United States: Construction Administration Liability Risk Avoidance

Professional liability claims against architects generally fall into two different categories. The first type of claim is errors or omissions in the architect's design drawings and/or specifications. The second type of claim is that the architect failed to properly perform its construction administration services pursuant to the generally accepted standard of care in the industry. Of course, there are instances where both types of claims are alleged.

The new AIA Standard Form Agreement between Owner and Architect (B101-207) describes construction administration services as "Construction Phase Services." An understanding of the nuances of these services and how claimants view the role of the architect is a key to educate architects (also applies to engineers and land surveyors) and to better equip them to avoid professional liability claims.

While the term "construction administration services/construction phase services" encompasses a variety of services by the architect (i.e. evaluations of work, certificates for payment, submittals, changes in work, and project completion), the focus of this article will be on the architect's construction observation services (described in the AIA documents as "Evaluations of the Work"). The intent is to give the architect an understanding of how to effectively handle their construction administration site observations in such a manner in order to help protect the professional from construction administration services liability claims, or at a minimum, to have the appropriate factual defenses to such a claim should a claim be made by the project owner.

The three pillars of properly executing the design professional's construction administration site observation services can be summed up as the "Three C's" – Control, Competence, and Communication.

Control

While it is anticipated that all architects want to perform their services in the best possible manner, it is imperative that there be some semblance of control of their client's expectations when it comes to construction administration. Whether the architect wants to believe it or not, in a majority of construction projects, it is the owner's expectation that the architect will use the utmost care and diligence in protecting the owner from deficiencies in the construction of the project by the contractor. In other words, regardless of the terms of the contract and whether the design professional has minimal construction administration services responsibilities, the owners will typically hold the design professional to a higher standard, more akin to a construction manager. In fact, it is fairly standard in litigation, especially when dealing with unsophisticated owners, that they will in fact call the architect the "construction manager" of the project. The owner will rely on the architect to see to it that the project is a success and any failure, whether it is during or after the project, regardless of whether it is actually the result of a failure on the part of the architect, will likely lead to a professional liability claim.

Educating the owner regarding the definition of construction site observations as well as the specific role of the architect during construction, should lead to fewer or diminished exposure claims. The shifting of the owner claimed responsibility for construction management from the architect to the owner will make the owner more vigilant when dealing with issues that may arise during construction with the contractor. Additionally, it would be more difficult for an owner (who will hopefully by this time be more involved in the project) to simply state that they were relying completely on the architect in all of the decision making (See Communication below). Stories abound in professional liability lawsuits where the owner claims that every decision they made was based on representations or decisions of the architect. Understanding that this is how owners view the role of architects during the construction phase should put every architect on their toes when providing site observation services.

Controlling the owner's expectations is now more important than ever given the changes from the old B141-1997 AIA Standard Form Agreement to the new AIA, B101 2007 Standard Form Agreement. The B101 2007 arranges the architect's services in terms of "Basic Services" as well as "Additional Services." The Basic Services are described at Article 3 of the Agreement, with the Additional Services set forth at Article 4.

A sophisticated owner may understand the language as put forth in the AIA contract documents; a lesser sophisticated owner will expect that this contract provision requires the architect to inspect the work of the contractor and identify deficiencies in the contractor's work. Clearly, this is not the intent of the evaluations of the work provision in the AIA agreement. A prudent architect will modify the Standard Form Agreement to add additional "plain English" language that clearly sets forth the architect's responsibilities in the evaluation of the work.

The B101-2007 is a good starting point for identifying the architect's duties during site observation work. However, additional language could be added which would further protect the architect and more clearly describe the intent of the architect's site observation work at the project. The additional language proposed is shown in italics and underlined.

§§ 3.6.2 Evaluations of the Work

In the event of litigation against an architect by a property owner, the owner will retain an architect consultant to give opinions as to the level of service provided by the architect and whether the architect "fell below the standard of care" in their work. It is generally accepted by those consultants that the project architect performing their site observation services are not required to make exhaustive inspections. However, those consultants are generally of the opinion that the architect is required to identify defects in the workmanship of the contractor. Additionally, those consultants would also agree construction site observations are simply to ensure that the construction by the contractor being performed is in "general conformance" with the plans and specifications. As lawyers often see in lawsuits, however, there can be a wide variety of opinions as to the level of observance or "inspections" that an architect needs to perform pursuant to its construction site observations.

