Federal government design contracts typically include clauses related to a designer’s obligations and potential liabilities. One clause, FAR 52.236-22, Design Within Funding Limitations (“DFL” clause) obligates the design professional to prepare a design for the project, which will permit the award of a construction contract at a price that does not exceed the estimated construction price set forth in the contract with the designer. If the bids or proposals exceed that estimated price, the DFL clause obligates the design professional to perform such redesign services at no cost to the government in order to permit a contract award within the funding limits.
In the last few years, the cost of construction has experienced very little or any growth due to inflation. In fact, bids or proposals have often been well below pre-recession government estimates. As with most economic cycles, that recent trend will end eventually and federal agencies may face escalating construction prices as compared to construction estimates developed in the 2009-2012 time frame. What is the potential extent of the design professional’s liability when that occurs? A recent decision of the Civilian Board of Contract Appeals, Moshe Safdie and Assoc., Inc. v. GSA, CBCA No. 2386, 11-2 BCA
¶ 34,851 clearly indicates that a designer’s potential liability may well extend beyond a duty to re-design the project at no cost to the government.
In the Moshe Safdie matter, the GSA the designer agreed to design a courthouse with an estimated adjusted target price of $43.8 million. Bids on the original design “significantly exceeded” the $43.8 million target.The designer performed the re-design, but the new bids also exceeded the $43.8 million target. The GSA then awarded a construction contract for $53,314,000 and made a claim for $5,275,880: the additional amount expended by the government due to the designer’s failure to deliver contract-compliant bid documents. GSA asserted that because contract-compliant documents were not delivered until 20 months after the due date it incurred escalated construction costs.
The CBCA held that in certain circumstances, the government may be able to recover delay or consequential damages and stated that it needed to address several factual and legal issues including:
- The foreseeability of the delay damages sought by GSA;
- The effect of the Responsibility of Architect-Engineer Contractor clause on the designer’s obligations;
- The parties’ pre-dispute, contemporaneous interpretation of the DFL clause;
- The parties’ intent and possibly trade practices and customs.