As owners, constructors, and architects, we have legal, financial and other professional interests in the success of our projects. This applies regardless of the project size and complexity-from Indefinite Quantity/Indefinite Delivery (IDIQ) contracts for on-call consulting services to large, long-duration capital works-and project delivery options, whether competitively bid as Design-Bid-Build (DBB), construction manager at risk (CMAR) or Design-Build (DB). Whether the architect, owner and constructor are bound directly through individual prime contracts, or the constructor and architect have a direct prime-subcontract instrument, such as in DB, we are “in it together for better or for worse.” These become business relationships, with advantages and constraints, opportunities and risks, and financial, legal, and ethical considerations.  In this article, we will examine some of the opportunities and challenges for architects to consider when entering into design/build agreements.

Factors which influence a project’s success or hinder outcomes apply across all delivery methods The characteristics of high-performing project teams and well-run projects as compared to the worst performing projects often are informed by how the following are structured:

• • Project governance: How the team is structured and managed from executive decision-makers to support staff, and across all of the parties vertically and horizontally is critically linked to root causes of successful projects.
  • Organizational culture: The culture of the participant organizations including owner, the design team and constructor, should be compatible and experienced in the proposed type of project delivery.
  • Project expectations: The project definition, including space requirements and physical parameters, project financials, and required schedule must be aligned and likely achievable.^[1]

There are a number of legal, technical, and financial opportunities and risks for architects in DB that also can be aided by best practices. These include:

1. Governance: Project team structure and management of the DB Project
   • Opportunities for Architects: Principal or shared role with co-managing authority in project reviews and approvals side-by-side with owner and constructor.
   • Risks for Architects: Potential of contractual and/or structural subordinate role without authority for governance decision-making.

   Situation:
   Preferably at the team formation stage and prior to the formal pursuit of the project (don’t forget your teaming agreement!), review the proposed architectural services and DB agreements, also requesting information such as a Project Management Plan (PMP), organization charts, etc. Confirm whether your firm will be a subcontractor to the construction contractor or a direct consultant to a third-party DB entity (DBE). Review all documents for gaps that need to be closed, and look for requirements that are inconsistent with the firm’s operating approach and/or professional liability insurance policy. Be explicit about terms which are non-negotiable. If the terms cannot be reconciled through the contract, then perhaps it is a procurement with which you and your firm should not proceed to pursue. Understand that your relationships and rights are significantly different as a subcontractor versus a direct-to-owner consultant.

2. Management: How project management is structured, by whom, and level of skill.
   • Opportunities for Architects: Advocacy and support by skilled owner-manager or third-party project manager, with early and cooperative involvement by all principals
   • Risks for Architects: Lack of support in subordinate structure without adequate representation by project manager or early project input

   Situation:
   You have reviewed the PMP, organizational chart, and proposed schedule, and see a gap between the lead project manager and executives, lacking clarity on review and approval flows.

   Questions should be raised prior to contract execution about how reviews, decisions, and the approval process will work, to be discussed and resolved at both firms’ executive level. Prepare the discussion with issue points, suggested flow charts, suggested solutions, and schedule tasks to focus on the risks and outcomes, and not on individuals’ subjective preferences. A risk register can be prepared to illustrate how approvals and schedule impact outcomes. Follow up with a work session or partnering exercise with key staff to build a positive result.

3. Culture: Owner, architect, and constructor organization culture

• • Opportunities for Architects: Positive and trusting partnership culture among owner, architect, engineer, and constructor, experienced in DB, with strong project mission and goals
  • Risks for Architects: Lack of experience in DB delivery within any entity organization, adversarial attitude about design management, architect in a subordinate role

  Situation:
  An architect is asked to partner by a DB firm on a project type and size with which both firms have expertise and experience. The architect has not worked with the constructor before nor does the architect have DB experience.  The client has successful experience with the constructor using CMAR and traditional DBB, and wants to use this project as a demonstration to try DB. You are concerned about your lack of experience with the client and constructor, and the client’s lack of DB experience.

  It’s best to discuss and determine the DB contractual, administrative, and financial risks before investing in the project pursuit. Ask, “Why does the client want to use DB, and is this project the right kind of project for that delivery?” “Does each party have the right staff needed to create a successful DB project?” “How do we fit in?” It may be possible to have a brief pre-partnering session with the client and constructor to discuss team structure, team member experience and background, risk management, and culture, all of which will factor in a successful project outcome.

4. Project Goals, Expectations, and Criteria: Program, budget, and schedule
   • Opportunities for Architects: Well defined project design criteria or scope used by the architect to develop usable design functional and space requirements
   • Risks for Architects: Poorly defined project design criteria and scope of architectural and engineering services in contract basis of design terms

   Situation:
   As the architect decides whether to partner with a DBE firm and pursue a project, it is important to determine how well the project’s program criteria, budget, and schedule have been developed, and whether all three are roughly in alignment. Often, an owner has a general idea of their needs but more detailed information has not been developed. The budget may be a “wish list” rather than a reality, and the schedule may be a pure guess or align with strategic or even personal expectations of a project participant such as an executive or a donor. Any of these factors can be a significant problem for the project team as they can create delays while the owner first begins to develop and document their project program, or create unreasonable expectations or impossible goals if there is a substantial disconnect between the program, budget, and schedule, the three legs of the project development stool.

