Construction Law

The design/build delivery model offers owners and contractors the potential for greater efficiencies in the construction process, but if the parties do not carefully manage the design review process, the project can experience unnecessary delays to procurement and construction that can cascade throughout the project. It is a complex process to track all of the hundreds or thousands of different engineering drawings submitted on a large project to ensure that they are being reviewed and approved according to the contract schedule. The process is further complicated because the owner’s engineers and the contractor’s engineers (and sometimes third-party reviewers) may have conflicting engineering judgments on complex technical issues.  

A good contract can help the parties avoid some of the common problems in the design review process. This article discusses some of the potential problems that owners and design/build contractors may encounter in the design review process and suggests some contract drafting strategies to prevent or mitigate these problems and keep the project on track.  

Design Review Problems

On any project, the final design is typically what tells the contractor what to buy (procurement) and what to build (construction).  Thus, if the parties cannot finalize the design on time, procurement and construction will be delayed.   

Design delays can cause potentially serious problems for procurement. Manufacturers, particularly manufacturers of complex mechanical and electrical equipment, often have tight production schedules. 

For example, if the owner and contractor are unable to agree on the design of the equipment to be used within an industrial plant, the contractor may not be able to place the purchase order in time to take advantage of openings in the vendor’s production schedule.  The contractor may then be forced to wait for the next opening and pay premiums to expedite manufacturing and shipping.   

Design delays can also delay the start of critical construction activities. If the owner and contractor have not agreed on the basic layout of a plant or the design of key buildings or processes, the contractor may not be able to start even basic civil works. Even if basic designs are agreed, delays in finalizing detailed designs can still cause delays. In more complex industrial plants, the building designs often depend on the type and layout of the equipment inside of the buildings. 

Thus, the contractor needs to know the configuration of the equipment inside the building order to finalize building details such as where to put openings for pipes and wiring in the walls and to ensure that the structure can support the loads from the equipment. Without final designs, the contractor may have to stop work before finishing a building or inefficiently work around the areas with unfinished designs.   

These are just a few examples of how upfront design delays can lead to project delays and cost overruns.  Below, we provide some contract guidelines to owners and contractors to help prevent or mitigate some of these common design delay traps. 

Guidelines for Addressing Design Review

The contract is the foundation of the design review process. The contract terms establishing the design review process should be clear, comprehensive and easy to follow for the project teams.  By laying out a clear and thorough design review process with objective standards in the contract, owners and contractors can avoid the ambiguities that lead to design disputes later in the project. The contract should clearly define both the review process and also the standards the design must meet.    

Some of the most important contract terms for the design phase are those establishing the review and comment time periods for drawings. The contract should establish clear time periods for review and comment from the initial submission through final approval. The contract should set an initial set number of days from the contractor’s submittal for the owner to either approve or provide comments, and then a further set number of days for the contractor to respond to those comments.  These defined time periods for review and response should continue to apply to all subsequent rounds of comments until the parties finalize the construction drawings. This keeps all parties “on the clock” and helps to avoid having unfinished designs fall into gaps in the contract and sit unaddressed for weeks or months at a time.

The contract should also provide flexibility to expedite the approval of important designs.  The parties should consider contract terms that allow the contractor to identify some of the most important drawings and submittals (e.g. plot plans, process flow diagrams, P&IDs, critical long-lead equipment, etc.) for expedited review. This will allow the contractor to prioritize the designs that are critical to keep key procurement and construction activities on schedule.  

To ensure a smooth review process, the owner may also consider setting limits on the number of drawings that the contractor can submit at any one time.  This will ensure that the owner’s reviewing engineers have enough time to comply with the contract review times and prevent the contractor from overwhelming the owner’s review staff by submitting hundreds of designs at one time.  

To minimize design disputes, the contract should include clear and objective design standards.  If possible, owners and contractors should base the contract on well-known industry standards and include those standards as contract documents. The parties should be particularly cautious of any design standards based on the approval of third-parties, such as government agencies (e.g. transportation authorities). If the parties cannot avoid third-party approval due to the nature of the project, the contract should clearly lay out which party is responsible for working with the third-party reviewer and for any delays caused by the third-party review.

Despite the best efforts of the parties, some disputes over design are likely.  So a good contract should include mechanisms to facilitate quick resolution of any disputes.  One idea the parties may consider is requiring a design review meeting or workshop for certain drawings or sets of drawings if they are not approved after the initial review and comment period.  Mandatory meetings will force the face-to-face discussions that can often help the parties resolve design issues.

Staying on Schedule

The review and approval of designs comprise the critical first phase of a design/build project. By addressing the design review process in the contract based on the guidelines provided above, the parties have a better chance of avoiding design delays and keeping the project on schedule. 

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