for the Architect to convey to the Design/Builder is that a contract provision requiring that the Architect carry insurance for ten to fifteen years beyond project completion does not protect the Design/Builder, the Owner, or the Architect. If the Architect fails to meet the contractual requirement of extensive post completion coverage, the Design/Builder will have a claim for breach of contract. But if the reason the Design/Builder has not continued the coverage is bankruptcy or closure of the business (two likely scenarios), there is no true remedy available. The Design/Builder would have been better off with a realistic expectation (that could be reliably met) that insurance would be in place for a period of three to five years after project completion. Beyond that, the Design/Builder would have to either provide for claims out of a contingency or obtain project specific insurance to cover any gap in the Architect’s coverage.

The parties may also want to discuss insurance limits. The Owner will usually specify its required insurance limits in the Request for Proposals, but the Design/Builder may have other (higher) limits in mind, based on historical experience; a misperception of coverage afforded by professional liability insurance; or a misperception regarding the role of the Architect. As with many other provisions of the design subcontract, the Architect should insist that (absent Owner demand) the required limits of professional liability insurance are comparable to the insurance limits that would be required on a design-bid-build project.

The Architect should also ask the Design/Builder what insurance it will be carrying on the project. The Architect will want to be added as an additional insured on the Design/Builder’s insurance (other than professional liability and worker’s compensation) as well as the insurance provided by the Design/Builder’s subcontractors. By being added as an additional insured on the Design/Builder and construction contractors’ policies, the Architect can often avoid having to defend claims or lawsuits arising from construction site injuries or losses, particularly if the injuries or losses in question arose outside of the Architect’s project responsibilities.

Staffing during the construction phase. The Design/Builder and Architect should address the expected obligations of the Architect during the construction phase of the project. If the Design/Builder provides construction management services and does not engage the Architect to perform on-site construction administration services, the Architect may be deprived of the opportunity to identify and assist in early resolution of coordination, dimensioning, and errors and omission issues. At the other end of the spectrum, the Design/Builder may want the Architect to provide a full-time resident construction representative. If agreement is reached on these matters at the MOU stage, the parties may wish to memorialize them in the MOU.

Liquidated damages. Liquidated damages are common in construction contracts, but not in design contracts. Design/Builders facing liquidated damages clauses in the contract with the Owner will naturally seek to flow those clauses down to their subcontractors, including the Architect. Since the Architect would not face liquidated damages were it directly under contract to an Owner, it should not be exposed to liquidated damages simply because it is now under contract to a Design/Builder. The Architect has no control over the Design/Builder’s work forces or the actions of the Owner or building officials who must approve portions or phases of the project. Because the Architect cannot control the progress of the construction or completion of the construction document phase through issuance of permits, it is unreasonable for the Architect to assume such liability for delay in completion of its work.

If the Design/Builder’s goal is to hold the Architect responsible for delays caused by the Architect’s negligence, a liquidated damages provision is not necessary. The actual damages incurred by the Design/Builder as a result of the Architect’s negligent failure to perform its services in a timely fashion should be covered by the design subcontract indemnity clause. In other words, if the Design/Builder is delayed 30 days by the Architect’s negligence, and as a result the Design/Builder is forced to pay 30 days of liquidated damages under the Design/Build Agreement, the Architect would ordinarily be responsible for those damages under the indemnity clause, whether or not the design subcontract contains a liquidated damages clause. In that event, however, the Design/Builder would have to prove that the specific liquidated damages it incurred resulted from delays caused by the Architect. The mere fact of delay would not be sufficient.

Payment terms. The Architect should insist that it be paid in a timely fashion whether or not the Design/Builder has received payment from the Owner (unless there is some dispute regarding the services performed by the Architect or regarding its invoice for those services). This issue can be handled with a provision that says exactly that (i.e., “In the event of non-payment by the Owner to the Design/Builder, the Architect shall nevertheless be entitled to payment unless the non-payment by the Owner is due to the fault of the Architect.”). A variation of this provision is “In the event of non-payment by the Owner to the Design/Builder due to the fault of the Design/Builder or any of the Design/Builder’s subcontractors, suppliers or consultants, or any other party for whom the Design Builder is legally liable (other than the Architect) and not the fault of the Architect, the Architect shall nevertheless be entitled to payment from the Design/Builder”

Retention. Where the Owner withholds retention under the prime agreement (and sometimes even when it does not), the Design/Builder is likely to want to withhold retention from all of its subcontractors, including the Architect. Since the Owner would not usually withhold retention from the Architect when under direct contract on a design-bid-build project, the Architect should seek to avoid retention clauses in the design subcontract.

Owners and prime contractors withhold retention in order to ensure that a pool of money will be available as security for punch list items and to ensure timely completion of the contract. These considerations are not applicable to design services, particularly since the design services are performed at the front end of the project. Furthermore, design services do not pose the same risks to the Design/Builder as construction work, and retention is therefore not appropriate.

The issue of retention may be moot if the Design/Builder or Architect is able to get the Owner to agree to exclude design services from the retention withheld under the prime contract. If the Design/Builder is intent on holding retention, it is important to negotiate retention release dates that approximate the real risk to the Design/Builder. Proposing releases of retention at critical contract points, such as by design phase, will help.