   Progressive DB provides the opportunity for the architect to be present at the start of the project. As the project development “progresses,” the project and partner team members assist the owner to develop a complete, accurate, and detailed program or criteria document. At the same time, the DB contractor can provide conceptual cost estimates and rough overall schedule. If there is a lack of alignment in any of these three legs, it is best to resolve and align them as early as possible.

5. Design philosophy: Design quality expectations and assumptions, discipline scope, and approach to design integration
   • Opportunities for Architects: Opportunity for the architect to participate in developing the design delivery approach as defined in the project’s initial proposal and further developed during the contract formation and pre-design meetings, including integration of design disciplines from pre-design through DB discipline/trades integration, production and construction
   • Risks for Architects: Project design and delivery approach may be weak, broad or without definition of design in contract statement of work.

   Situation:
   Whether during the proposal process or project development, an architect sometimes approaches the project with a “this is how we’ve always done it,” “this is the way we prefer to do it,” or simply, “this is our design style preference” without exploring or asking the owner’s preferences or needs, or the culture of the owner organization to support this structural approach to project development and delivery. The owner may not have much project development experience, a strong opinion, or may not communicated their preference during pre-proposal phase.

   One of the earliest discussions in the project development should be general approach, style, and preferences. If the owner has established these or can provide them, architects should first determine if what the owner requires can be accommodated with the architect’s preference, or if the architect is willing to adjust to the owner’s situation. If the architect’s style and preference is significantly different from the owner and there’s little ability to be flexible, this likely will lead to tensions or failures throughout project development and delivery. If there is no strong preference, the architect can lead this development during the programming phase.

6. Procurement and contract approach: Role of the architect and engineering pre-design, “bridging” and scoping;
   • Opportunities for Architects: Qualifications Based Selection (QBS) or Progressive DB, with clearly defined architect/engineer roles, statement of work, responsibility and burden in project criteria or definition document, terms for scope changes in contract terms
   • Risks for Architects: Inadequate qualifications basis of selection; poorly defined or broad architect statement of work from pre-design or criteria definition through design phases with associated lack of clarity for scope changes in contract terms

   Situation:
   Procurement and contracts for DB comes in many flavors, from two-step selection (qualifications, then followed by an early design and cost proposal), one-step (qualifications only), bridging (owner provided partial design then adopted and completed by the DB team), to the more currently popular and successful variation, progressive DB (qualification based selection, with DB team then engaging with the owner/user to program and develop the early design, then a cost offer.)

   Two-step selection often requires a substantial and often unpaid/under-paid effort by the architect to produce a design far enough along to allow the constructor to provide a cost offer. It offers little opportunity for engagement with the owner and stakeholders in the design. Progressive DB selection, a welcome evolution from the one-step selection, creates a collaborative effort, early engagement and cooperation between the DB team and owner, resulting in greater risk reduction for all parties, and a greater chance for project success and stakeholder satisfaction.

   Last, review the type and timing of the pricing offer to the owner.  Is the price a part of the selection criteria? Will this be a fixed price, guaranteed maximum price (GMP), or cost-plus? When is it due-up front, based on an outline of a design? At the end of design development? At the time the constructor feels that the work is well enough defined to offer a fair and accurate price? The earlier and more fixed the price offer is, the higher risk for the DB team.

7. Contract key structure and terms: Fundamental prime/sub-contractor structure; open or closed book budget and cost accounting; design and construction phases contingency amounts, administration; standard of care, production phases, architect as partner or subcontractor
   • Opportunities for Architects: Architect can have significant input in agreement negotiation, contract terms and administration, including open-book cost transparency, dedicated or sharing of contingencies, and change responsibility structure
   • Risks for Architects: Lack of transparency, i.e. closed book budgeting and cost accounting without adequate design and construction contingencies, lack of sharing between the constructor and architect; inadequate experience/skill of the architect team in negotiation and administration of agreements

   Situation:
   Your firm wants to pursue a DB project with a lead DB firm with which you haven’t yet worked. You have worked successfully with the AIA DB agreements. As part of the procurement process, the owner provides a draft AIA agreement for comments that includes modifications that are unacceptable to you and your legal counsel, and will require every submitting firm to sign an acceptance of the agreement without exceptions.

   The architect now must engage with the lead DB firm about whether they are willing to adjust or add terms to the subcontractor agreement with your firm, and whether those will pass through upward to the owner’s agreement. Examples of these terms may include allocation and management of contingencies, payment for scope changes, allocation of or unanticipated costs and risks, application of the standard of care, retention or withholding of architect payments, and fee adjustment for project delays.  If the terms are irrevocably unacceptable, the firm should have a process to evaluate withdrawing from the pursuit based on the risks and opportunities of the project.

Conclusion

Architects need familiarity and knowledge with the contracts they are offered. This includes negotiation of an appropriate fee and adequate time to perform the services, as well as agreeing upon an appropriate standard of care. The architect should confirm that there will be adequate skill and experience of staff on all teams to deliver a successful, quality project.

As noted above and in the referenced Pankow study, the architect, owner, and constructor should incorporate three “key performance indicators” for a successful project:

• full QBS of the consultants and DBE (constructor) based on a fully developed project criteria document;
• cost transparency in the contract terms, project governance structure, and organizational/management plan; and
• early participation in contract negotiation by all principal parties-including the architect-to provide for defined, commensurate, fair, representative contract terms with full financial and legal transparency, in order to fairly share rewards and risks.