A case that is currently before the Massachusetts Supreme Judicial Court spotlights the difference between contracts fashioned in traditional design-bid-build protocol versus a construction management at-risk delivery service. The latter type places the responsibility for design squarely on the construction manager at risk and removes it from a designer as well as the owner. If the case is upheld by the SJC, the decision will change the extent of liability a contractor may have on certain projects.
The Superior Court Decision
The initial case, Coghlin Electrical Contractors, Inc. v. Gilbane Building Company and Travelers & Surety Company of America, was dismissed on the basis that Gilbane, a contractor, could not file a third party claim against the Massachusetts Division of Capital Asset Management and Maintenance. Gilbane, a construction management at risk firm, had taken responsibility under a contract on a Chapter 149A project, according to the decision by the Massachusetts Superior Court in 2014.
DCAMM contracted with Gilbane to build a psychiatric unit in Worcester. Ellenzweig Associates were hired to design the project, and Gilbane subcontracted Coghlin Electrical Contractors to provide electrical construction. Coghlin made design changes and gave them to Gilbane. In addition, the design changes were given to Ellenzweig and DCAMM. The three were unable to come to a successful resolution on the changes, and Coghlin filed suit against Gilbane for $5 million. Gilbane, as a third-party plaintiff, filed a claim against DCAMM. In line with the responsibility assumed by the CMR firm as well as its obligation to hold DCAMM harmless, the Superior Court decided to uphold DCAMM’s motion to dismiss.
Construction projects in the past were structured as design-bid-build project delivery methods where the owner or agency contracted with a designer, then entertained bids from contractors followed by a building phase. The contractor became involved when construction began. In the 1990s, construction management at risk firms emerged, ones that placed responsibility for design with the construction manager at risk and away from the designer or owner of the project. The CMR is responsible for reviewing the design for constructability, provide project cost estimates and a construction schedule, reporting to the owner. The at-risk firm also negotiates the guaranteed maximum price and submits a new contract. In short, the CMR firm is responsible for the work that will be performed on the project.
Massachusetts Superior Court Ruling
In June 2014, the court decided that Gilbane, as a CMR firm, was required to assume responsibility of the design modifications submitted by Coghlin Electrical. Gilbane reviewed the designs provided by Ellenzweig Associates. Although Gilbane had it written into the firm’s contract with DCAMM that Gilbane was not responsible for the designs despite reviewing them, the court maintained that under CMR rules the responsibility remained. In addition, since a CMR firm must indemnify the owner, Gilbane could not file a third-party claim against DCAMM. The case was brought to the Massachusetts Supreme Judicial Court and, on March 2, oral arguments were heard.
Massachusetts Supreme Judicial Court
Gilbane filed a notice of appeal in August 2014. Both DCAMM and Gilbane filed briefs. The American Council of Engineering and the Associated General Contractors of America submitted amicus briefs. If the SJC rules in favor of the decision by the lower court, the CMR firm will be liable for the project design.
A ruling to uphold the lower court’s decision in this case will place the burden of responsibility on a construction manager at risk for building design and free the designer and owner from liability. The assumption of responsibility and its subsequent potential for liability may influence the number of firms bidding for projects.