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ConstructionPro Week, Volume: Construction Advisor Today - Issue: 131 - 10/28/2011

Should Design Professionals Be Liable When Construction Cost Exceeds Budget?

Project owners must work within a budget based on available funding. The project design must accommodate that budget. Yet construction cost cannot be determined until binding responsive bids are received from responsible bidders. And those bid prices are the product of ever-changing market conditions. When the low bid exceeds the available funding, what is the responsibility of the design professional?

 

The federal contract documents include a clause entitled “Design within Funding Limitations.” It states that if the low bid exceeds the stipulated funding limitation, the architect must perform redesign with no additional compensation. The clause is silent regarding any further responsibilities or liabilities of the architect. But it was recently ruled that the clause did not necessarily limit the government’s remedy against the architect to free redesign. The government could pursue a claim for the excess construction cost.

It should be noted that not all contract documents leave the design professional with this liability exposure. Not surprisingly, the American Institute of Architects agreement does a better job protecting the architect in this situation. The AIA document expressly states that redesign at no additional charge is the limit of the architect’s responsibility. In the federal arena, however, this is an open question.

 

What do you think? Should design professionals assume some of the financial risk of construction cost which exceeds a stipulated budget? Or is that inconsistent with the traditional role of the design consultant and a risk which is disproportionate to the compensation the designer receives? I welcome your comments.

 

Featured in This Week’s Construction Claims Advisor:

  • Court Calculates Overhead and Profit on Force Account Change Order Work
  • Owner Liable to Sub for Interference with Subcontract
  • Small Business Administration Applied Wrong Subcontracting Limitation

 

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