LEARNING FROM THE MISTAKES OF OTHERS:

WHEN DESIGN-BUILD HAS GONE AWRY

Deborah J. Mackay

Part I:

Lessons Learned from the Procurement and Proposal Process

This paper examines some of the causes and consequences of errors during the procurement and proposal phase of design-build projects. The common thread linking the problems discussed below is a failure to delineate clearly at the outset of project planning the respective responsibilities of the design-build team members with regard to key project elements, such as budget, performance objectives and schedule. Many of the problems outlined here can be avoided by clear documentation of team roles at the start of the proposal phase.

A. Failure to Assemble a Team of Subcontractors and Suppliers Who Have Experience With Similar Projects.

Several cases bear witness to the problems that can arise when a design-builder involved in a large-scale, complex project fails to ensure that its team members have sufficient experience to meet the project’s demands.

An Eighth Circuit case demonstrates the importance of retaining a designer experienced in the relevant industry and with projects of comparable scale. C.L. Maddox, Inc., v. Benham Group, Inc.,[1] dealt with a contract dispute arising out of a design-build project for the extensive remodeling of a coal processing system at an electrical power plant in Illinois. Maddox, the prime contractor, subcontracted with Benham for design engineering services on the project, including preparation of equipment lists and material quantity estimates for use in preparing Maddox’s fixed price construction bid. Maddox contracted with Benham specifically for an “in-depth study of equipment layouts, equipment sizing and to supply necessary information and assistance for [Maddox] to prepare a final construction cost (lump sum) for the project.”[2] At trial, a representative testified that Maddox relied heavily on Benham’s estimates in preparing its bid, because Benham possessed all of the design information. Based on Benham’s estimates, Maddox signed a design-build contract for $10 million.

As the Eighth Circuit understatedly noted, “[t]he project did not go well.”[3] Among other things, Benham significantly underestimated the amount of work required to complete the final design and frequently failed to submit drawings in a timely fashion. Maddox ultimately sued Benham and another subcontractor seeking $5 million for additional costs incurred on the project. Of Maddox’s claimed damages, $2.7 million allegedly arose from errors by Benham in the information provided to Maddox for use in bidding the project. The dispute resulted in a five-week trial, and a jury award of $5 million. Through post-trial motions and appeal, the defendants obtained a reduction in the damage award to the $2.7 million attributable to erroneous bidding information that Benham supplied to Maddox.

At trial, expert testimony demonstrated, among other things, that Benham had underestimated the project’s engineering requirements; that Benham failed to schedule its work properly to allow Maddox to meet the construction schedule; that Benham understaffed the project; that Benham’s drawings demonstrated inadequate knowledge of materials handling; that Benham underestimated the number of drawings that the project would require; and that although Benham assumed the total engineering function on the job, there was no evidence of experience by Benham in handling very large material handling projects.[4] This last factor appears to have been key in the project’s failure. The lesson plainly implied from this case is that a designer with prior experience with materials handling in the power industry, in addition to sufficient design capabilities and staffing, could have avoided the drastic underestimates seen in Benham’s work on the project.

The Maddox case is also noteworthy for the fact that that Maddox ultimately had to bear over $2 million in losses itself, although it had claimed that these damages also resulted from failures by Benham and the other defendant. The Eighth Circuit further reduced the jury’s damage award by an additional $1.2 million claimed to have arisen from Benham’s “failure to guard Maddox against Maddox’s own deficiencies.” This claim was based on a contract provision stating that Benham “shall keep [Maddox] informed of the progress and quality of the Work, and shall endeavor to guard [Maddox] against defects and designs [sic] in the Work of [Maddox].”[5] The court declined to accept Maddox’s interpretation that this clause operated to shift to Benham the risk that Maddox would not properly perform its own obligations under its contract with the project owner.[6] The Eighth Circuit found that Benham had “no duty under the contract to act as insurance against Maddox’s own carelessness.”[7] In addition, the Eighth Circuit affirmed the trial court’s reduction of the jury’s damage award by approximately $1.4 million because Maddox did not offer evidence that Maddox had been damaged when the owner incurred expenses in these amounts to remedy defective work resulting from the defendants’ breaches. While these amounts may have been borne by bond sureties on the project, the ultimate cost to Maddox was undoubtedly real. By the Eighth Circuit’s account, utilizing an inexperienced design subcontractor turned this project into a total failure from Maddox’s standpoint.

