We are the DOR.  The work is in place and during commissioning it was discovered that the HVAC design does not work.  The Government has directed the contractor to work the issue out directly with us for payment as opposed to the Government using the current contract and coming at us for the added cost.  The contractor is not in favor of this, nor their attorney.  We own the problem, but this corrective action direction does not appear normal for Government contracting.  Is it?   I welcome your advice.  

My questions based on your post.

"DOR"?  Designer of record and you are an A-E firm?  If so Design-Build with a prime contractor that you were a sub to the Prime, or?  Is it "Payment" or is additional cost of design and what I will call re-build to have the HVAC actually work?

And this thought even in light of my questions - In Government contracting the general norm is there is no privity of contract between the Government and a subcontractor so if a subcontractor has not done quality work the issue is between the prime and the sub to solve.  Why do you think this norm does not apply in your instance?

C Culham, Thank you for your response.  I should have provided more clarification.  Yes, we are the Designer of Record.  This is DBB (Design-Bid-Build) and we produced the design for the Government.  We are also providing construction services for the Government during project construction.  We have no contract with the Construction contractor.

The Government wants us, the AE firm, to perform the re-design, negotiate directly with the contractor, absorb the final cost, and cut a check directly to the Contractor for their loss.  Both the Construction contractor and AE are not sure what bearing this will have on future warranty issues or other issues that may arise for this work being completed outside the contract. 

 

Edited March 13Mar 13 by Boomer635
more information

2 hours ago, Boomer635 said:

 We own the problem, but this corrective action direction does not appear normal for Government contracting.  Is it?   I welcome your advice.  

No, it isn’t normal in my experience for government construction or A-E Contracts in DBB acquisition approach.

Based on the limited information regarding the actual problem, I wouldn’t know where there is A-E liability for impact cost  damages (here in the construction contract)  to the government for A-E negligence in the performance of any services. The government must first determine this question. Have they done this and do you agree?

There is no question here that you must correct the design at no additional cost to the government. See the below FAR coverage and A-E contract clause. ** However, whether you are liable for the cost of the change, also including such impacts as tear out and replace/delays to the contractor, etc. depends upon whether or not whether there is negligence in the design beyond the normal standards of care of design.

** 36.609-2 Redesign responsibility for design errors or deficiencies. This is the internal policy guidance.

** 52.236-23 Responsibility of the Architect-Engineer Contractor. (A-E contract)

Even if you have been determined to be responsible for the cost of the change/impact damages, as stated in above posts, there is no privity of contract between the construction contractor and the A-E firm nor anything in either contract that would require either one of you to work the issue out directly including payment to the contractor between you two entities.

The Government is responsible to the construction contractor for the adequacy of the design. You are reaponible to the government for the adequacy of the design and might be responsible for “damages” due to negligence in performance of your contract.

Many times, there are no  liable “damages” when the cost of the change wouldn’t exceed the cost to build the project had the design initially included the correct feature.

 

 

Edited March 13Mar 13 by joel hoffman
Elaborated further

I was the chief of a USACE contract administration section for seven years that also included determination of A-E contract liability for design errors or omissions. I had an employee whose full-time duties included  managing and determining if there was damage liability for design errors and omissions. We never made the two parties “work it out “ for collection of damages.

Edit: added. I was also one of the design-build approach experts for the USACE and for Districts and Divisions that I worked with. One of the advantages of the The D-B approach is the single point of responsibility for design and construction errors and omissions, when not the government’s responsibility. 

Edited March 13Mar 13 by joel hoffman

1 hour ago, Boomer635 said:

C Culham, Thank you for your response. 

 

29 minutes ago, joel hoffman said:

No, it isn’t normal in my experience for government construction or A-E Contracts in DBB acquisition approach.

With the clarification I agree with Joel's response.   It is good that you have legal counsel involved.  By my past experience having the designer invovled in DBB also provide construction services does make for a situation that is unique.   

Here is a BCA decision that might be useful to you.  I will be honest I did not read it other that it references a case that I was involved when a CO for an agency.  So I do not know if it is spot on to your situation it just is something I quickly found.   

https://www.cbca.gov/files/decisions/2011/POLLACK_10-13-11_2386__MOSHE_SAFDIE_AND_ASSOCIATES,_INC._508.pdf

Good luck.

For those readers not familiar with Design-Build contracting, the governments awards a single construction contract for both design and construction of a facility or faculties or System(s). It is not an A-E contract and the prime contractor, whether an A-E firm or construction contractor is the single point responsible party to the contract.m for design and construction.

The Government is responsible for adequacy and quality of any design criteria furnished under the DB  contract and generally responsible for any partially developed designs furnished to proposers or the awarded DB contractor (with some exceptions).

The life cycle Design-Build Construction class that I used to teach was a 38 hour course of instruction. So I’m just touching on some bssic concepts here.

I was also a design engineer for about seven or eight years early in my career. I am a retired Professional Engineer, registered in two states.

11 hours ago, Boomer635 said:

the Construction contractor and AE are not sure what bearing this will have on future warranty issues or other issues that may arise for this work being completed outside the contract. 

 

I don’t remember reading this earlier but I agree that this directed approach could very well muddy both the design contract responsibilities and the construction contract warranty.

But the bottom line is that neither contract with the government has any provision that would allow the government to unilaterally direct this solution to the two different contractors. This approach is outside the scope and terms and conditions of either contract.

i will add that the A-E may want to have real time visibility of the negotiated contractor construction costs for the design solution, if it will be found to be liable for those costs due to negligent design services.

 

 

 

Joel Hoffman and C Culham, 

Thank you for the discussion and help.  You have provided great information.  We have received background information that the Government does not have the funding, and this direction was the easy button to resolve the issue.  Regardless, we, both Contractor and A-E, plan to respectfully push back and request the government resolve this issue through our existing contracts with the government.  I am not sure at the moment what the Government's response will be, but I will provide an update.  

My best advice to you is to provide the re-design ASAP if you haven’t already.

if there are delay cost impacts due to alleged lack of funds, I don’t think that the government can hold you liable for that but I’m not a lawyer. The contractual remedies are available to the government through the terms and conditions in both contracts.

Obviously, I don’t know all the facts, the scope or magnitude of cost of the construction fix, what government entity you are contracted with  or what appropriated funds are, etc.

if this is DOD, I find it difficult to understand that no funding is available.

You may or may not have professional liability insurance for damages.   But the government is overstepping its authority if it wants you to pay the contractor directly outside of either contract. In fact, that action might be considered improper augmentation- not sure.

[Edit: It also depends upon the nature of the corrections and costs to make the HVAC system work. If any of those aspects and costs to correct the HVAC system should  have been in the initial design, and would have been reflected in a corresponding higher initial contract cost, the government would have paid for that anyway (less impact/delay/tear-out costs of course) - those usually aren’t considered liable damages. That was always a USACE* consideration in whether there was A-E liability involved or at least the degree of liability. End of Edit]

When I recovered liquidated damages or A-E liability damages, they were deposited in the US Treasury - except in Saudi Arabia where the Saudis funded the program. When we recovered damages on contracts there, the Treasury deposited it in the Saudi Engineer Assistance Program Agreement accounts for use on the Saudi Program, including our USACE employee salaries and support costs.

You are welcome to PM me in confidence. I don’t have a horse in this race. Be glad to discuss it privately with you.
 

*USACE: US Army Corps of Engineers

Edited March 14Mar 14 by joel hoffman