Stopping and Restarting Projects Not Business as Usual. RLI Design Professionals Design Professionals Learning Event DPLE 224 April 20, 2016

Transcription

1 Stopping and Restarting Projects Not Business as Usual RLI Design Professionals Design Professionals Learning Event DPLE 224 April 20, 2016

2 With Special Thanks To David J. Hatem of Donovan Hatem LLP Presented Today By: Barbara Sable and Abbey Brown

3 RLI Design Professionals is a Registered Provider with The American Institute of Architects Continuing Education Systems. Credit earned on completion of this program will be reported to CES Records for AIA members. Certificates of Completion for non-aia members are available on request. This program is registered with the AIA/CES for continuing professional education. As such, it does not include content that may be deemed or construed to be an approval or endorsement by the AIA of any material of construction or any method or manner of handling, using, distributing, or dealing in any material or product. Questions related to specific materials, methods, and services will be addressed at the conclusion of this presentation.

4 Copyright Materials This presentation is protected by US and International Copyright laws. Reproduction, distribution, display and use of the presentation without written permission of the speaker is prohibited. RLI Design Professionals

5 Course Description The financial crisis of the late 2000s affected the A/E sector by causing many projects to be suspended or terminated due to lack of financing. This presentation is going to discuss the common issues design professionals face when a project is suspended, terminated, and/or restarted.

6 Learning Objectives Participants Will: 1. Learn to identify financial and contractual risks on projects. 2. Gain knowledge about industry and economic trends that impact project execution. 3. Better understand the risks associated with restarting a suspended project. 4. Develop the skills necessary to use contractual terms to protect yourself in these situations.

7 Past Industry Trends Funding difficulties Risks of signing bad contracts Negligence-based counterclaims against DPs who pursue fee claims

8 Current Industry Trends Continued issueswith accessing funding New organizational players Renewed need for risk management Biggest concerns: impacts on the bottom line

9 Preliminary Steps 1.Look into potential client s financials. 2.Make decisions about what will happen if the project is suspended or terminated before suspension or termination. 3.Vet your subconsultants.

10 Reminder Proceeding to provide services without a contract only breeds uncertainty.

11 General Issues with Suspension - Fees - IP rights - Changes in Laws, Codes, & Regulations - Risk Exposure

12 The Likely Scenarios Understand which case your project falls under in order to manage risks: Case #1: Same Owner, Same Design Firms Case #2: New Owner, Same Design Firms Case #3: Same or New Owner, You Are Terminated Design Firm Case #4: Same or New Owner, You Are New Design Firm

13 Case #1 Same Owner, Same Design Firms Make-It Engineering Co. & Develop-It Inc. SUSPENSION Make-It Engineering Co. & Develop-It Inc.

14 Case #1 Same Owner, Same Design Firms: Update Original Contract OR Draft New Agreement

15 Case #1 Task List Collect payment for past services before negotiating new terms Update contract OR draft new agreement Verify compliance with regulations & codes Review previous studies and reports Evaluate design team

16 Case #2 New Owner, Same Design Firms Make-It Engineering Co. & Develop-It Inc. SUSPENSION Make-It Engineering Co & Build More Inc.

17 Case #2 Task List Draft new agreement Confirm copyright ownership Confirm design team

18 Case #3 Same or New Owner, You are Terminated Design Firm Make-It Engineering Co. & Develop-It Inc. SUSPENSION Smith & Associates LLP & Develop-It Inc.

19 Case #3 Same or New Owner, You Are TERMINATED Design Firm: Preliminary Steps: 1. Confirm status as terminated 2. Notify affected parties of departure

20 Major Concerns Getting paid Release and/or indemnification Use of documents

21 Releases & Indemnifications PUT THIS: IN THIS: In consideration of the mutual covenants, conditions, and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Owner agrees to waive any and all claims against the Design Professional and to defend, indemnify and hold the Design Professional harmless from and against any and all claims, losses, liabilities and damages arising out of or resulting from the use, reuse or alteration of the Design Professional s Documents by the Owner or any other entity or individual. The Owner will remove markings on the Documents that would be sufficient to identify the Design Professional as the author of the Documents.

22 Protecting Your Designs To Include in Your INITIAL Contract with Owner: 1. Ownership Clause 2. Warranty Disclaimer Clause

23 Ownership Clause To the fullest extent permitted by law, the Documents prepared by the Design Professional, regardless of form, shall remain the property of the Design Professional. The Design Professional shall retain all common law, statutory and other reserved rights, including, without limitation, the copyrights thereto.