Another case demonstrates that a material supplier’s level of know-how can also drastically impact a design-build project’s success, particularly when the prime contractor issues a purchase order before the design is complete. In Carolina Steel Corp. v. Palmetto Bridge Constructors,[8] the design-builder, Palmetto, entered a contract with the South Carolina Department of Transportation for a complex bridge project over the Cooper River in Charleston. The project design ultimately included seismic requirements that differed from the DOT’s standard designs. These issues cost Palmetto an additional $1 million in a damages award in favor of its steel supplier at the conclusion of the lawsuit.

Palmetto contracted with Carolina Steel Corporation for the fabrication and supply of all the steel required for the project. Because the project was design-build, the final design was not complete at the time Carolina Steel submitted its bid. The bid drawings did not reflect that the project would eventually incorporate a seismic design.[9] Rather, it appears that in bidding, Carolina Steel assumed that the project would follow “standard SCDOT design.”[10]

Carolina Steel bid to provide all of the required steel on the basis of one fixed unit price per pound of steel. Because the design was incomplete, the purchase order that Palmetto issued to Carolina Steel allowed that a “[s]ubstantial deviation in design may necessitate a change in cost which will be determined on a case by case basis.”[11]

When the final construction drawings were released eight months after issuance of the purchase order, the drawings showed that several interchange bridges had increased in weight and complexity in order to comply with earthquake, hurricane and collision criteria. These design changes substantially increased the amount of steel required on the project.

In response to the changed design, Carolina Steel submitted several proposals to simplify the design in an effort to reduce costs. However, Carolina Steel’s proposals were not incorporated in the final design.

At the conclusion of the project, Carolina Steel had been paid over $20 million based on the agreed unit price, but had six outstanding claims for additional payment totaling over $1.5 million. After a bench trial, the court found in Carolina Steel’s favor on the majority of its claims and awarded damages in excess of $1 million.[12] The contested issues varied, but included disputes as to whether various changes constituted “substantial deviations” from the as-bid drawings that justified a change in the unit price, as well as disputes as to the weight calculation when the agreed-upon unit price applied.

However, all of the claims arose from the central assumption by Carolina Steel that the design would follow standard SCDOT design and would not be augmented by the ultimately-adopted seismic and related strengthening criteria. Carolina Steel demonstrates the risk a prime contractor may incur when a major supplier makes a faulty assumption – perhaps based on its own limited prior experiences - as to essential design criteria and the design is incomplete at the time of bid. Seismic design criteria can significantly increase material requirements. The purchase order in this case was sufficiently open-ended to expose the prime contractor to substantial increased material costs. The lesson learned? If significant design changes are still possible that may drastically impact material quantities, it may be wise to delay issuing a final purchase order for any major material supplier until quantities can be accurately estimated, or alternatively to include a price adjustment mechanism for critical materials in the contract with the owner in order to pass increased costs upstream.

1. Failure to identify the disciplines required to meet owner’s performance criteria.

Even when design services are to be performed in-house by the design-builder, problems arise when the level of design services provided are inadequate to meet the owner’s criteria. Similarly, failure to identify and provide key services necessary for the construction phase may sound a project’s death-knell.

Both problems surfaced in a recent Connecticut case. Bakish v. Donnelly[13] involved a high-end residential design-build project in Danbury, Connecticut. The homeowners hired Blaze-Design Build Group Inc. as design-builder for a substantial renovation and expansion of a lakeshore property. The agreement contemplated a phased project including demolition of an existing structure, excavation, foundation and watertight shell construction. Both parties acknowledged the significant challenges that the site posed because of its lakeside location and the presence of rock ledge.

After demolition had taken place, it quickly became apparent that the design-builder did not have the capabilities to perform the excavation needed to address the site conditions. The homeowners chose to subcontract out the excavation to a separate contractor. After this point, the project appears to have gone rather quickly downhill. The design proved to be deficient in several respects, including omitted roof trusses required for structural reasons. Construction slowed and ground to a halt. The homeowners sued for breach of contract, claiming that the design-builder had overcharged for design services; that the design was inadequate; that construction failed to conform to the homeowners’ requirements for quality, time and budget; and that construction was not completed.

The court ruled in favor of the homeowners. The deficient design was a key element of the case. The court noted that the designer, one of the principals of the design-build entity, was not a registered architect. Expert testimony demonstrated that the design failed to comply with even basic design standards, was structurally deficient, violated the building code, was inconsistent and inadequate for construction purposes. The homeowners had been forced to hire an architect to prepare a revised design to allow construction to be completed.

