Design-Build Skip Over Clause
from the desk of Nahom Gebre
For design professionals considering design-build projects for the first time, special attention must be paid to the prime agreement between the owner and design-builder. Frequently, design professionals provide their design services as a subconsultant to the design-builder. During a recent contract review we came across the following clause in the prime agreement between the owner and design-builder:
The Owner acknowledges that the Design-Builder is not a design professional, but is merely furnishing, not performing, professional design services. Owner expressly agrees that Owner’s recovery for claims of professional errors and omissions shall be limited to the amount recoverable from the errors and omissions insurance coverage carried by the design professionals employed by the Design-Builder or its contractors or subcontractors. Subject to the limits of Architect’s insurance, Design-Builder agrees to assign to Owner Design-Builder’s rights against Architect to the extent Owner suffers damages or losses caused by professional errors and omissions of Architect. Owner shall be a third party beneficiary of the Agreement between Design-Builder and Architect for purposes of recovering against Architect for damages or losses of Owner caused by professional errors and omissions of Architect under this clause.
This is known as a skip over clause where, essentially, the design-builder has agreed that if there is a problem that appears to be design-related the owner has the right to bring a claim directly against the architect. Just about any problem is going to involve questions about design adequacy, and as such a skip over clause would make the architect a target for cost recovery efforts by the owner. From a risk management standpoint it would be prudent not to have such a skip over clause; instead the owner can pursue a claim against the design-builder, the entity with whom it has a contract. The design-builder can then bring a claim against the architect if it relates to the professional services that the architect provided on the project. Having the owner designated as a third-party beneficiary with a right to bring claims directly against the architect increases the risk for the project significantly.