24 License to Use $ $ $ $ $ $ $ $ Upon payment in full for services rendered hereunder, the Design Professional grants to Owner a nonexclusive license to use Design Professional s Instruments of Service solely and exclusively for purposes of constructing, using, maintaining, altering and adding to the Project. The license granted under this section permits the Owner to authorize the Contractor, Subcontractors, Sub-subcontractors, and material or equipment suppliers, as well as the Owner s consultants and separate contractors, to reproduce applicable portions of the Instruments of Service solely and exclusively for use in performing services or construction for the Project. $ $ $ $ $ $ $ $

25 Warranty Disclaimer Clause The Parties agree that at this time, the Design Professional does not represent that the Documents are complete, or that they are consistent with the current conditions that may affect the Project, and makes no representations or warranties about the fitness of the Documents for any particular purpose.

26 Case #3 Task List Collect payment Secure release/indemnification Resolve ownership of documents Include warranty disclaimer

27 Case #4 Same or New Owner, You are New Design Firm Make-It Engineering Co. & Develop-It Inc. SUSPENSION The Design Guys, LLC & Develop-It Inc.

28 Case #4 Same or New Owner, You Are NEW Design Firm: 1. Responsibility for Services Completed Before You Were Hired. 2. Ownership and Use of Documents.

29 Responsibility for Prior Services In consideration of the mutual covenants, conditions, and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Owner agrees to waive any and all claims against the Design Professional and to defend, indemnify and hold the Design Professional harmless from and against any and all claims, losses, liabilities and damages arising out of or resulting from the services performed by the [prior Design Professional].

30 Ownership & Use of Documents In consideration of the mutual covenants, conditions, and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Owner agrees that the Owner has permission from [prior] that Owner can forward plans and specifications and any and all Instruments of Services created by [prior] to the Design Professional for the Design Professional s use in the preparation of the Design Professional s plans and specifications.

31 Case #4 Task List Confirm responsibility for prior design Confirm copyright ownership Confirm right to use prior design documents

32 AIA Contracts

33 AIA Contracts B 101 Article 7 Copyrights and Licenses 7.1 The Architect and the Owner warrant that in transmitting Instruments of Service, or any other information, the transmitting party is the copyright owner of such information or has permission from the copyright owner to transmit such information for its use on the Project

34 AIA Contracts B 101 Article 9 Termination or Suspension 9.2 If the Owner suspends the Project, the Architect shall be compensated for services performed prior to notice of such suspension. When the Project is resumed, Architect shall be compensated for expenses incurred in the interruption and resumption of the Architect s services. The Architect s fees for the remaining services and the time schedules shall be equitably adjusted. 9.3 If the Owner suspends the Project for more than ninety (90) cumulative days for reasons other than the fault of the Architect, the Architect may terminate this Agreement

35 AIA Contracts B 101 Article 9 Termination or Suspension 9.6 In the event of termination not the fault of the Architect, the Architect shall be compensated for services performed prior to the termination, together with Reimbursable Expenses then due and all Termination Expenses as defined in Termination Expenses are in addition to compensation for the Architect s services and include expenses directly attributable to termination for which the Architect is not otherwise compensated, plus an amount for the Architect s anticipated profit on the value of the services not performed by the Architect.

36 AIA Contracts B 101 Article 11 Compensation Unless otherwise agreed, payments for services shall be made monthly in proportion to the services performed. Payments are due and payable upon presentation of the Architect s invoice The Owner shall not withhold amounts from the Architect s compensation to impose a penalty or liquidated damages on the Architect, or to offset sums requested by or paid to contractors for the cost of changes

37 AIA Contracts C 401 Article 1 General Provisions 1.1 A copy of the Architect s agreement with the Owner, known as the Prime Agreement is attached as Exhibit A and is made a part of this agreement. 1.3 To the extent that the provisions of the Prime Agreement apply to This Portion of the Project... Insofar as applicable to this Agreement, the Architect shall have the benefit of all rights, remedies and redress against the Consultant that the Owner, under the Prime Agreement, has against the Architect.

38 Final Thoughts

39 This concludes The American Institute of Architects Continuing Education Systems Program Laurel Tenuto, Client Risk Management Coordinator Barbara Sable, Assistant Vice President