The law hasn't kept up with the changes in the way big construction projects are managed. As a result, a lot of design professionals are in what Milton Lunch, general counsel of the National Society of Professional Engineers, calls "a dangerous situation."
Traditionally, the owner of a planned building went to a firm of architects and engineers to design it and then to a general contractor to build it, with the general contractor in turn hiring plumbers, electricians and the like.
But for some years now, a new kind of middleman has been getting into the picture: a construction manager or project manager who stands in for the owner in dealing with both the designers and the builders.
As a standard agreement worked out by the Engineers' Joint Contract Documents Committee puts it, "The project manager will take over for the owner many administrative and coordinating functions."
He would, in effect, take charge of the project from beginning to end, in order to provide special expertise and relieve the owner of duties and responsibilities that the owner is neither qualified to undertake nor for which he will have a need on a continuing basis.
The construction manager is expected to review the designs to make sure that they come within the cost and time limits set by the building owner; oversee budgeting, scheduling, procurement; make sure that the materials and workmanship live up to specifications; handle labor relations, and in general make sure that the building gets done properly. It makes sense, but it does not fit neatly into the time-honored definitions of who does what in the construction industry.
For instance, must the firm that takes on that job have a license from the state to operate as a contractor or architect/engineer? In California, the answer (from the state Attorney General) is "no." But in Arkansas, the issue became so heated that the legislature, in 1977, passed a law to make it clear that, "yes," the construction manager does need a license.
What about on-the-job safety? Is the construction manager--who does not employ the construction laborers--responsible for violations of Occupational Safety & Health Administration standards? The clear answer is "sometimes." Decisions by the Occupational Safety & Health Review Commission say that the deciding factor is not what is happening at the job site, but the language of the contract between the manager and the owner of the project. When the overseer is called a "construction manager" and agrees to coordinate the construction work, the firm is then "engaged in construction work" and subject to OSHA prosecution, the commission has ruled. But when the contract calls merely for the manager to "observe" the construction work--and doesn't specifically call the job being done "construction management," then, the commission says, the firm cannot be held responsible for workplace hazards.
"The wise practitioner should probably assume that he may be held liable for construction accidents and failures," Lunch advises in an upcoming issue of the journal Law and Contemporary Problems, published by the Duke University School of Law.
But the real rub is that, while architects or engineers may make that assumption, their insurance carrier will not. No company offers a professional liability insurance policy specifically for the construction-management business. And it is a matter of conjecture whether regular liability policies for architects and engineers would cover a malpractice suit against a construction manager.
Traditionally, the policy offered by Continental Casualty Co.--which covers more architect/engineer firms than any other carrier--provided protection only when "legal liability arises out of the performance of professional services for others in the insured's capacity as an architect or engineer." Now a new version adds the services of a "construction manager," but it specifically excludes liability for any claims arising from the "scheduling of construction or the means, methods or techniques used in construction." And that's a lot of what construction managers do.
The usefulness of the construction-management approach is too great--and the money to be made in the field by design professionals too tempting--for the legal uncertainties to curb the growth of the concept. But there are legal hazards for those who get ahead of courts and legislatures. Law is based on tradition, with special risks for those who try to change tradition.