Foran Glennon Palandech Ponzi & Rudloff

August 2014

Close Counts in Horseshoes, Hand Grenades, and . . . Professional Design Services

Steven C. Swanson

Design professionals are not required to perform to the impossible standard of perfection.  The common law requires only that architects and engineers perform like an average designer or, as the courts phrase it, that designers “use the same degree of knowledge, skill and ability as an ordinarily careful professional would exercise under similar circumstances.”  Thompson v. Gordon, 241 Ill.2d 428 (2011) (citing Advincula v. United Blood Services, 176 Ill.2d 1 (1996)).  Under this rule of law, owners remain at risk for costs resulting from ordinary design errors that do not rise to the level of negligence and are within the standard of care.  This is why litigation against design professionals often becomes a battle of experts subjectively arguing about how much imperfection is permissible.  But what kind of objective evidence is there of the average rate of errors actually committed by ordinarily careful designers?  And how might design professionals use that information to manage client expectations?  Ideally, more projects would be perceived as successful, and more litigation avoided, if project participants entered the design process understanding the level of errors they should expect.  This important subject is the focus of an upcoming American Institute of Architects study entitled The Cost of Imperfection:  Typical Costs Due to Errors, Omissions, and Coordination Issues.

Discussion

Owners, designers, and contractors each acknowledge the construction process is not perfect and involves risk and uncertainty in terms of cost, schedule, and quality.  But each tends to perceive that risk differently and they often end up arguing about responsibility for errors at the end of projects.  Similarly, project participants know design and construction budgets must include contingencies to absorb the cost of a reasonable amount of errors and omissions, but lack an objective basis to set a sufficient contingency.  Projects where the added cost of design errors exceed an insufficient contingency are ripe for acrimony.

To address these issues, the AIA’s Cost of Imperfection study explores the range of uncertainty actually found in different types of building projects using different delivery methods (i.e., traditional design-bid-build, fast-track, design-build).  The study will identify factors affecting levels of risk and uncertainty in the design and construction process and, it is hoped, identify means to improve industry performance.  From the standpoint of litigation, the study data may also provide a more scientifically objective basis to substantiate expert opinions about where to locate the line between negligent and non-negligent design errors.

The AIA recognized the credibility of the study depends on the involvement of owners and contractors, not just architects.  To ensure objectivity and achieve industry buy-in, the AIA invited owners and contractors become co-sponsors of the study.  Ownership interests were represented by the General Services Administration, Disney, Crate & Barrel, Hines Development, Sutter Health, the University of Chicago, and the Whirlpool Corporation.  Contractor interests were represented by the Associated General Contractors and the Design-Build Institute of America.  The study collected information regarding seven factors that impact uncertainty in construction including accelerated schedules, owner-driven changes, design errors, design omissions, construction coordination issues, contractor delays, and unforeseen site/construction conditions.  The study analyzes these factors from the perspective of owners, designers, and contractors using the three metrics of cost, schedule, and quality.

The raw study data has already produced interesting and occasionally amusing results.  As one might expect, each group of project participants (owners, designers, and contractors) seemed unwilling to acknowledge the degree of impact their own actions had on project cost, schedule, and quality.  For example, none of the architect’s polled believed design errors were the leading cause of cost increases while 12% of contractors and 14% of owners thought so.  Similarly, only one percent of the contractors polled agreed that contractor-caused delays or construction coordination issues were the leading cause of cost increases.  Owners are not immune from this type of self-interest.  Only 16% of owners acknowledged their program and design changes affected cost while nearly half of the architects and a quarter of the contractors thought so.  Interestingly, the responses were most uniform regarding the cost factor for which none of them would be responsible:  27% of owners, 25% of contractors, and 20% of architects agreed differing site conditions were the leading cause of cost increases.

The study also collected data on the perception of owner satisfaction.  In terms of project quality, nearly all the designers and contractors believed owners were very frequently satisfied with their projects and owners generally agreed (86%).  However, there was less alignment of perceptions when it comes to cost and schedule.  More than one out of three owners reported being often dissatisfied with their project cost and schedule.  Only one out of ten designers and contractors realize owners view projects this way.

Another interesting preliminary finding of the study is the frequency of belief in the industry that a perfect set of construction documents is attainable.  Thirteen percent of architects believe it is possible to produce a perfect set of plans on a reasonably complex project.  Thankfully, only 7% of owners agreed.  Although the remaining 93% of owners did not believe a perfect set of plans is possible, many of them (21%) nonetheless expect their architect will create a perfect set of construction documents on their project!  Owners have similarly misaligned expectations regarding the performance of contractors:  three quarters expect their contractor to perform perfectly even though only one quarter believe it is possible to do so.  This misalignment between expectations and reasonably-achievable standards is a fertile source of potential dissatisfaction and litigation.

Preliminary study results concerning the expected cost of non-negligent design errors are also interesting.  Of those owners who acknowledge the likelihood of design errors on future projects, most expect to pay 3-4% of added costs for non-negligent design mistakes.  Architects are actually harder on themselves:  they say only 2-3% of added costs should be expected.  The study also explored more detailed metrics for measuring design team performance.  There was close alignment among participants regarding how to determine whether designers did their job.  Designers, owners, and contractors all felt that the best measure of design team performance was whether they produced a set of documents that were constructable and within budget.  The second most important metric was the ability of design team members to resolve issues without escalating the issue for owner resolution.  The greatest divergence in opinion between designers and owners/contractors involved so-called “hard metrics” such as the percentage of contingency actually consumed due to design errors/omissions and the absolute number of change orders on a project.  It is apparent designers dislike hard metrics being applied to them.

Respondents also provided useful information regarding the top factors to reduce uncertainty.  Large majorities of respondents identified clearer direction and leadership from owners, more communication between designers and builders during the design phase, and more time for design coordination as leading factors to help reduce uncertainty.  Participants were less sanguine that design-build, lean design, integrated project delivery, or use of construction managers would reduce risk.

Conclusion

This summary only touches on the wealth of useful information we expect from the final report of The Cost of Imperfection study.  The final study results will be published in a McGraw Hill Construction SmartMarket Report expected in October 2014.  These results will provide real-world statistical data to quantify the risk of uncertainty inherent in various project types and delivery methods.  Designers should become familiar with the results so they can engage in dialogues with owners to begin aligning project team expectations regarding cost, schedule, and quality, and provide more scientifically-reasonable information for establishing appropriate design and construction contingencies.  Construction attorneys and litigation experts should consider the data regarding the actual incidence of design errors that may help determine how close to perfection is close enough.

[Source:  Davis, Clark S., “Is Perfection Possible?  Managing Uncertainty and Expectations in Building Design and Construction,” AIA Convention, June 2014]