Vol. 2 No. 3		March 1983

It is becoming one of the driving forces in the construction industry in the United States. We are about to undertake a nationwide effort to repair our deteriorating highways and bridges. At the same time, there is a growing trend toward the modernization of existing buildings--with new standards, new programs, and in many cases, for entirely new uses.

What does all this have to do with your exposure to claims of professional liability? Simply this: The risks inherent in rehabilitation work are substantially greater than those associated with new construction. You can control the impact of these risks on your practice, but only if you are prepared to address them with a good deal of clarity and candor.

Whether buildings or bridges, it makes little difference. Rehabilitation adds a new element of uncertainty to an already uncertain undertaking. On most projects, you will be asked to work on the basis of information that may or may not be accurate, that may or may not be complete. You can attempt to verify this information by taking measurements, observing the surface features of buried utilities, and peering through access panels. But, in the end, you will have to make your own assumptions. Where actual conditions later prove to be different from the assumptions you have made, there will be changes and delays. Some will be costly. Therein lies a healthy portion of the risk.

The question is, who is going to assume this risk? Rightfully, it ought to be the owner. But, unless you raise this question at the very outset (and come to a clear understanding about its resolution), the owner is likely to assume either that the risk is yours, or that it can somehow be passed through to the contractor. The resulting expectation? If you perform your tasks properly at the front end, there will be no unpleasant surprises later.

You know the actual conditions you will encounter during construction can vary, perhaps significantly, from the available "as built" drawings, equipment submittals, and design data. Your client is unlikely to share this understanding--unless you go to some lengths to explain how hidden conditions can affect the work in unforeseeable ways. If you do not, you can expect that the owner will look to you to make good on "losses" arising out of what appear to be errors in your design.

You can avoid being drawn into unsettling and potentially costly situations, such as this, if you recognize the unique risks involved in rehabilitation work, and if you bring your clients to understand that they, not you, are the only ones in a position to take those risks. How can you do this without losing your clients before you even start work? Here are some ideas you might consider as you approach your next renovation project:

1. Candor.

   You are going to have to explain to your clients just what the risks are. Otherwise, they will not understand the problems you face in relying on existing information and visual inspection as a basis for your design. Nor will they be prepared to cope with the changes, the increased costs, or the time delays your experience tells you can easily be anticipated.

   Once you have discussed the risks involved, you might suggest that the least uncertain approach would be for you to conduct a detailed analysis of existing conditions as a preliminary, separate project. Point out that this entails such testing, early demolition, and exploratory excavation as may be necessary for you to verify the location and condition of concealed installations and buried utilities. Discuss the cost.

   This may not be a financially feasible option. But simply by raising it, you can help your clients to understand that in choosing, instead, to have you prepare plans and specifications based on existing information, a known cost is avoided only at the expense of increased uncertainty. It is an opportunity for you to explain that there may well be real costs involved in making this choice--costs likely to manifest themselves in the form of substantial changes during the course of the work.

2. Right to Rely.

   Once you have established a clear understanding with your client, it is important to reduce that understanding to writing. One way you might do this would be to incorporate into your agreement an acknowledgment of your "reasonable right to rely" on the accuracy of the information you will have to use to complete your work. Although it may well be appropriate for you to agree to exercise usual and customary professional care in your efforts to verify that information, you need to be explicit about what the limitations are.

3. Indemnification.

   You might also seek to build into your agreement an indemnification provision designed to protect you against the costs of being drawn into an unwarranted lawsuit, in spite of your best efforts to foster realistic expectations. Subject to review by your attorney, you might consider the following language for this purpose:

   Inasmuch as design for remodeling and/or rehabilitation requires that certain assumptions be made regarding existing conditions, and because some of these assumptions cannot be verified without the expenditure of large sums of additional money or destroying otherwise adequate or serviceable portions of the building, the Owner agrees that, except where the Architect (Engineer) is held to be negligent, the Owner will hold harmless and indemnify the Architect (Engineer) from and against any and all claims, damages, awards, and costs of defense arising out of the professional services provided under this Agreement.

4. Equity.

   It is also important to keep in mind that you and your client are not the only parties to the project with an interest in a successful outcome. The contractor wants to complete the work on time and walk away from it with a reasonable profit. This will be difficult, at best, if the owner chooses to operate under the mistaken assumption that the inherent risks can be shifted to the contractor simply by requiring verification of conditions on the site prior to the submission of a bid.

The contractor is in no better position to verify hidden conditions than you are, and contract language seeking to force the issue is little more than an invitation to trouble. It is likely to result in an inflated bid and, should that later prove to be inadequate, in requests for change orders and extensions in time--requests that can be "respectfully denied" only if you and your client are willing to fight a costly, time-consuming battle to find out whether the construction contract is enforceable or not.

The odds are not in your favor. Far better that you convince the owner to set aside adequate reserves for contingencies that simply cannot be anticipated in advance. If the reserves must be used, they will be available; if not, so much the better. In either case, if conflict is avoided, everyone involved comes out ahead.