Scope of Work Strategies & Solutions David A. Ericksen, Esq. Severson & Werson March 25, 2015.

Scope of WorkStrategies & 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 Clauses You Need to Know

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

Questions & AnswersThank You!

David A. Ericksen, Esq.Severson & Werson

(415) [email protected]