Wednesday, September 28, 2011

Proprietary Meetings; To Meet or Not to Meet, That is the Question

Whether 'tis nobler in the mind to suffer the slings and arrows . . . Oh, wait.  Wrong blog. 

I spent the morning at the DBIA Northwest Region Owner's Forum, sponsored by Mortenson Construction (Thanks, Jim.)  Craig Unger and I spoke on the topic of proprietary meetings, those meetings between owners and design-build proposers that allow the parties to start the communication process, clarify the owner's program and exchange information prior to the submission of the proposal.  Even though proprietary meetings are a DBIA best practice, they are often misunderstood and met with resistance from owners and owner's attorneys.  Craig spoke about the mechanics of the proprietary meeting, while I talked about the legal issues. 

Craig had participated in many procurements and suggested two sets of proprietary meetings, one during the RFQ process and then again during the RFP process.   His suggestion is to mark the first RFP as a "draft" to solicit suggestions from the finalists, then issue a final RFP incorporating any changes suggested by the proposers.  This process provides the owner the opportunity to "test drive" it's program for feasibility and to flesh out any items that are unnecessarily driving the schedule or cost.

Proprietary meetings can be an excellent way for owners to clarify their program and communicate with proposers, but public owners need to be careful not to run afoul of their authorizing legislation.  The basic tenets of fairness still apply in alternative procurement.   Owners cannot give an unfair advantage to one bidder over the others.  Owners can and should solicit and evaluate innovations proposed by the finalists, but if a solution is not responsive to the RFP, the case law suggests that the owner should issue an addenda that addresses the issue or reject the proposal. 

Attached is a link to my powerpoint presentation for the Owner's Forum.  There is more to come on this topic in future posts!

Monday, September 19, 2011

Where's the Proof?

When teaching the DBIA Contracts and Risk Management class, I am often asked how one goes about proving professional negligence claims.  The first thing that I explain is that being right and proving that you are right in court are two completely different things.  The rules of evidence in court are arcane and often defy ordinary logic.  Often, you have to go completely against your initial, gut reaction.
For example, in a 2010 case a laundry room caught on fire because the halogen lights above the counters ignited the sheets that were left on the granite counter space, which incidentally was the only place available in the room for the laundry.  Dockhorn v. Kitchens v. Klewenco, 1020 WL 1196425 (2010).  Even though the sheets were not touching the lights, they apparently were within 6 inches of the 12 inches available for stacking laundry on the counter.  
As a mom of 3 tweens with a particularly busy laundry room, I would rule that the designer was not only negligent in specifying lights that prohibited the use of the only flat space in the laundry room, the designer should be publically berated for the mere act of making a mom’s life more difficult.  I find it particularly cruel to have the only flat space available in the room inaccessible and even more diabolical because the space is nicely lighted.  Any mom on the jury would hang the designer out to dry.  However, the plaintiff was trying to prove professional negligence, not court ruled that to find professional negligence, the plaintiff had to introduce expert testimony.  Despite the fact that the design defied all logic and decency, the court noted that the “common knowledge” exception to the requirement to produce an expert was not applicable. 
“The Court holds that the common knowledge exception is not applicable here.  Despite the ordinary experience of jurors with kitchens and home construction projects, the facts in this case involve the standard of care for a professional kitchen designer and a professional contractor.  Here, the standard of care of a kitchen designer in selecting light fixtures for a kitchen and a contractor who installs those fixtures is outside the ordinary experience and common knowledge of the jury and beyond the capability of a lay person to decide.  Instead, to establish the standard of care for a kitchen designer and a contractor, plaintiff must present testimony of someone who is competent to testify as to whether defendants’ respective actions conformed to the standard of care for their respective professions.”
So, the answer to the question of how one proves professional negligence is that a party must produce expert testimony.  Thus, the old adage that legal proceedings are simply a means to make litigation more expensive gets more support. 

Wednesday, September 14, 2011

How Does the Spearin Doctrine Apply in Design-Build?

