Non-negligent E&O Limitations vs Betterment 2

[rbergholz]

I'm trying to find either case studies or formal language that draws the line between a consulting engineers financial liability for non-negligent errors and omissions, and betterment of the project.

Simple case: Say I have a conflicting callout on the plan and profile for a specific catchbasin type. In construction, the RFI is made asking which one. I designate the correct type, which is of course the more expensive and not what was bid. The contractor submits a change order. The claim from the owner is, "you made an error, therefore you have to pay the difference in cost."

I can understand if demolition, re-construction, or contractor inflated the change-order cost, then I would be liable for that cost.

But if the structure has not been built yet, there is no reconstruction, no damages, no additional work and no markup on the change order since its a line item cost, then I should have zero financial liability. What the owner would be asking is for me to pay for betterment of the project.

I'm looking for a clear and simple defense to this claim. Any ideas? (yes I'll be talking to our E&O insurance guy again tomorrow) Thanks in advance..

 

[BigInch]

construction contracts I have writen include the clause,

"The Contractor <Construction Contractor> shall examine in detail all contract documents for errors, omissions and inconsistancies and shall perform a field investigation to verify and confirm the existance of all field conditions and existing constructions, as may be shown on the plans and drawings and within the specifications, or not. Contractor shall perform his examination of the documents and undertake and complete a field investigation prior to the commencement of construction and shall inform the owner, or his representative, of any such errors or omissions, deficiencies, inconsistancies, or contradictions between drawings, plans, specifications, construction contract and other relavent documents, and the actual conditions encountered in the field. Any and all such inconsistancies or conflicts shall be resolved by the Owner, or his duely appointed representative, whom shall have the final authority to resolve any and all such conflicts and inconsistancies in his sole interest. Failure by the contractor to confirm and verify conditions in the field and existing constructions, above or below ground, or failure to report any such conflicts and inconsistancies between the field conditions, the plans, the specifications, the construction contract, or other documents relavent to this contract, to the Owner, or his duely appointed representative, in writing, before <such and such date, time of construction, mobilization, 30 days in advance of, etc.> shall not form, nor be construed in any manner, to constitute grounds for any extra payments to be made to Contractor at a later date.

BigInch-born in the trenches.

http://virtualpipeline.spaces.msn.com

 

[civilperson]

Pay the claim, dump the client. Cheaper and more professional than arguing. Spend your time on quality control and plan checking.

 

[ccor]

You have no legal obligation to pay. Engineers are not required to be mistake free, only to meet the standard of care. Besides, had you called it out correctly on the plans the owner would have had to pay for it in the original contract, its a cost of doing the project not of your mistake. If this is a client you want to keep then pay it, if this minor detail is any indication they are not worth keeping. Make sure the contractor isn't gouging. I say don't pay and dump the client.

 

[DMcGrath]

Wow! Dump the client just like that? Unless they grow on trees where you are and you can replace the workload easily, I wouldn't be so quick to drop them. Even pain in the *behind* clients are worth keeping if they supply you with work and keep paying you in a decent amount of time. Remember also that a claim against your insurance is ammunition for the insurer to increase your premiums. It might be cheaper and buy you some goodwill with the client to just "take one for the team" and get on with it (if you can afford it). Another take would be to negotiate with the client to split the cost somehow.

...just some ideas...

 

[rbergholz]

We're not interested in performing any future work with this client.

I'm concerned that being soft at this stage will open us up for more claims. Our response basically denied acceptance to anything. If anyone is interested, I can post the meat of the letter, with names altered of course.

I did find a little legal language to toss in, but not a formal definition. We intend to look into our contract language and potentially include stronger language defining the industry standard of care and protectection from claims that reflect betterment to the project.

 

[BigInch]

Wouldn't that just open the floor for more interpretation?

BigInch-born in the trenches.

http://virtualpipeline.spaces.msn.com

 

[rbergholz]

BigInch, I like the spec section you provided. Truly all inclusive, and adding it in the construction contract would certainly help both the engineer and owner. I believe (and agree) the construction contract is a better spot for this language than the consulting contract.

Unfortunatly, I don't have this languge to fall back on. And this is probebly an odd case where a client is going to loose money on the development and therefore is making any claim he can to reduce his loss, like going after the engineer.

Just another challenging situation.. It's true that we learn from our mistakes.. and I'm learning alot these days...

thanks everyone for your comments..

 

[BigInch]

Thanks. On one hand, I don't like the idea of just abdicating engineering responsibility and "dumping it all" on the construction contractor, but there is some justification for doing that. By the time the CC returns the bid, the engineer has pretty much corrected everything (s)he is ever going to find, and, if the construction contractor is worth his salt, he's just gone through everything with a fine tooth comb and a fresh set of eyes. Underlying it all is the idea that nobody should be taking advantage of anybody else in a fair contract, so everybody has some responsibility to bring up discoveries in a fair manner and negotiate what should be done about them... in a fair manner and pay for them in a fair manner. The contractor must do for ex. a geotechnical study, existing u/g utility survey and, in general, gather enough site information to make an accurate bid anyway, and the above clause simply guarantees that he do the bulk of the info gathering at the best time, before construction. It assures that the contractor discovers everything he can, and fairly, gives him a route to change his bid accordingly. Lastly, it protects the owner from those few unscroupulous contractors that hide discoveries for the sole intent of pulling them out at the worst possible time and saying "BIG EXTRA".

BigInch-born in the trenches.

http://virtualpipeline.spaces.msn.com

 

[ConstPM]

I think the owner has no basis for a claim. Since the contractor bid the lower cost catchbasin and is now providing a higher cost catchbasin, the owner would have paid for the higher cost item anyway. The only cost difference would be a percieved loss since the work will be done as a change order and was not competitively bid. This is very difficult to prove and in todays construction market would probably be negligible.

