Waiver of subrogation provision
When an insurance carrier pays out a claim, it is not unusual for them to seek to recover the loss from other entities they believe may be responsible or contributed to the loss through litigation against them; this is called subrogation. The insurance carrier cannot sue its own insured (the contractor), but may litigate against the owner, design professional, and other subcontractors and consultants, unless there is a contractual provision requiring the contractor’s insurance carrier to waive its rights to subrogate. Such provisions need to expressly identify the entities to be covered by the waiver, and a written endorsement from the insurance provider is necessary to document that it has, in fact, agreed to waive its subrogation rights. Such a clause costs the owner nothing, and provides significant protection for the entities identified in the contractor’s waiver of subrogation provision.
The standard contract documents of AIA and EJCDC include a waiver of subrogation provision regarding builder’s risk insurance, protecting the owner, contractor, subcontractors, design professional, and other consultants. Many non-standard Division 00 documents reviewed by this article’s author have no waiver of subrogation provision and, when such a clause is included, it usually omits the design professional and other consultants, leaving them exposed to subrogation suits by insurance carriers when they rarely ever had any control over or responsibility for the associated loss.
Controlling the work
Many non-standard Division 00 documents reviewed by this writer allocate to the design professional extensive responsibilities to exert some degree of control over the contractor’s work, usually with the aim of ensuring the latter is doing a good job and is employing competent, experienced tradespersons. While the rationale for such provisions is understandable and seem reasonable at first, they muddy the contractual waters of responsibility for the contractor’s obligation to provide construction in accordance with the contract documents. Widely used standard contracts, such as those by EJCDC and AIA, make controlling work and the means, methods, techniques, sequences, and procedures of construction solely the contractor’s responsibility. The design professional should not have any responsibility to control the contractor’s work or its workers, or to evaluate the workers’ fitness because an obligation comes with a contractual right. Construction is difficult enough without the contractor claiming to be relieved of their contractual responsibilities because “the design professional did not tell me what to do” or to continuously check the workers’ competency and fitness for their tasks.
Safety and protection at the site
Many non-standard Division 00 documents interject, or allow interjection of, the design professional or owner into the contractor’s construction safety and protection procedures. While everyone wants a safe project without any property damage, such provisions create ambiguity as to which entity is truly responsible for safety and protection at the jobsite. Widely used standard contracts such as AIA A201 and EJCDC C-700 make safety and protection the sole responsibility of the contractor, which is where the responsibility should reside. Anything else, no matter how well-intentioned, has the potential to diminish the contractor’s responsibilities for ensuring construction site safety and protection, and increases the risk of the entities with the right to interpose themselves into the contactor’s onsite safety and protection practices.
Ordering work stoppage
Many non-standard construction contracts authorize or require the design professional to either stop or suspend construction work for various reasons, such as safety and protection concerns or when work is not proceeding in accordance with contract documents. However, an order to stop the work also means the design professional may be participating in a three-way mediation session to resolve the contractor’s associated delay claim because this is tantamount to opening the owner’s checkbook. Therefore, an engineer or architect should never have authority, or be obligated to, to stop the work of an owner-hired contractor. Standard contracts such as EJCDC C-700 and AIA A201 allocate such rights only to the owner.
What comprises contract documents?
Most of the non-standard construction contracts reviewed by this writer include multiple, and often, conflicting provisions concerning contract documents. This has significant potential to result in unintended interpretations of what the contract does and does not require, in the event of a claim or dispute. The contract should indicate what constitutes the contract documents at only one location—optimally, in the owner-contractor agreement. The listing and enumeration of the contract documents should be clear, complete, concise, and correct.
When required to use the owner’s non-standard Division 00 documents, it is wise for the design professional to perform a risk-management review with the goals of:
- identifying the unusual risks;
- educating the owner on such risks and providing appropriate mitigation measures;
- advising the owner to consult with the owner’s legal counsel; and
- obtaining the owner’s approval to make appropriate, risk-mitigating revisions to the project’s construction documents.
In this writer’s experience, such reviews, when performed by experienced, senior staff familiar with contractual issues, typically require 20 to 30 hours or more, as well as time for meeting with the owner to discuss findings and recommended changes and for making authorized revisions to the project’s construction documents.
It is pertinent to remember construction is a risk-filled business, so it is best to avoid going into construction stage with significant risks handicapping the owner and design professional, who should work together to determine the optimal, cost-effective risk allocations that best serve the project and the participants’ long-term interests. Each risk should be allocated to the party best-able to control and manage it.
When the owner requires the design professional to stitch together a set of construction documents from their own, unique Division 00 and the design professional’s own specifications—which are probably drafted to coordinate with either AIA or EJCDC standard contracts—significant challenges are likely. By heeding the recommendations set forth in this article, owners and design professionals can reap several benefits, including producing well-coordinated construction documents within budget, and with lower risk to the owner and design professional (opinions expressed in this article are the writer’s alone and should not be attributed to any other individual or entity).
Kevin O’Beirne, PE, FCSI, CCS, CCCA, is the national manager of engineering specifications at HDR, a global engineering and architecture firm. He has more than 30 years of experience designing and constructing water and wastewater infrastructure. O’Beirne serves on various CSI national committees and is an ACEC delegate to the Engineers Joint Contract Documents Committee (EJCDC). He can be reached via e-mail at kevin.obeirne@HDRinc.com.