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Stopping and Restarting Projects– Not Business as Usual RLI Design Professionals Design Professionals Learning Event DPLE 224 April 20, 2016
Stopping and Restarting Projects–
Not Business as Usual
RLI Design Professionals
Design Professionals Learning Event
DPLE 224
April 20, 2016
With Special Thanks To…
David J. Hatem
of Donovan Hatem LLP
Presented Today By: Barbara Sable and Abbey Brown
RLI Design Professionals is a Registered Provider with
The American Institute of Architects Continuing Education Systems.
Credit earned on completion of this program will be reported to
CES Records for AIA members. Certificates of Completion
for non-AIA members are available on request.
This program is registered with the AIA/CES for continuing professional
education. As such, it does not include content that may be deemed or
construed to be an approval or endorsement by the AIA of any material of
construction or any method or manner of handling, using, distributing, or
dealing in any material or product. Questions related to
specific materials, methods, and services will be addressed
at the conclusion of this presentation.
Copyright Materials
This presentation is protected by US and International Copyright laws.
Reproduction, distribution, display and use of the presentation
without written permission of the speaker is prohibited.
© RLI Design Professionals
Course Description
The financial crisis of the late 2000s affected
the A/E sector by causing many projects to be
suspended or terminated due to lack of financing.
This presentation is going to discuss the common
issues design professionals face when a project is
suspended, terminated, and/or restarted.
Learning Objectives
Participants Will:
1. Learn to identify financial and contractual risks on projects.
2. Gain knowledge about industry and economic trends that
impact project execution.
3. Better understand the risks associated with restarting a
suspended project.
4. Develop the skills necessary to use contractual terms to protect
yourself in these situations.
Past Industry Trends
Funding
difficulties
Risks of signing
bad contracts
Negligence-based
counterclaims
against DPs who
pursue fee claims
Current Industry Trends
Continued
issues with
accessing
funding
New
organizational
players
Renewed
need for risk
management
Biggest
concerns:
impacts on
the bottom
line
Preliminary Steps
1.Look into potential client’s
financials.
2.Make decisions about what
will happen if the project is
suspended or terminated
before suspension or
termination.
3.Vet your subconsultants.
Reminder
Proceeding to provide services
without a contract only breeds uncertainty.
General Issues with Suspension
- Fees
- IP rights
- Changes in Laws, Codes, & Regulations
- Risk Exposure
The Likely Scenarios
Understand which case your project falls under in order to manage risks:
Case #1:
Same Owner, Same Design Firms
Case #2:
New Owner,Same Design Firms
Case #3:
Same or New Owner, You Are Terminated
Design Firm
Case #4:
Same or New Owner, You Are New Design
Firm
Case #1
Same Owner,
Same Design Firms
Make-It
Engineering Co.
& Develop-It Inc.SUSPENSION
Make-It
Engineering Co.
& Develop-It Inc.
Case #1
Same Owner, Same Design Firms:
Update Original Contract
OR Draft New Agreement
Case #1 Task List
Collect payment for past services before negotiating new terms
Update contract OR draft new agreement
Verify compliance with regulations & codes
Review previous studies and reports
Evaluate design team
Case #2
New Owner,
Same Design Firms
Make-It
Engineering Co.
& Develop-It Inc. SUSPENSION
Make-It
Engineering Co
& Build More Inc.
Case #2 Task List
Draft new agreement
Confirm copyright ownership
Confirm design team
Case #3
Same or New Owner,
You are Terminated Design Firm
Make-It
Engineering Co.
& Develop-It Inc.SUSPENSION
Smith &
Associates LLP &
Develop-It Inc.
Case #3
Same or New Owner, You Are TERMINATED Design Firm:
Preliminary Steps:
1. Confirm status as terminated
2. Notify affected parties of departure
Major Concerns
� Getting paid
� Release and/or
indemnification
� Use of documents
Releases & Indemnifications
“In consideration of the mutual covenants,
conditions, and agreements herein
contained and other good and valuable
consideration, the receipt and sufficiency of
which are hereby acknowledged, the Owner agrees to waive any and all claims against the Design Professional and to defend, indemnify and hold the Design Professional harmless from and against
any and all claims, losses, liabilities and
damages arising out of or resulting from the use, reuse or alteration of the Design Professional’s Documents by the Owner or any other entity or individual. The
Owner will remove markings on the
Documents that would be sufficient to
identify the Design Professional as the
author of the Documents.”
PUT THIS: IN THIS:
Protecting Your Designs
To Include in Your INITIAL Contract with Owner:
1. Ownership Clause
2. Warranty Disclaimer Clause
Ownership Clause
“To the fullest extent permitted by law,
the Documents prepared by
the Design Professional, regardless of form,
shall remain the property of the Design Professional.