The situation would be different if the basin was already in place or ordered. The water can get very muddy here.

Hope this helps.

 

[BigInch]

Actually I think rb could very easily just say, either one works (if it is indeed true), and let the owner pay for whichever one he wants to pay for, and that's that.

BigInch-born in the trenches.

http://virtualpipeline.spaces.msn.com

 

[Ron]

Why on earth would you ever accept liability for a non-negligent condition? NEVER, NEVER, NEVER accept liability for non-negligent conditions. Always make sure your general conditions have liability clauses that are negligence based.

If there is no negligence, it's your professional judgment and opinion. Nothing wrong with that even if it differs from someone else's.

As long as you comply with your local standard of care in such decisions, your liability should be negated or very nearly so.

 

[dik]

ccor and ConstPM... depends on the jurisdiction and case law.

There was a case in Vancouver, British Columbia, Canada where the foundation contractor was given the opportunity to submit a change to the foundation in his bid. The proposed change wasn't acceptable to the EOR without modification and the foundation contractor sued for the difference... the engineering consultant was on the hook. The case went through to the Supreme Court for a final ruling (not sure if BC Supreme Court or Supreme Court of Canada).

With ambiguities in construction documents, the courts in these environs generally rule against the person who crafted the documents (almost a rule).

 

[dik]

BigInch... in some jurisdictions your all inclusive demand on the contractor may be considered unreasonable and if challenged in the courts may not be as 'bulletproof' as intended.

Dik

 

[ConstPM]

dik...In the BC case, the contractor was given the opportunity to modify the bid, and it was accepted. This situation is different. The bid documents had a conflict in them that was discovered during construction. The catchbasin had not been constructed. The EOR clariflied the detail and chose the higher cost item. Still, the owner would have bore the cost of the higher cost of the more expensive catch basin whether it was in the original construction documents or modified through an RFI.

If an owner could pursue an engineer for change orders such as this, no engineer would take up work. Every owner in the land would pursue the engineers for every little error and conflict. Lord knows I have wanted to in the past, but again no set of drawings are perfect. And when you have a case where the work has not commenced, such as this, the owner would have surely paid for the higher cost of the item. The issue at hand is that the item would be part of the original bid or part of a change order.

I agree that the burden lays with the drafter of the documents. But I think the owner is just trying to get the engineer to pay for a product he would have bought anyway.

 

[BigInch]

dik, Valid comment. Of course anything can be challenged in court, especially in the USA, however don't you agree that the above clause would tend to position a plaintiff at an immediate disadvantage? I think the only possibilities to challenge that clause would be if it was reasonably possible for a capable and competent construction contractor to have made the discovery within the allowed time at reasonable expense, or not, and perhaps the unfairness of the provision to resolve a conflict in the sole interest of the owner. And that, I believe as long as the owner did not overexert that advantage, it would be difficult to persue.

Do you have a suggestion for improving it?

BigInch-born in the trenches.

http://virtualpipeline.spaces.msn.com

 

[MikeHalloran]

The spelling and grammar could use a little work.



Mike Halloran
Pembroke Pines, FL, USA

 

[dik]

ConstPM... the case I'm thinking of involved the EOR not accepting the proposed change and the contractor successfully litigating when the EOR insisted that the as tendered foundation be provided. There was a problem, however, with the construction dox... I'll try to dig up the cite...

Biginch... I'll sit down and see what mods I can make... different focus in that depending on the circumstances, it's unreasonable to place the burden of unknown site conditions on the contractor. There is a fair amount of case law on this... and the practice generates more case law... I know that this is often done, and that there are often many 'weasle' clauses trying to pin the tail on the contractor; sometimes they don't hold up. Also a problem if the part of the documents can be shown to be unreasonable, then adds credence to other portions being unreasonable.

 

[BigInch]

I don't believe it does, as it specifically requires the contractor to investigate all the conditions prior to construction and it allows for renegotiation of any unusual discoveries made during that time. If there were to be any conditions that were missed, it would be due to the contractor's inadequate investigation, or the fact that it was unreasonable to expect discovery of that particular condition could be made during the allowed time, in which case it should be treated as a normal claim for extra.

BigInch-born in the trenches.

http://virtualpipeline.spaces.msn.com

 

[dik]

"...all contract documents for errors, omissions and inconsistancies and shall perform a field investigation to verify and confirm the existance of all field conditions and existing constructions... complete a field investigation prior to the commencement of construction"

This should be done by the owner... prior to tendering or alternatively can be made part of the work to be undertaken by the contractor. If it is an issue, or can have an impact on the project it should be investigated by the consultant or owner. If it is something obscured by earth, etc. that may have an impact on the project, then unless the owner is prepared to pay for the investigation, it is unreasonable for the burden of this to be placed on the contractor.

"Any and all such inconsistancies or conflicts shall be resolved by the Owner... whom shall have the final authority to resolve any and all such conflicts and inconsistancies in his sole interest."

This, IMHO, is unreasonable and likely unenforceable... it also can lead to bad case law...

"Failure by the contractor to confirm and verify conditions in the field and existing constructions, above or below ground, or failure to report any such conflicts and inconsistancies between the field conditions, the plans, the specifications, the construction contract, or other documents relavent to this contract, to the Owner, in writing shall not... constitute grounds for any extra payments to be made to Contractor at a later date."

With latent problems this is also unreasonable and likely unenforceable... This may not be consistent with the project schedule... ditto.

just some ramblings... with larger projects, I generally ask that the owner has his solicitor review the tender documents prior to issue... just to cover my *ss.

Dik