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New liability issues presented by design/build agreements.

Property owners, architects and contractors alike are facing new liability issues with the increased use of design/build contracts, Jamie Frankel told an attendees at the Seventh Annual Construction Superconference at New York City's Waldorf Astoria Hotel. Frankel is the senior partner of the Construction Industry Practice Group of New York law firm Shea & Gould.

"As a means to establish greater control over a project by making one party responsible for both its design and construction, design/build contracts is on the rise, said Frankel.

"In addition, this type of contract also inables the owner to control project costs."

In design/build contracting, the owner looks to one party--the design/builder -- not only for design and construction, but also for the coordination of these two functions.

Frankel outlined three different design/build scenarios which are used today: *The contractor retains the architect to develop the design and monitor its construction. *The architect retains the contractor to construct the design, which has been developed *The architect and builder form a joint venture call a "design/builder"

"Each of these arrangements present different liabilities to the various parties," said Frankel. "Therefore, each party should examine its exposure before entering into any type of design/build arrangement."

For example, in design/build contracts the owner only has one party to look to for the recovery of damages if a problem arises or a defect develops in the project. While, in an arrangement where the architect is responsible for the entirety of the project, he may be potentially liable for failing to design a facility which meets the owner's needs or performance standards. Frankel pointed out that major design/build projects are being developed for the public and private sector.

"Design/build arrangements are valuable in that they increase coordination and cooperation between the contractor and the architect, translating into cost and time savings for the owner," said Frankel. "And with careful examination of potential areas for liability, the benefits of this method of contracting can far outweigh the risk to all involved."
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Publication:Real Estate Weekly
Date:May 13, 1992
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