By Erin Johnson, JCJ Insurance
Successful construction projects consist of multiple design firms working towards a common goal. Some projects, your role may be the Prime Consultant, and on other projects you may be the Subconsultant. No matter your role, the success of the project is dependent on all the members of the design team working together in harmony. As the Prime, it is your responsibility to foster a collaborative working environment to ensure the Subconsultant feels like part of the team. As the Subconsultant, you need to support this spirit of collaboration.
Establishing a successful Prime/Subconsultant relationship requires careful planning, selection, clear communication, and thorough contract management. Here are some key considerations that firms can take to increase the chance of a successful design team relationship.
- Design Team Formation
- Contractual Agreement and Responsibilities
- Project Coordination
- Communication and Documentation Protocols
Design Team Formation
For your role as the Prime, you should have a well-defined process for evaluating and selecting your Subconsultants. As Subconsultant, you should also have a process to evaluate both the Prime Consultant and the Owner of the project. Some key points to help with the selection process are listed below:
- Discuss with members of your team about the past experience and performance of Subconsultants that you have worked with. To aid your firm in this evaluation process, we recommend having a standard evaluation form that your team can use when a project is complete.
- Understand the Subconsultant’s working style and corporate culture to ensure it aligns with your firm’s values and practices.
- Evaluate the financial stability and past claims experience of their firm.
- Determine if they have a cohesive team – how long have their employees been there, what is the quality of their work, their technical qualifications?
- Know the key members of their firm, who will be assigned on this project, and their capacity and technical experience for each particular project.
- Check references and consider the Subconsultant’s reputation in the industry.
It is beneficial for everyone when you develop long-term relationships with partners that support a spirit of cooperation and collaboration. While these may be harder to identify, it is also good if you understand the firm’s approach to decision making and problem solving. Are they in line with your firm’s view on ethics and client service? You want to make sure that if there is a problem, they will work with you to resolve any issues.
Contractual Agreement and Responsibilities
All parties involved on the design team should have a written agreement that outlines their roles and responsibilities for the project. Whether we are talking to a group of architects or engineers, Prime Consultants or Subconsultants, our message is the same. We want a fair contract that is reasonable for all parties. We want to allocate the risk to the party best capable of managing it. We believe that a good contract is the cornerstone of a solid risk management program. By clearly and realistically defining the expectations and responsibilities of each party, a good contract can reduce the potential for conflicts and claims. Should a dispute occur, the right contract can facilitate a faster, more cost-efficient resolution. That is why it is so important to draft a comprehensive contract that clearly defines all terms and conditions, including scope of work, payment terms, timelines, deliverables, and responsibilities.
Some keys areas to focus on are:
- Flow down provisions – Flow down, pass through, or incorporated by reference provisions require Subconsultants to be bound to the same obligations as the Prime is to the client. An issue for Subconsultants is that you are typically not involved in the negotiations for the flow down provision. This language can sometimes be ambiguous or even conflicting, so it is crucial to establish a precedence of terms.
- Scope of Services – Your scope of services can be instrumental in determining whether or not you’re responsible for an alleged error or omission. The scope needs to clearly define the roles of each member of the design team. Clearly outline the scope of work and the objectives for the Subconsultant’s role in the project. Ensure both parties have a mutual understanding of the project goals and deliverables.
- Insurance Requirements – There are two items to consider regarding the insurance. First, what is the owner requiring? Second, what is your exposure? The first is pretty clear – the owner requires certain limits, and you must satisfy those limits in order to be in compliance with your contract. The second is more subjective. As the Prime, your exposure includes the actions of your Subconsultants. As the Prime, you are vicariously liable for the services provided by your Subconsultants, aka “inherited risk”. You want to make sure that the Subconsultants have adequate insurance to cover any errors or omissions in their design.
- Limitation of Liability – If your Prime Agreement with the Client does not contain a limitation of liability clause, beware of agreeing to limit your Subconsultant’s liability. Again, you are vicariously liable for the actions of your Subconsultant. You do not want to be in a position where your firm becomes financially responsible for the mistakes of others.
- Dispute Resolution – You need to feel confident that if you are involved in a claim, the entire design team will work as a unit to defend it. That is why it is extremely important to have coordinating dispute resolution requirements. If you are bound to arbitrate with the client and a dispute arises due to the services of your Subconsultant, you cannot force them to participate in the arbitration if you agreed to mediate any disputes with your Subconsultant.
When reviewing a contract – make sure the contract language is clear and concise. If you do not understand it, do not sign it. Courts are expected to enforce the contract as written.