Particularly in light of the fact that the site’s challenges had been acknowledged by all parties from the outset, the design-builder’s failure to come up with an adequate design was fatal to the project. The design-builder was required to pay damages to the homeowners for completion of the project and related costs. Plainly, the case demonstrates again that obtaining a design that conforms to the owner’s performance criteria is key to the success of any design-build project.

B. Failure To Define Clearly the Roles and Responsibilities in the Teaming and Proposal Phases.

1. Design-builder fails to define performance criteria for subs, suppliers and designers in preparing proposals.

a. Failing to identify purpose of evaluation and input from subs and suppliers.

Failing to spell out in the contract documents the intended use of input from design-build team members, particularly designers, can lead to significant disputes between the design-build team members. CRS Sirrine, Inc. v. Dravo Corp.,[14] involved a design-build project for a large and technically complex power plant for the U.S. Navy at the Norfolk Naval Shipyard in Portsmouth, Virginia. Dravo and Sirrine formed a joint venture, based on Dravo’s construction capabilities and Sirrine’s experience in the design of similar projects. Fixed price competitive bids were submitted on the basis of preliminary design and engineering by the bidders. Detailed design was done only after contract award.

The joint venture parties agreed that Sirrine would prepare and submit the initial technical proposal, and if the technical proposal was accepted, Dravo would assume primary responsibility for preparing and submitting the bid. Sirrine was responsible for supplying the technical information needed to prepare the bid. The joint venture’s successful competitive bid was in excess of $100 million.

The dispute arose because the plant cost significantly more to build than the bid amount. Dravo incurred more than $30 million in losses on the construction phase. Dravo sued Sirrine seeking damages of $12.5 million, arguing (among other things) that Sirrine had failed to provide sufficient, accurate information to Dravo for use in the bid, had failed to design the project within budgeted quantities, and had failed to give notice to Dravo that the bid quantities would be exceeded. At trial, Dravo recovered $5.5 million in damages.[15] On appeal, the case was remanded for clarification of the damage amounts contained in the judgment.

The key to this dispute was the letter agreement between the joint venture parties that allocated their respective responsibilities for bidding and design. While providing that Sirrine was responsible for supplying the technical information for Dravo to use in preparing its bid, the letter agreement also stated that Sirrine would not guaranty the accuracy of Dravo’s estimates used in preparing the bid. Sirrine argued that the agreement unambiguously released it from any responsibility for damages resulting from increases in construction material quantities. On appeal, Sirrine claimed that the trial court wrongly failed to enforce this provision.

The court of appeals affirmed the trial court’s finding that the letter agreement between the parties was ambiguous and did not intend to release Sirrine from all liability for quantity overruns, if the overruns resulted from errors or omissions in Sirrine’s pre-bid or post-bid design and engineering services.[16] While the agreement also contemplated that Dravo would be responsible for any overruns resulting from its own bidding errors, in the end it was unclear as to how responsibility for cost overruns would be allocated between the parties. This ambiguity was key to the dispute and appears to have prevented resolution of the case prior to a costly trial and appeal.

It is possible that this dispute could have been minimized if the exact allocation of responsibility for any overruns had been spelled out in the letter agreement. Certainly the provision that apparently protected Sirrine, the designer, from responsibility for overruns should have been omitted or more clearly limited as to its application. Because the fixed-price bid had to be submitted based only on the initial technical proposal and before final design was completed, the key documents between the design and construction partners should have more accurately dealt with the possibility of cost overruns, to the extent that such overruns could not be recovered from the owner.

b. Failing to specify design-builder’s reliance on input from subcontractors or suppliers for pricing purposes and GMP proposals.

The Sirrine case discussed above also plainly stands for the proposition that the contract documents between construction and design partners need to accurately and unambiguously state the design-builder’s reliance on design information for its pricing purposes. Otherwise, parties providing information for use in pricing will attempt to escape liability and shift all responsibility for cost overruns to the constructor.

c. Failing to clearly delineate the extent and scope of design responsibilities for subs and suppliers at the proposal stage.