Spearin v. US was decided by the Supreme Court in 1918, an ancient case by legal precedent standards.  The case stands for the proposition that the owner warrants the sufficiency of the plans and specifications provided to the contractor.  In the many years since Spearin was decided, it has been cited 1929 times.  Through this case law, the courts have essentially created a “strict liability” standard for owners, which means that despite the fact that owners typically neither design nor construct the building, the owner becomes responsible to the contractor for problems associated with the design.  Of course, the owner can look to the designer for responsibility for these problems, but the designer is only responsible for problems that rise to the level of negligence, and practically, the owner can only expect that the designer will contribute its terribly expensive and woefully under insured professional liability policy.  This situation is what DBIA has termed the “liability gap,” and the “elimination” of the liability gap is one of the reasons touted by many for the use of design-build. 
However, Spearin is still alive and kicking in the design-build world.  In fact, in the decision denying the summary judgment in the K-Con case cited above (the denial of the summary judgment is K-Con Build. Systems, Inc., v. US, 97 Fed. Cl. 41 (2011)), the court noted that even in design-build projects, owners are responsible for any design or prescriptive specifications provided to the design-builder.   There is no question that “[w]hen the Government provides a contractor with design specifications, such that the contractor is bound by contract to build according to the specifications,” a contractor that fully complies with the specifications is “not responsible for the consequences of defects in the specified design.” White v. Edsall Constr. Co., 296 F.3d 1081, 1084–85 (Fed.Cir.2002) (citing United States v. Spearin, 248 U.S. 132, 136, 39 S.Ct. 59, 63 L.Ed. 166 (1918))” 
That’s serious longevity for such an old case.    Owners need to be careful, then of the use of prescriptive specifications.  Clearly, it is a fine line that owners have to balance.  On the one hand, if an owner knows that it will only accept one solution, or if it has regulatory compliance issues or other limitations on its design, then a prescriptive specification is necessary.  In fact, it is the rare design-build project that has no prescriptive requirements.  However, owners should try when possible to convert what it perceives as a prescriptive need to a performance requirement.  I often joke in my classes that owners need to wrest their cold dead hands off the control of the design of the project, but the benefits have a huge impact on the project.  First, the owner shifts the risk of compliance to the design-builder.  Second, the owner allows the design-builder room to innovate and create a cost effective solution. 
Owners should focus on end results, rather than control.  After all, it is the end result that matters, right?

Tuesday, September 13, 2011

Study Shows Design-Build Market Analysis

A recent study by RS Means reviewed information on construction projects between 2005 and 2010.  The study encompasses 80-90 percent of the construction performed in the United States, including approximately 95% of public work and 75% of private work.  According to the study, the design-build method of delivery constitutes approximately 40.9% of the current non-residential construction market.  Design-bid-build is 52.9%  and CM-at-risk is 6.3%.  One stunning statistic accumulated by the study was that for military construction projects over $10 million, design-build was used in approximately 80% of the projects.  For all projects over $10 million in 2010, just over half the projects were design-build. 
The study clearly shows the rise of the use of design-build, particularly in the public sector.   The challenge is to try to make sure that the projects are being performed in a way that utilizes best practices. 

Saturday, September 3, 2011

September DBIA NW Region Events

The DBIA NW Region will have several events this month:

September 7, 2011, Breakfast Meeting:  "Public Owner's Project Pipeline", which will feature Washington public owners discussing their upcoming projects. 

September 21, 2011, 5-7 pm:  Annual Meeting.  We will be discussing the state of the Region and electing the officers for the 2012-2014 term.

September 26, 2011:  Post Award Design-Build.  This class is a terrific way to explore what happens after you get the contract and will be taught by the amazing Craig Unger and Greg Gidez.  We are incredibly lucky to get these two terrific instructors for this event.

September 27, 2011:  Owner's Forum.  This event is focused on owners.  Craig Unger is our keynote speaker and will be discussing proprietary meetings.  I will follow with the legal issues surrounding proprietary meeting.  We will also have some terrific Washington owners. 

All of these events are better described on the DBIA NW website:  Hope to see you there!