Design-Build Agreements: Tips to Help Protect Your Design Business

Before you commit to your next design-build project with a contractor, taking some time to evaluate your design-build agreements can help protect your design firm from the unexpected. Having a teaming agreement during the bid phase and a separate professional services agreement, negotiated at the same time, can help manage risks throughout the project.

“The prudent design professional should enter into a teaming agreement to manage the risk related to bid phase services,” according to Jonathan C. Shoemaker, an attorney with Lee/Shoemaker PLLC. “A separate professional services agreement, negotiated concurrently, can help manage risk related to design and construction administration services.”

4 Provisions to Consider for a Teaming Agreement

The teaming agreement addresses risks related to bid phase services on a design-build project. Here are four key provisions to consider:

• Obligation to Award Professional Services Agreement – This provision recognizes that there is little to no compensation for the design professional associated with their services during the bid phase. To account for the lack of compensation for the work effort during the bid phase, this provision provides the security that, if the bid is accepted, the contractor will award the design work to the firm that provided the design services during the bid phase.
• Ownership of Design Developments – If a design firm retains ownership of the designs created for the bid phase, the design professional has leverage to ensure that the design-build contractor agrees to take on a fair amount of risk in the professional services agreement.
• Waiver of Liability for Unsuccessful Proposals – An unsuccessful bid happens for a multitude of reasons. This clause removes the potential for recriminations after the fact. This means that if the bid is unsuccessful, it prohibits the contractor from blaming the design firm and filing a lawsuit.
• Limitation of Liability – Many claims associated with design-build projects stem from allegations of inaccurate or incomplete design information delivered by the design professional during the bid process. Most contractors know that the design professional’s work during the bid phase depends on a collaborative approach among several participants. It is fair and reasonable to limit liability. This helps protect your design firm from claims that you provided deficient designs. Since you rely on information and direction from the contractor and possibly others to create your plans, the liability should be limited and shared.

4 Provisions to Consider for a Professional Services Agreement

When entering into a professional services agreement for a design-build project, consider the following four provisions:

• Standard of Care – Include a traditional, insurable “standard of care” provision that overrides other contract provisions. This provision states that professionals should practice at the care and skill ordinarily used by members of the profession, who are practicing under similar conditions.
• Limitation of Liability – In a design-build project, risk comes in many forms that are often beyond the control of the design professional. To that end, include a limitation of liability provision in the contract that puts a cap on the amount of potential damages to which your design firm can be exposed.
• No Damages for Delay – The design-build contractor’s schedule incorporates design and construction-related tasks. The time associated with many of those tasks extends beyond the design professional’s control. On that basis, consider including a “no damages for delay” provision, in which the contractor agrees that an extension of time may be necessary as a result of delays in the progress of the work.
• Design Contingency – If a sudden design request emerges mid-project, a design contingency can help cover any difference from the original budget. The amount and usage can vary by project.

While this is not a comprehensive list of provisions that should be included in design-build agreements, it is a good start for design professionals contracting to provide services on a design-build project.

Learn more about our Design Professional Liability products and services and how Travelers can help protect your business, or talk to your independent agent or broker.