When the project requires design input from subcontractors or suppliers, the extent and scope of these design responsibilities must be clearly defined and agreed at the proposal stage. Failure to do so can result in disputes such as the large-scale material cost overrun problem seen in Maddox v. Benham, discussed above. In that case, there was no formal agreement between the contractor, Maddox, and the designer, Benham, for the pre-proposal design services. There was simply an oral agreement, under which Benham would complete the drawings and specifications necessary for the Maddox to prepare its bid, including equipment list and quantity information.[17] Obviously, the deficiencies in these documents were the source of the substantial overruns Maddox sustained on the project, but the agreement lacked any definition as to Benham’s responsibilities for errors or omissions in these pre-bid services. A formal agreement with the designer at the proposal stage, including appropriate risk allocation provisions, should be a baseline requirement.

d. Failing to clearly obligate the subs, suppliers and design professionals to the project performance requirements at the teaming and proposal phase.

Similarly, the design-builder should ensure that necessary subcontractors and other team members are firmly obligated to participate in the project if their proposals are used in the project bid. This issue arose in Perini Building Co. v. Fisher, Albright & Masters, Inc.,[18] a case involving a design-build project for a commercial headquarters in Argonne, Illinois. Perini, the prime contractor, solicited bids from trade contractors prior to submitting its fixed-price bid to the owner. Fisher had submitted a proposal for drywall and painting. In submitting its proposal to the owner, Perini calculated that it would ultimately change the design then under consideration, and would also go back to subs to negotiate discounts and various changes in work scope.

After being awarded the job, Perini approached Fisher to negotiate a different work scope and the parties agreed on a revised scope and price of $1.9 million. Fisher submitted a written one-page proposal reflecting the price and scope.

However, it was the intent of both parties that a formal subcontract would follow, including all necessary terms and conditions. When Perini several months later provided its subcontract form to Fisher, the parties encountered irreconcilable differences, particularly with regard to terms for payment and termination. Fisher ultimately notified Perini that it no longer wanted to negotiate with Perini on the project and the parties’ communications came to a halt. Perini sued Fisher for breach of contract, and on equitable theories.

Although Fisher had already commenced work on the job, the court found that no contract had been formed between the parties, because the formal agreement intended by both sides was never reached, even after several months had elapsed. The court granted summary judgment dismissing Perini’s breach of contract claim. The court, however, denied both parties’ summary judgment motions on the issue of promissory estoppel, finding that a jury could decide either way on whether Perini had reasonably relied on Fisher’s oral agreement as to price and scope reached after the bid date.

The Perini case demonstrates that a design-builder must reach enforceable agreements with team members whose bids are key to the project. Design-build may differ in this respect from a traditional competitive bid situation, where the general’s reliance on a subcontractor’s proposal in its submitting the general’s winning bid will generally create a binding promissory estoppel. As in Perini, if the design or other requirements are to be changed after acceptance of the bid, there may be no enforceable obligation on the sub’s part, unless a separate independent agreement is negotiated and signed. To avoid being left without a key subcontractor when the project is already well underway, the design-builder should obtain agreements with subcontractors as soon as scope and price can be agreed.

2. Design-builder fails to recognize and provide for professional licensing compliance for design participants/contributors.

a. Failing to recognize licensure requirements applicable to the design-builder.

The potentially devastating consequences of failure to obtain the required licensure for designers working on design-build projects are now well-known. Courts have denied payment to design-builders who render design services without first obtaining the licensure required in the jurisdiction, and may require disgorgement of fees wrongfully obtained. For example, in Food Management, Inc. v. Blue Ribbon Beef, Inc.,[19] a turnkey contractor’s act in gathering data within State of Iowa while fulfilling a contract whereby it was to design, supervise construction, and initially operate a meat packing plant constituted the unauthorized practice of architecture. The court severed the contract and only allowed enforcement of the non-architectural portions. Design-builders need to remain vigilant regarding licensure requirements – or design-build prohibitions - that may be triggered by their activities in any jurisdiction and ensure that they are in compliance before entering any contracts or beginning work.

b. Failing to coordinate licensure requirements for lead designer, suppliers, and subs with design responsibility.

The Bakish case discussed above[20] illustrates the problems that can follow from the design-builder’s failure to ensure that the designer is properly licensed and in compliance with other regulatory requirements. As noted, the designer, a principal of the design-build firm, was not a registered architect. Moreover, the design-build entity had failed to comply with Connecticut’s Home Improvement Contractors Act (HIA). The parties’ contract failed to include certain provisions required under HIA. The court further noted that the principals were ignorant of HIA’s requirements. Their failure to comply with HIA also constituted a per se violation of Connecticut’s Unfair Trade Practices Act. The defendants’ HIA violation was factor the court considered in denying their counterclaims for setoff for sums allegedly owed.[21]

C. Design-Builder’s Failure to Adequately Apprise Design Participants of Their Responsibility for Meeting Contract Performance Specifications.