It is very important to have a signed contract before starting work on the project. Contract negotiations are a good indication of the attitude of the parties and should be used as part of your vetting process. If the negotiations are difficult, it is a good sign of how decisions will be made and how problems will be solved throughout the project. You want both parties to have a shared mindset and be able to work together – where there is cooperation and both sides are open to making concessions. If the negotiations are one-sided and unreasonable, you may want to reconsider taking on this project.
Project Coordination
The Prime is ultimately responsible for project coordination. Unfortunately, some firms fail to proactively manage problems that often arise in a Prime/Subconsultant relationship. To avoid some of these problems, Primes should take a disciplined approach to the design team relationship. Early engagement of Subconsultants is one of the best ways to foster project coordination. Regardless of when the design team is assembled, having a well-developed project plan will help with organization. Consider having a project launch meeting to make sure everyone understands the expectations and goals for the project, the schedule requirements, and known conditions. The Prime, who has the relationship with the owner, needs to make sure that the Subconsultants are aware of the owner’s preferences, for example, are they interested in sustainable or resilient design? It is also important to establish procedures to identify problems such as gaps or overlaps in the scope, what to do when there are disagreements about additional services or conditions of payments, and how to respond when there are claims. The project plan should also address regularly scheduled coordination meetings. Most problems on projects are not from technical issues, but rather stem from the coordination of the different design elements. Having a comprehensive project plan, that is in writing and agreed to by the entire design team, will help prevent unnecessary claims and disputes.
Earlier we mentioned having a standard evaluation form to use to evaluate Subconsultants at the end of the project. Questions pertaining to project coordination should be incorporated into this review. For example – Did they adhere to the schedule and deadlines? Did they support a collaborative approach? How was their responsiveness and follow-through during construction? Similarly, Subconsultants should have a process to evaluate how a Prime manages project coordination.
Communication and Documentation Protocols
Communication is key to a successful project. Good communication should be on-going, with consistent feedback and participation from the team. Breakdowns in communication can lead to claims. To avoid common pitfalls, assign a single point of contact for both parties to streamline communication and decision-making. Establish regular communication channels and schedules for updates and progress reports.
Having a written communication plan helps with consistency at your firm. You can establish standard templates to ensure each member of your firm captures important information from your meetings. You want to identify who on your team is ultimately responsible for communication and documentation for each project and make sure that you are promptly sending meeting minutes and responding to other requests, such as RFIs and change orders, in a timely manner. So, what is a timely manner? That should be outlined in your contract.
It is crucial for design professionals to maintain a consistent line of communication with all members of the design team. Whether you are the Prime or the Subconsultant, keeping an open line of communication is important. And documenting these conversations is a key risk management tool. Documentation is essential to project management and the foundation for an effective risk management program. While consistent documentation may be challenging, especially with how busy everyone is, there is great value in being the author of the project record. Documentation should start with your contract and continue throughout all phases of the project through completion.
You should also understand the communication style of your client, or the Prime if you are the Subconsultant. If they like to meet in person or have a call, that is great. Just make sure that you follow up with an email outlining the conversation and decisions made, especially if it is a decision you don’t agree with. This will ensure everyone is on the same page and will preserve the conversation in the project record. When problems occur on a project, don’t wait to address the issues with your Subconsultants. By the time you notice a minor issue, it may indicate a far bigger problem. Typically, the faster you respond to a situation, the more easily it can be resolved. Provide constructive feedback and address any issues promptly to avoid delays and quality issues.
While most of this information is self-explanatory and common sense, a reminder never hurts. The point we want to stress is that if there are problems on a project, don’t go alone. And don’t ignore issues with the hopes they will go away. COMMUNICATE. Talk internally with people at your firm. Get outside advice. If it’s something you’re concerned with, call your insurance broker and talk through it – they may have seen a similar situation and can offer a different perspective. We tell our clients we would rather know about any issues sooner rather than later. Many insurance policies offer pre-claims assistance. A claim is typically defined as a demand for money or services. Pre-claims assistance provides help for circumstances that are not formal claims but could develop into a claim. Pre-claims assistance does not trigger your deductible and is not included in your loss history. Your insurance company has a vested interest in avoiding a claim, so they would prefer to get involved early. Many Professional Liability insurance companies have in-house attorneys or staff that can provide excellent resources and guidance.
Being a member of a design team is an important responsibility. By carefully considering these steps, firms can establish strong, productive, and mutually beneficial relationships. A healthy Prime/Subconsultant relationship will lead to successful projects, increased profitability, fewer disputes, and a more enjoyable project experience.