Design Responsibility under Design and Construct Contracts: Some issues for Principals

Introduction

There are a number of reasons design and construct (D&C) contracts are attractive to principals and lenders. There is a single point of responsibility for both design and construction aspects of the project, the principal is able to fast track the project although not all aspects of the construction are complete, there is greater certainty of price and the contractor is involved from the earliest stage in planning design and programming. In consequence, the principal will need to accept a higher price for the contractor to take on this additional risk compared to more traditional construct only contracts.

This paper will identify some issues for principals to consider when allocating design responsibility to contractors within a D&C project. These issues arise as the design and construct process involves a fundamental conflict of interest. Principals desire to have constructed a product of the best quality for the lowest possibly price. The contractor on the other hand is more likely to make a higher profit if the product is of a lower quality (and therefore cost) and a higher price (as opposed to costs). In addition, although a greater proportion of design risk is placed on the contractor, this passing of risk is often accompanied by the abrogation of responsibility and loss of control.

The paper will refer to the approaches of 3 standard form contracts - AS 4300-95, AS 4902-00 and PC1-98 in dealing with these issues focussing on:

1 content of the design duty (this may be duty to achieve a specified result or satisfy particular criteria) and role of the principal’s project requirements (PPR);

2 level of design responsibility (such as an absolute duty or a lower duty of reasonable skill or care);

3 responsibility for prior design