1. Failure to Convey Purpose and Use for Conceptual Estimating and Pricing; Quantity estimates and systems or process selection (for pricing by team)

Design-builders should ensure that the intended purpose and use for information supplied at the proposal phase is clearly stated in the contract documents with designers. Failure to do so can result in the designer’s attempts to evade responsibility when the design and/or material estimates later prove to be woefully inadequate, as seen in the Maddox and Sirrine cases discussed above. Without a clear written communication as to the intended use of the designer’s work product, holding the designer accountable may be unnecessarily difficult. As a baseline requirement, the purpose and use of estimates and pre-proposal design as a basis for bidding should be clearly enunciated in a formal written agreement, along with allocation of risks as between the constructor and designer for any errors or omissions in this material.

2. Clearly conveying that subs are responsible for performance of the system in the context of overall project performance criteria.

Similarly, the design-builder may encounter problems if the contract documents fail to convey that subcontractors are responsible not only for design but also ultimate performance of the system and compliance with the project’s performance criteria. The Maddox case provides a clear illustration of this point. The court expressly noted that the omissions of the designer, Benham, included a failure to properly define the project’s objectives.[22] However, the basis of the designer’s defense was that it was protected from any liability arising from defects in the pre-bid estimates that it furnished. Benham argued, albeit unsuccessfully, that the parties’ oral agreement for its pre-bid services was unenforceable under the parole evidence rule; and further that it never warranted that the bidding information was accurate.[23] These arguments were ultimately unsuccessful. However, the court did agree with Benham’s contention that it had no obligation to protect Maddox from Maddox’s own deficiencies during the construction phase.[24] If written contract documents had clearly spelled out that Benham’s responsibility included achieving successful compliance with the owner’s project performance criteria, these issues could have been avoided or dealt with in a more satisfactory manner.

D. Design-Builder’s Failure to Recognize the Extent of Diffused Design and Account for All Required Design Input.

1. Failure to coordinate design of systems.

Problems may arise on projects where multiple subcontractors or suppliers are required to supply design input, but the various design contributions are not carefully coordinated. In the Maddox case, the problems at the coal processing system were not limited to deficiencies in Benham’s bidding information. Maddox also sued a separate subcontractor, Dynalogic, who designed and supplied the computer control system for the coal processor. The owner ultimately determined that Dynalogic “never produced a product [that was] dependable,” and finally replaced it with an entirely new computer system at a cost of over $300,000.[25] The description of the project’s course demonstrates that the software Dynalogic supplied never operated correctly and suggests that Maddox failed to control coordination of Dynalogic’s system design with Benham’s design input.

2. Failure to convey and account for scheduling and schedule impact of design phase including design review and approval by design builder and owner of all design contributors (in the proposal phase).

Contracts for large-scale build projects can impose severe liquidated damages provisions in the event that the project fails to meet the owner’s required completion date. A key source of delay in the design-build context can be failure to obtain a complete, approved design in a timely manner in order to allow construction to proceed on schedule. Several of the cases discussed demonstrate the consequences of delay in design completion. For example, in Sirrine, the court awarded over $1.5 million in damages against the designer because of delays attributed to the designer’s deficiencies.[26] The court found that 91 days of delay were caused by the designer’s failure to give timely notice of quantity growth, late issuance of released for construction drawings, and increased material quantities. An additional 102 delay days were caused by plain design error.[27]

There was no contractual method specified to account for negative scheduling impacts resulting from designer error. Design-builders should consider whether such a provision is necessary to avoid a protracted dispute such as that seen in Sirrine.

In addition, cases demonstrate that the time needed to obtain final owner review and approval of the design documents can be significantly underestimated. In Maddox, the litany of Benham’s failures noted by the court included failure to properly estimate the project’s engineering requirements; failure to schedule its design work in order to allow the construction schedule to be met; underestimating the number of drawings needed; and understaffing. Some of the delays in finalizing the design were due to continued changes by the owner and delays by Maddox in submitting vendor-prepared drawings to Benham for review.[28] The case teaches that when multiple parties are involved in the design preparation and review process, adequate time must be included in the schedule agreed to by the design-builder.

