Scope of Work Strategies & Solutions David A. Ericksen, Esq. Severson & Werson March 25, 2015.
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Transcript of Scope of Work Strategies & Solutions David A. Ericksen, Esq. Severson & Werson March 25, 2015.
An Opening Question
What type of contract do you execute most often?- Standard AIA, AGC, or similar agreement- Client Generated Agreement- Short Form Agreement Incorporating Another
Agreement- Letter Proposal/Agreement- Notice to Proceed- Handshake & Hope
Agenda
— Contract Fundamentals— The Sixteen and the Six— Scope of Work Essentials— The Scope of Work as a “Work Around”— The Scope of Work as a Blocking Tool
A Tale of Two Scopes
Minimal: “Design a K-8 School for District’s Use”
Maximum: AIA B101 with specific allocation of tasks and incorporating design-builder agreement with owner, master programming document, and all existing project records.
Four Contract Fundamentals
Elements of a Contract
Meeting of the Minds
Integration Clause & Parole Evidence Rule
Appropriate Risk/Reward Allocations
Elements of a Contract
Three Elements: 1- Offer2- Acceptance
- By stating “yes” (preferred)- By conduct (last resort)
3- “Consideration”Writing not required, but always better.
Meeting of the Minds
An agreement is to reflect “a meeting of the minds”
- Establishes reality, expectations, and accountability
- Enforceable reference point- Generally , only mutual mistakes
may be corrected
Integration Clauses &The Parole Evidence Rule
Integration Clause: “This Agreement represents the entire and integrated agreement between the Owner and the Architect and supersedes all prior negotiations, representations or agreements, either written or oral.” (AIA B101, 13.1)Parole Evidence Rule: Absent ambiguity, if it isn’t in the agreement, it doesn’t exist.
Appropriate Risk Allocation
The party with the ability to control a risk, should bear that risk.
Risk should follow reward.
Essential A/E Contract Elements
(1) Client & A/E identification;(2) Description of services and schedule; (3) Basis of compensation & method of payment;
(4) Procedure for additional services; and(5) Termination procedures for either party.
(Based on California Statutes)
Common Contract Structure
Most design professional agreements are organized by:
— Chronology— CompartmentsBoth formats typically leave a miscellaneous “grab
bag” at the end.Many overlap provisions.To correlate all the terms, functionality may
be the best organization for analysis.
Dominant Functions in Contract Clauses
— Relationship— Scope of Responsibility— Performance Standards— Procedures— Financial Rights & Responsibilities
Sixteen Clause Checklist
— Parties— Scope of Work— Additional Services— Owner Rights/Duties— Standard of Care— Ownership of Docs— Payment Terms— Warranty/Guarantee
— Assignability— Third Party Rights— Communications— Limitation of Liability— Indemnity— Insurance— Dispute Resolution— Consistency with
Other Agreements
A Contract Evaluation Matrix- Perfection Denied
- Improvement PursuedClause Open-
Ended Vague
Third- Parties
External Factors & Events
Risk Exceeds Control & Reward
Other Response
Scope of Work
Other
The Pragmatic Priorities- (The Pareto Principle)
— 80% of the liability claims against design professionals are based on or made worse by 20% of the typical contract provisions; or
— Focus on 20% of the typical design professional contract provisions can successfully avoid or limit 80% of claims.
Six Core Issues(The Key 20%)
1. Standard of Care2. Scope of Work3. Warranty & Guarantee4. Third Party Relationships & Rights5. Indemnity & Defense6. Dispute Resolution Provisions
Scope of Work Esssentials
A good scope of work is:- Realistic- Professional service oriented- Educational- Qualitatively and quantitatively detailed- Sequential/Process-oriented- Limited & closed- Based on a solid/reliable set of expectations
The Scope of Work as a “Work Around” Enhancement
Elements for a Contract/Risk Management Scope of Work:
— Intended Beneficiaries & Uses — Standard of Care— Assumptions & Additional Services— Closure & Inclusion
The Scope of Work as a “Work Around” – Parties & Uses
Consultant’s services are intended for the Client’s sole use and benefit and solely for the Client’s use on the Project and shall not create any third party rights. Except as agreed to in writing, Consultant’s services and work product shall not be used or relied on by any other person or entity, or for any purpose following substantial completion of the Project.
The Scope of Work as a “Work Around” – Standard of Care
Consultant’s services shall be provided consistent with and limited to the standard of care applicable to such services, which is that Consultant shall provide its services consistent with the professional skill and care ordinarily provided by consultants practicing in the same or similar locality under the same or similar circumstances.
The Scope of Work as a “Work Around” – Close & Include
Consultant’s services shall be limited to those expressly set forth above, and Consultant shall have no other obligations or responsibilities for the Project except as agreed to in writing or as provided in this Agreement.
All of Consultant’s services in any way related to the Project shall be subject to the terms of this Agreement.
The Scope of Work as a “Work Around” – Stated Assumptions
— Via “excluded” or “additional” services or via “assumptions”
— Consultant’s services are based on the following assumptions. In the event of any ultimate facts or events differ from such assumptions, Consultant’s services, schedule, and compensation shall be adjusted accordingly.
Scope of Work – Blocking Dangers/Blocking Strategies
Are you blocked from using the scope of work to define and limit duties & responsibilities?- Contract states either:
- “scope establishes only duties and cannot limit or modify contract terms”
- “contract terms control in the event of any conflict”
Scope of Work – Blocking Dangers/Blocking Strategies
Can you use the scope of work to nullify a meeting of the minds? - Example: Indemnity or limitation of liability
Can you use the scope of work to shape a responsibility?- Examples: Standard of Care
Responsibility for OthersIntended uses/beneficiaries
Additional Resources Available
— 16 Contract Clauses You Need to Know— Skating on Thin Ice: Surviving and Succeeding
on Projects with Precarious Contract Terms— Making the Grade: Testing Design Professional
Indemnity Obligations— Prevailing Party Clauses: The True Pandora’s
Box for Design Professionals— Could You Be a Cash Flow Hostage: Keys to
Avoiding Mid-Project Fee Impasses