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Design-Build Disputes

What is a Design-Build?

Traditional construction projects involve managing two separate contracts. The investor signs the construction contract with the contractor (who can use subcontractors). In addition, the owner has a second contract with the designer (who uses sub-consultants). In practice, such arrangements often led to misunderstandings and disputes arising from problems in coordinating between contractor and designer. Both subjects blame each other when things go wrong (unpredictable costs, changes due to unforeseen circumstances, etc.).

Unlike the conventional way, build-design projects focus on a single point of responsibility. The investor signs only one contract with the so-called design-build entity that involves the contractor and designer working together on a construction project. When challenges arise, they address the issues as a team, coordinating their activities and adjusting to budget and design changes. In contrast to the conventional model, the investor interacts only with one entity that is jointly responsible for the project. The design-build system requires close collaboration and coordination between the contractor and designer. Otherwise, disputes can arise.

Legal Issues Typical for Design-Build Projects

Although design-build projects involve one point of responsibility, minimizing the possibility of disagreements, some legal issues can result in a design-build dispute.

For example, licensing issues can cause problems because design-build contractors often do not meet engineering and architecture requirements. Instead of having a professional license, design-build entities hire designers and contractors as sub-consultants/subcontractors.

Performance warranties are also a frequent cause of potential disputes. Unlike traditional contractors (who are not responsible for all aspects of a construction project), design-build entities must guarantee the success of a project as a whole. Many design-build contractors seek to limit their responsibility by warranting performance for a limited period or until subsequent testing. Different modalities result in disagreements giving rise to a dispute.

Also, an entitlement to change orders can represent a significant legal issue. Unlike contractors who can request the change order because of unforeseen circumstances, investor faults, and design problems, the design-build entity does not have the right to change in case of design issues.

Two Phases in Which Design-Build Disputes Can Occur

Desing-build disputes typically occur in two phases of a construction project: the tender phase and the design phase.

Tender-phase disputes arise between the design-build entity and the investor due to errors or omissions resulting in low bid prices.

Detailed design-phase disputes can occur between the designer and contractor, disagreeing about design changes that emerged after the tender. They develop conflicting views regarding the nature of such changes (whether they are normal or unforeseen).

When the dispute arises, parties have two options: to engage in an adversarial court battle or resolve their dispute out of court through negotiations.

Desing-Build Disputes Litigation

In construction projects, time is essential. Every postponement or delay in performance causes significant damage. The traditional court process involves multiple litigation stages, adding extra costs and prolonging the dispute resolution. That harms the project dynamics, increasing the overall costs and causing other problems. Because of its adversarial nature, litigation cannot reconcile the disputed parties enabling them to continue cooperation. Dispute resolution often marks the end of successful business cooperation.

Resolving Design-Build Disputes in Mediation

Desing-build mediation is an alternative dispute resolution method that focuses on out-of-court efforts in negotiating and settling the disputed matter. It has numerous advantages over conventional court processes, allowing the parties to overcome their disagreement and preserve the dynamics of the design-build project.

Disputed parties entrust the resolution of their conflict to a neutral third person called the mediator. As retired judges or attorneys, mediators possess subject matter knowledge and valuable construction dispute experience in addition to negotiation skills.

The process is voluntary, neutral, and confidential.

After choosing the mediator (by signing an agreement to mediate), parties initiate the mediation process, which typically has four stages.

In the introduction stage, the mediator presents their qualifications and explains the rules of the procedure. The parties can then give opening statements, after which they go to separate rooms for private conversations with the mediator. During caucuses, the mediator analyzes their arguments, assessing the chances for settling. In the joint session, the parties and the mediator sit at a negotiation table to discuss matters openly. The mediator facilitates negotiations without proposing solutions or offering legal advice. Unlike judges, they cannot issue a binding decision to resolve the dispute.

By signing an agreement to mediate, the parties and the mediator oblige themselves to keep everything confidential. They cannot disclose information disclosed during mediation sessions. Confidentiality extends to future litigation if the mediator process does not yield positive results. That is particularly important in design-build disputes, where the secrecy of business information determines the overall success.

Successful negotiations lead to a settlement. The parties sign the mediation agreement (that is binding and enforceable), resolving the dispute.

Why Choose David L. John?

If you are involved in a design-build dispute, avoiding litigation should be your number one priority.

David L. John, a high-profile Florida mediator, can help you resolve your dispute amicably and peacefully while continuing successful business cooperation. With over 30 years of invaluable experience in construction, engineering, consulting, and general business, Mr. John will provide you with a unique approach that resonates with your specific needs.

Do not hesitate to call and schedule your free appointment.

David John

David L. John

My experience of over 30 years of actual hands-on business experience in manufacturing, professional engineering consulting, construction, commercial & residential real-estate transactions and general business.

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