The project architect should keep in mind that an owner's consultant has the benefit of hindsight and gets to play "Monday morning quarterback." Whether this is fair or not is irrelevant as to whether or not a claim will be brought.

An alternative to modifying the contract is a simple letter to the owner at the beginning of the construction phase outlining what the architect's evaluation of the work will be and, in fact, offering additional services to the owner is prudent. A sample of such a letter in its very basic form could be as follows:

Sincerely,

Architect

Controlling the client's expectations is key to how the owner will feel during and after the completion of the project. Sometimes, how an owner "feels" about the services provided by the architect could be the flame that stokes the fire of litigation. If the owner's expectations are controlled during the construction process and there is proper communication by the architect (see below), the owner will feel more satisfied as to the services performed by the architect pursuant to the agreed upon scope. Conversely, if these expectations are not controlled, the owner will first look to the person holding a professional license as the culpable party for the failures of the project.

Competence

It goes without saying that most site construction administration liability claims against architects involving their site observation services can be avoided by having the architect perform its work competently. The term "competence," however, is often described differently by owner's consultants in litigation. Whether the architect's representative is a general contractor, technician, architect, or architect in training, there is a general level of experience and knowledge that is required when evaluating the work of the contractor. Attention to detail as to the construction documents is paramount in properly evaluating the contractor's work. Furthermore, an understanding of proper construction techniques and practices, as well as materials used, will help the architect in evaluating the work of the contractor.

Is the contractor performing its work at a reasonable pace pursuant to the construction schedule? Does it appear that the contractor has skilled workers as well as appropriately credentialed subcontractors? While a successful project is a collaborative effort by the owner, architect, other consultants and contractors, simply notifying the contractor's superintendent/foreman is not sufficient to notify the superintendent/foreman of sloppy workmanship and/or defective construction and does not satisfy the architect's responsibilities in terms of evaluating the work.

Observing discrepancies in the construction should alert the architect to more thoroughly evaluating the contractor's work (even if this means spending a little more time at the site) and, as always, communicating to the owner (see below). Knowledge of the materials being used by the contractor and their performance requirements, as well as their installation instructions, are critical requirements of an architect when performing their evaluations of the work. This is especially true when dealing with a new product that has not been around in the marketplace for very long. The architect is the professional with the license, and eventually the buck will stop with the person holding the most credentials.

While it is generally accepted that the architect performing construction administration site observations is not required to inspect the work, it cannot be understated that many litigation consultants that analyze the work of architects during the project architect's construction administration services, routinely attempt to hold the architect up to that higher standard of investigation versus limited site observations.

While the contractor is responsible for the means and methods of construction, invariably issues will come up during the construction process where the contractor will request information from the architect as to how to build a specific component. For most projects, that comes in the form of request for information ("RFI"), thereby documenting the requested information. However, it is not uncommon that during site observation work, the contractor will simply ask a question of the architect's representative who will, in turn, agree to a proposal set forth by the general contractor. Prudent architects and their representative at the site should not automatically assume that the contractor has the knowledge to properly construct the building component in question. Therefore, the architect's representative must use all resources available to make the determination of whether the recommendation by the contractor is, in fact, the proper course of construction. Additionally, should the change be substantive in changing the character, materials or look of the project the change should be vetted through the owner. Again, the buck will stop with the architect and not the contractor should the proposed change result in defective workmanship and/or unacceptable deviations from the owner approved plans.

Another common theme that lawyers see in architect liability claims are instances where the architect and the contractor have worked on several projects together and there is a general familiarity with one another. While this is often useful in the success of a project, it can also have some downside. For example, while the two companies may have worked together, it does not automatically assume that those persons involved in the actual day-to-day operations of the project are familiar with each other, nor how things have been accomplished on other projects. What one superintendent may have understood the plans to mean on one project, may be completely different from a superintendent on the next project. Additionally, the architect's representative on one project may assume that the contractor knows how to install a specific building component based on the history of the other project when, in fact, the contractor's superintendent and workers were not involved in that other project. The level of attention to detail during site observations and evaluations of the contractor's work should not lessen just because the architect is familiar with the contractor.

