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Design-Builder Awarded Delay Damages for Improper Government Interference in Design Process

Design-build contracts, in which the contractor is responsible for both design and construction of a project, are abundant in today’s construction industry, including on federal government projects.  For owners, these contracts offer the possibility of a streamlined project with a single point of accountability, while for contractors, design-build schemes lend greater control and flexibility throughout the design and construction phases.  In a traditional design-bid-build model, the owner is often heavily involved in reviewing the builder’s construction processes and shop drawings to ensure that they comply with the designer’s plans.  In design-build contracts, the owner’s role is far more limited, and its review of the contractor’s designs is restricted to a determination of whether the contractor’s design documents meet the technical specifications of the design-build contract, thereby giving the contractor flexibility in its approach to the design and build processes.  On design-build projects where the parties to the project respect these lines of responsibility, the design-build delivery system can operate to the benefit of all, but on projects where owners become over-involved in overseeing and issuing commentary on the design-builder’s design, the process can suffer, causing headaches – including changes and substantial delays – for the entire project. 

In RBC Construction Corp., a recent case before the Armed Service Board of Contract Appeals, the Government owner required additional information from the design-build contractor concerning the proposed design for an underground fire cistern as part of the design review process.  The contract in this case allowed the contractor to proceed with phases of the construction work only upon the Government’s approval of the initial “fast track” design submittals for the particular phase.  This approval mechanism became problematic when the Government’s design reviewer expressed concern about the underground fire cistern and requested certain size calculations related to the underground installation design before giving approval for the design.  Although the Board noted that the Government reviewer’s concern was reasonable given the risks posed with installing an underground cistern, it also found that the contract did not require the contractor to submit the fire cistern size calculations as part of the initial fast track set of submissions, but rather as part of a later “interim design package.”  Thus, the Board held that the Government’s insistence on receiving the size calculations early interfered with the contractor’s ability to proceed with performance as contemplated by the contract and such interference constituted a constructive change entitling the design-build contractor to delay damages for work not required by the contract.

The RBC Construction case sets helpful precedent for design-build contractors who find themselves subject to undue owner oversight resulting in delays.  Although the Board in this case ultimately found that some of the contractor’s claimed delays were due to its own actions resulting in concurrent delays, the holding that undue Government review and oversight is grounds for a constructive change provides contractors with an important remedy.

Our firm continues to stay up-to-date on developments and current issues in the construction and government contracts fields.  We are available to assess and counsel on issues facing your project.  If you have any questions, please contact the authors:

Brian J. Vella
Email: bvella@smithpachter.com

Armani Vadiee
Email: avadiee@smithpachter.com

Julia S. Shagovac
Email: jshagovac@smithpachter.com

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