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Every Rose Has Its Thorns: Unique Challenges with the Design-Build Model in Construction

By Eric Michener

May 16, 2018

   One of the recent trends in the construction industry is to move toward more Design-Build projects, as opposed to the more traditional Design-Bid-Build model.  In the Design-Build model, the owner of a project picks a general contractor to help him not only build the project, but to also help him design the project.  This stands in contrast to the Design-Bid-Build model where the owner hires an architect to help him design the project, puts those designs out for competitive bidding, and then selects a contractor with the lowest and best bid to build the project.

   The Design-Build model has many advantages.  The owner only has to deal with one party and gets a more stream-lined and often quicker process.  The general contractor gets to have more control of the project from the beginning, which can save time and money down the road.  These advantages have been confirmed by recent studies that suggest the Design-Build process is on average faster and cheaper than the Design-Bid-Build process.

   But as with everything in life, there are also downsides.  For example, once a general contractor accepts responsibility for both the design and building of the project, he gives up specific legal defenses.  In one of the oldest construction cases on record, the Supreme Court said that a contractor cannot be held responsible for defects in his work that were the result of flaws in the design of the project.  Known as the Spearin doctrine, many contractors have used this defense when faced with problems during the building of a project.  Under the Design-Build model, the general contractor gives up this defense.

   Another downside to the Design-Build model is that it creates new insurance risks for a general contractor.  Normally, a general contractor obtains insurance under a Commercial Liability Policy (“CGL”) for accidents or problems during the construction phase of the project.  Under Design-Build, however, the general contractor is responsible for the architect’s work, which would not be covered under a CGL policy.  Accordingly, the general contractor now has to worry about obtaining professional liability insurance for architectural work done for the project in addition to the normal CGL policy. 

   Even with these and other downsides, the Design-Build model still has substantial benefits in many situations.  The risks associated with Design-Build can be managed, just like any other risks.  It is important, however, that you be aware of the unique issues that arise in these types of contracts and consult an attorney to help protect your interests.

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