Most of the work by the architect is completed by this stage and most of the money has been paid from the owner to the architect. However, it is imperative the architect not lose focus during the site observation and evaluations of work stage of the project. The architect should see the project to the finish line and avoid the claim.

Communication

Architects should not underestimate the value of properly communicating and, when necessary, documenting those communications with the owner's representative. At a minimum, the architect representative should be noting discussions where decisions are made it their respective field notes. When appropriate, a letter to the owner memorializing the communications and decisions will help combat the owner from later taking an opposite position or conveniently forgetting the conversation and its substance. Communicating clearly and effectively can reduce the chance of a liability claim in the first instance.

While there is a working partnership with the contractor in attempting to get the project completed, it should be remembered the architect is working directly for the owner and the law will treat the architect as the owners agent. In other words, the architect is required to have the owner's back. The duties for the architect flow to the owner and not to the contractor. Therefore, a prudent architect will be vigilant in their advocacy for the owner in any situation where there appears to be conflict between the owner and contractor.

During the architect's construction administration site observation services, it is imperative that the architect not only communicate what they observed at the site, but also to detail it in writing to both the owner as well as the contractor if they observe any problems of concern or deficiencies in the work of the contractor. While this may appear to be documentation that would be self-serving and cover the architect, that is exactly the point. Keep in mind that when owners hire consultants during the litigation process to evaluate the work of the architect, the first thing they are looking at is for some basic factual background of the project and the work and services performed by the architect. Without proper documentation, the consultant is simply left to their own imagination and determination of the level of services provided by the architect. Do not give them that opportunity.

While the architect may have had dozens and dozens of conversations with the owner and the contractor on the project, if it is not somehow documented, the owner and the contractor will typically have very short memories and will not recall the specific instances of those communications. Having the proper written documentation will tell the story of the project and the level of services provided by the architect in their site observation services.

Documenting instances of construction deficiencies and advising the owner or the contractor of those deficiencies puts them on notice of the issue and should hopefully rectify the deficient construction. It is key that when the architect notices these deficiencies that there is some follow up observation to ensure that the contractor is back on track for performing that specific construction pursuant to the contract documents. By documenting the deficiency, it shows that the architect is vigilantly performing its evaluation of the contractor's work and advising the contractor and the owner of those particular issues. Without properly documenting the deficiency in writing, it opens up the architect for a claim by the owner's consultant during litigation that the architect should have noticed the defect, but did not. Regardless of whether or not the architect verbally communicated the issue to the owner and contractor, it is important to keep in mind that memories fade over time and professional liability claims against architects may take several years before they are alleged. Additionally, those individuals that the architect may have had verbal communication with may no longer be affiliated with the project in any way, and therefore the consultant for the owner is again left to use their own imagination and speculation as to the level of services performed by the architect.

Another critically important issue in communicating with the owner is when a change order may be required which creates additional costs. The reason for the change order, as well as the decision of whether to accept or decline the change order, is vitally important to be put down in written form. It is not unusual for there to be a verbal change order on a project, but again, such a lack of written documentation is at the crux of many professional liability claims against an architect.

A tangential issue in terms of communicating with the owner and contractor is the issue of documenting verbal conversations or other issues in a written field observation report. The architect's on-site representative should take the necessary time, even if it is just a few minutes, to write down the discussions that took place at the on-site construction meeting so that memories regarding specific conversations can be refreshed during the course of litigation by triggering events in the site observation report.

Conclusion

A prudent architect will not let a contractor's construction deficiencies bring them into a lawsuit, where claims can are made against the architect in that they failed in the performance of their site observations as part of their construction administration services. By eliminating claims related to construction administration services, the architect has a much better chance of avoiding potential professional liability claims. Following the Three C's of Control (controlling client expectations), Competence (knowledge and expertise), and Communication (written documentation of services) will greatly reduce the potential for professional liability claims against the architect pursuant to the construction administration services duties.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.