E. Design-Builder’s Failure to Plan for Code Compliance.

1. Competitive Bidding

Design build participants should be aware of the potential hazards surrounding design-build contract procurement on public projects. Design-build contract awards on public projects are particularly susceptible to challenge by disappointed bidders and others for alleged violation of competitive bidding requirements. For example, C&C/Manhattan v. Gov’t of the Virgin Islands[29] was a bid protest decided in 1999 regarding contracts for the design and construction of three government facilities, including a prison and a jail, in the Virgin Islands. The unsuccessful bidder, C&C, sought and obtained an injunction preventing the government from proceeding with the prison contract awarded to C&C’s competitor, Hyde Park. The basis for C&C’s challenge was noncompliance with Virgin Islands’ competitive bidding laws.

In order to abate prison overcrowding, the government had adopted an expedited process to hire a single contractor to design and construct the facilities. The expedited process essentially consisted of an RFP and negotiated agreement. C&C argued that it was the “lowest responsive bid proposer,” and that under the Virgin Islands’ competitive bidding laws, it should therefore have been awarded the contract.[30] The government rejected the protest on the grounds that competitive bidding laws did not apply to the RFP and negotiation process that it had adopted.

In granting the injunction, the court noted the general rule that the Virgin Islands government was required to competitively bid all construction contracts. In adopting the RPF and negotiation procurement process, the government relied on the “professional services” exception to the competitive bidding requirement.[31] The exception provided that contracts for professional services could be made without competitive bidding, provided that “competitive negotiation” was used where practicable. The government argued that the design-build contract let to Hyde Park was a professional services contract and thus within the competitive bidding exception.

The court rejected the government’s position, finding that the prison contract was not a contract where the construction services were “merely incidental” to exempt professional services. Rather, the “bulk of the work” was not of a professional nature, but was construction work. The court noted the lack of any specific statutory authority allowing the Virgin Islands to let design-build contracts on public projects, in contrast with the design-build procurement method expressly authorized by federal regulations.[32]

The result in C&C should not come as a great surprise today, as it is generally acknowledged that a public entity needs specific statutory authorization in order to utilize design-build contract procurement if competitive bidding would otherwise apply to construction contracts in the relevant jurisdiction. However, it is worth noting that design-build projects continue to be the subject of challenges based on alleged violation of competitive bidding regulations.[33] In a case decided in 2003, Sloan v. Greenville Cty.,[34] the appellate court upheld the use of design-build procurement on two road improvement projects, but threw out the design-build procurement process that the same county used on a forensic lab project, because it failed “to provide any reasoned basis for the decision to use design-build source selection.” Although the county’s ordinances permitted it to use design-build, the court found that the county had failed to meet its own standards for making a determination that design-build was appropriate in this particular instance.[35] Practitioners and design-builders need to keep on top of regulations and statutes authorizing design-build on public projects, and to ensure that procedures are strictly followed in order to avoid challenges to the legitimacy of public design-build contracts.

2. Building Code Compliance

Design-builder s will of course be subject to the same liability for failure to comply with applicable building codes as other contractors. For example, Bakish v. Donnelly,[36] discussed above, demonstrates the problems that resulted when one of the design-build principals herself prepared a design that violated the building code. In the design-build context, however, the team leader will need to ensure that checks are in place to monitor code compliance by subcontractors and design consultants.

a. Failure to monitor code compliance by subs and design consultants.

The Carolina Steel case indicates the types of problems that can occur when a design-builder fails to establish a protocol to ensure that subcontractors understand and are complying with applicable codes or standards during the proposal phase.[37] The seismic and collision design criteria that ultimately applied to the steel for this complex bridge project led to massive increases in material costs that eventually cost the design-builder an additional $1 million on this job. Subcontractor assumptions regarding applicable codes or standards should be verified before bids are submitted. Similarly, the design-builder should establish a protocol for ensuring that consultants or subcontractors tasked with design responsibilities are aware of all applicable codes, including any special requirements for the specific project at issue. By closely monitoring code compliance during the proposal and design phases, potentially expensive problems can be averted.

Note however, that code compliance alone may not be a complete defense to a claim of negligence against a design-builder. In Williams v. Melby,[38] a design-builder (among others) was sued after an apartment tenant fell through a third-story bedroom window and sustained severe injury. The plaintiffs claimed that even though it complied with the applicable code, the window’s design was negligent and had caused the injury. The court held that code compliance does not ipso facto preclude a finding of negligence. The court noted that the builder had chosen the design and approved the plan and was therefore “responsible to avoid unreasonable risks created in the final product.”[39]

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