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Civil Engineers Give Nation’s Infrastructure a D+
Death by Contract: Design Disclaimers
Although there has been some incremental progress toward restoring the nation’s infrastructure, it has not been enough, according to the American Society of Civil Engineers. As in 2013, the United States’ cumulative GPA for infrastructure is once again a D+. The 2017 grades range from a B for Rail to a D- for Transit, illustrating the clear impact of investment—or lack thereof—on the grades. Three categories—Parks, Solid Waste, and Transit—received a decline in grade this year, while seven—Hazardous Waste, Inland Waterways, Levees, Ports, Rail, Schools, and Wastewater—saw slight improvements. Six categories’ grades remain unchanged from 2013— Aviation, Bridges, Dams, Drinking Water, Energy, and Roads. ASCE has published its Infrastructure Report Card, which grades the current state of national infrastructure categories on a scale of A through F, since 1998. Since then, America’s infrastructure has earned persistent D averages, and the failure to close the investment gap with needed maintenance and improvements has continued. Even though the U.S. Congress and some states have recently made efforts to invest more in infrastructure, these efforts do not come close to what ASCE estimates is a $2 trillion need. ASCE estimates that to raise the overall infrastructure grade and maintain the country’s global competitiveness, Congress and the states must invest an additional $206 billion each year to prevent the economic consequences to families, business, and the economy.
A design disclaimer can come in many forms, but essentially, it is a statement in a contract that means “this part of the design might not be good enough.” When a contract or a subcontract contains a design disclaimer, it shifts the design risk to the contractor or subcontractor, whether or not a design-build warranty was supposed to be part of the deal. From a financial standpoint, a design disclaimer amounts to the same thing as a design-build warranty, because both make the contractor or subcontractor responsible for increased costs should the design prove inadequate. For example, a Washington, D.C.-area contractor learned an expensive lesson about contractual design disclaimers when it spent twice its bid amount to complete a subway station. After an inconsistency between the final bid package and the resulting requirements, the winning contractor discovered that the design was inadequate and sued to recover for the resulting extra costs. The owner disclaimed its warranty of the design in the contract, effectively putting the contractor in the position of warranting the design. However, a court decision found that the contactor “had a duty to inquire about the true meaning of the contract.” The court also found that: “By failing to inquire, the contractor assumed the risk that the owner would offer reasonable but conflicting interpretation.” This is an example of a design-bid-build, lump-sum contractor, not involved with the design, assuming responsibility for cost overruns caused by design changes.
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To make its case, the contractor might have pointed to industry best practices described in the Guidelines for a Successful Construction Project, developed and published by ASA, the Associated General Contractors of America and the Associated Specialty Contractors. The “Guideline on Design Responsibility” provides: “Contractors and subcontractors must not be held responsible for the adequacy of the performance or design criteria indicated by the contract documents.” Perhaps the best way to guard against design disclaimers is with a contract addendum that incorporates your bid proposal. For example, the ASA Subcontract Addendum provides: 2. Scope of Work. Subcontractor’s scope of work includes only the following: [Insert your scope and pricing information below. Many subcontractors may wish to substitute a different format.] WORK CATEGORY(IES) AND SPECIFICATIONS TO WHICH THIS ADDENDUM APPLIES: EXCLUDING, HOWEVER:
Subcontractor’s obligation to examine documents, the project site, and materials and work furnished by others is limited to notification of Customer of any defects or deficiencies that a person in the trade of Subcontractor would discover by reasonable visual inspection. No testing beyond reasonable visual inspection shall be required. Subcontractor is entitled to rely on the accuracy and completeness of plans, specifications and reports of site conditions provided to Subcontractor.
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