Hazardous materials. The Architect needs to know from the start if hazardous materials are likely to be present at the project site, and if so, how they will be handled. If the Architect is expected to provide remediation design or otherwise be involved with hazardous materials, it needs to make sure that the scope of services related to hazardous materials is consistent with the risks that it is willing to take. If the Architect is not expected to take any role with respect to hazardous materials, that fact should be clearly stated in the MOU or design subcontract.

Confidentiality. Depending on the sensitivity of the confidential information that needs to be exchanged between the parties, the parties may want to include a confidentiality clause in the MOU or enter into a separate Confidentiality Agreement. Generally, a separate agreement may be called for when the nature of the confidential information is such that very specific identification, marking, handling, or remedies for disclosure must be addressed.

Right to review the Design/Build Agreement. The Architect should always seek to review the Design/Build Agreement before the Design/Builder has finalized the terms with the Owner. The MOU should expressly require the Design/Builder to provide the draft Design/Build Agreement to the Architect for review and comment. After all, the Architect will to a great extent have to live with the flow down of the Design/Build Agreement terms. The Design/Builder and Architect are likely to be aligned on those issues which impact them in similar ways – force majeure, consequential damages, no damages for delay, right to rely on Owner provided data. Other provisions, however, such as clauses related to indemnity, insurance, warranty, standard of care, and ownership and reuse of design documents may affect the Architect in a different way than they affect the Design/Builder. Unfortunately, once the Design/Builder has agreed to the Design/Build Agreement, the Architect may have little room to negotiate.

By reviewing the Design/Build Agreement and participating in the negotiations, the Architect can bridge the divide between the Design/Builder’s interests and the Architect’s interest in the Design/Build Agreement clauses. For example, the parties may have differing views of the Design/Build Agreement indemnity, with the Architect intent on obtaining an indemnity based on negligence and the Design/Builder willing to accept a broader, non-negligence based indemnity. By participating in the negotiations, the Architect has an opportunity to explain its insistence on an indemnity based on negligence and the standard of care. Even if the Owner does not agree to revise the terms for the entire Design/Build team, a direct negotiation between the Architect and the Owner may enable the Architect to explore or suggest alternatives, such as a “split indemnity” with one clause applicable to the design services to be performed under the Design/Build Agreement and one clause applicable to the non-design services.

Similarly, if the Design/Build Agreement requires that the work to be performed under the Design/Build Agreement be “free from defects,” the Architect may be able to negotiate a standard of care exception for the design services or to clarify that “work” is limited to construction and does not extend to design services. Review of the Design/Build Agreement also provides the Architect with the opportunity to raise any concerns it has regarding the insurance terms, and to request any modifications that it needs to meet its particular insurance program.

Finally, the Design/Build Agreement is likely to contain a number of provisions pertaining specifically to design, including those addressing responsibility for design, professional design licensing requirements, ownership of design, and scheduling of design. The Architect will want to weigh in on these issues. Less specific provisions may be of interest as well, such as how and under what conditions a change order may be issued; when the contract may be suspended, terminated for cause, or terminated for convenience; and what method will be utilized for dispute resolution. These issues are difficult to address at the MOU stage due to the lack of a Design/Build Agreement for review. But it is important for the Architect to have the opportunity to review these terms and give input from the Architect’s standpoint prior to the execution of the agreement. Therefore, the MOU should, at a minimum, provide that the Architect will have an opportunity to review and comment on the Design/Build Agreement; ideally, the Design/Builder will commit to giving the Architect a real seat at the negotiating table.

The Architect’s review of the Design/Build Agreement benefits the Design/Builder too. The Architect may have different or additional suggestions for handling difficult contract provisions that affect both the Architect and Design/Builder, thus expanding the knowledge and experience base of the negotiating team. In addition, by making the Architect a partner in the negotiation process, the Architect may be more willing to share certain Design/Build Agreement risks, or better understand the need to accept those risks, having participated in the conversation with the Owner. Finally, having Architect participation throughout the Design/Build Agreement negotiating process will increase the likelihood that the Design/Build Agreement terms and the design subcontract terms are consistent, decreasing the chance of a disconnect between the design obligations and responsibilities in the Design/Build Agreement and those in the subcontract.

Conclusion

Having established a dialog regarding risks and responsibilities at the MOU stage, negotiation of the design subcontract should proceed expeditiously after execution of the Design/Build Agreement. There will certainly be the opportunity to negotiate various project specific terms and conditions, as well as to negotiate responsibilities for ownership of documents; means, methods, and safety; specific financial terms, and the like. The terms and conditions most likely to cause friction between the Design/Builder and the Architect (or likely to place the Architect in a position where it is forced to accept a risk that is cannot successfully bear) will be out of the way however, allowing the Design/Build team to focus on it primary goal – successful project delivery, on schedule, on budget.

Endnotes

1. As used herein “Memorandum of Understanding” and “Teaming Agreement” are one and the same, both being encompassed in the term “MOU.”