The Design Professional shall retain all
common law, statutory and other reserved rights,
including, without limitation, the copyrights thereto.”
License to Use
“Upon payment in full for services rendered hereunder, the Design Professional grants to Owner
a nonexclusive license to use Design Professional’s Instruments of Service
solely and exclusively for purposes of constructing, using, maintaining, altering and adding to the Project.
The license granted under this section permits the Owner to authorize the Contractor, Subcontractors,
Sub-subcontractors, and material or equipment suppliers, as well as the Owner’s consultants and separate contractors, to reproduce applicable portions of the Instruments of Service
solely and exclusively for use in performing services or construction for the Project.”
$ $ $ $ $ $ $ $
$ $ $ $ $ $ $ $
Warranty Disclaimer Clause
“The Parties agree that at this time, the Design Professional does not represent
that the Documents are complete, or that they are consistent with
the current conditions that may affect the Project, and makes no representations
or warranties about the fitness of the Documents for any particular purpose.”
Case #3 Task List
Collect payment
Secure release/indemnification
Resolve ownership of documents
Include warranty disclaimer
Case #4
Same or New Owner,
You are New Design Firm
Make-It
Engineering Co.
& Develop-It
Inc.
The Design
Guys, LLC &
Develop-It Inc. SUSPENSION
Case #4
Same or New Owner, You Are NEW Design Firm:
1. Responsibility for Services
Completed Before You Were Hired.
2. Ownership and Use of Documents.
Responsibility for Prior Services
“In consideration of the mutual covenants, conditions,
and agreements herein contained
and other good and valuable consideration,
the receipt and sufficiency of which are
hereby acknowledged, the Owner agrees to waive any and all
claims against the Design Professional and to defend, indemnify
and hold the Design Professional harmless
from and against any and all claims, losses, liabilities and
damages arising out of or resulting from the services performed
by the [prior Design Professional].”
Ownership & Use of Documents
“In consideration of the mutual covenants, conditions, and
agreements herein contained
and other good and valuable consideration,
the receipt and sufficiency of which are
hereby acknowledged, the Owner agrees that
the Owner has permission from [prior] that
Owner can forward plans and specifications and any and all
Instruments of Services created by [prior]
to the Design Professional for the
Design Professional’s use in the preparation of
the Design Professional’s plans and specifications.”
Case #4 Task List
Confirm responsibility for prior design
Confirm copyright ownership
Confirm right to use prior design documents
AIA Contracts
AIA Contracts – B 101
Article 7 – Copyrights and Licenses
7.1 The Architect and the Owner warrant that in transmitting
Instruments of Service, or any other information,
the transmitting party is the copyright owner of such
information or has permission from the copyright owner to
transmit such information for its use on the Project…
AIA Contracts – B 101
Article 9 – Termination or Suspension
9.2 If the Owner suspends the Project, the Architect shall be
compensated for services performed prior to notice of
such suspension. When the Project is resumed, Architect
shall be compensated for expenses incurred in the interruption
and resumption of the Architect’s services. The Architect’s fees
for the remaining services and the time schedules shall be
equitably adjusted.
9.3 If the Owner suspends the Project for more than ninety (90)
cumulative days for reasons other than the fault of the Architect,
the Architect may terminate this Agreement…
AIA Contracts – B 101
Article 9 – Termination or Suspension
9.6 In the event of termination not the fault of the Architect,
the Architect shall be compensated for services performed
prior to the termination, together with Reimbursable Expenses
then due and all Termination Expenses as defined in 9.7.
9.7 Termination Expenses are in addition to compensation for
the Architect’s services and include expenses directly attributable
to termination for which the Architect is not otherwise
compensated, plus an amount for the Architect’s anticipated
profit on the value of the services not performed by the Architect.
AIA Contracts – B 101
Article 11 – Compensation
11.10.2 Unless otherwise agreed, payments for services
shall be made monthly in proportion to the services
performed. Payments are due and payable upon
presentation of the Architect’s invoice…
11.10.3 The Owner shall not withhold amounts from
the Architect’s compensation to impose a penalty or
liquidated damages on the Architect, or to offset sums
requested by or paid to contractors for the cost of changes…
AIA Contracts – C 401
Article 1 – General Provisions
1.1 A copy of the Architect’s agreement with the Owner, known as
the Prime Agreement…is attached as Exhibit A and is made
a part of this agreement.
1.3 To the extent that the provisions of the Prime Agreement
apply to This Portion of the Project ... Insofar as applicable
to this Agreement, the Architect shall have the benefit of all
rights, remedies and redress against the Consultant that the
Owner, under the Prime Agreement, has against the Architect….
Final Thoughts
This concludes The American Institute of Architects
Continuing Education Systems Program
Laurel Tenuto, Client Risk Management Coordinator
Barbara Sable, Assistant Vice President
