BIM and Legal Risk
Carlo Paciulli, Esq.
Hunt Ortmann
301 North Lake Avenue, 7th Floor
Pasadena, CA 91101
626.440.5200
paciulli@huntortmann.com
www.huntortmann.com
Who Am I?
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Graduate architect
Construction manager
Project manager
Contracting Officer’s Representative
Licensed general contractor
Construction law attorney
Traditional Design Risk
Traditional Design Risk
• Traditional design-bid-build delivery
• The “Spearin Doctrine”
United States v. Spearin, 248 U.S. 132 (1918)
• a 1918 decision holding there is an “implied warranty”
in documents furnished by the owner
• if the documents are complied with, “the work would
be adequate”
The Spearin Doctrine
“…if [a] contractor is bound to build according to plans
and specifications prepared by the owner, the contractor
will not be responsible for the consequences of defects
in the plans and specifications. This responsibility of the
owner is not overcome by the usual clauses requiring
builders to visit the site, to check the plans, and to inform
themselves of the requirements of the work ….”
What Did Spearin Allow?
• Contractors could assert an action against the owner
for breach of the implied warranty
• The Court’s ruling shifted away from the contractor the
responsibility for inadequate construction where the
contractor was misled “by erroneous statements in the
specifications”
Gold Isn’t Pure … No One’s Perfect
• No requirement that plans and specifications “be
paragons of perfection”
• Must be “reasonably accurate”
• Defective documents are those that are “so faulty as to
prevent or unreasonably delay completion of the
contract performance”
When is There a Spearin Breach?
• Documents must be “substantially deficient or
unworkable”
• If there are many errors or omissions, the contract is
breached if “the cumulative effect or extent of these
errors was either unreasonable or abnormal” taking
into account the scope and complexity of the project
• Contractor must accurately follow and rely upon the
defective plans and specifications
Traditional Design Risk
• Risk begins shifting where contractor participates in
drafting specifications, participating in constructability
reviews, etc.
• The lines of division and responsibility become blurred
Facts Matter
• Key Factors:
Does contractor have “superior knowledge”
▫ knowledge that is vital to performing a contract, but
which is unknown and not reasonably available to
bidders, who are thereby misled
▫ Contractor may gain such knowledge if it participates in
design
Facts Matter
• Did contractor have “significant participation” in
developing specification?
• Did a “constructability” change alter design?
• These factors are important because: the party that
drafts, or changes, specifications is responsible for losses
suffered by the other due to defects
Facts Matter
• Performance versus design specifications
▫ Design Specs = detailed map, warranty
 sets out in precise detail the materials and manner in which
the work is to be performed
 contractor cannot deviate; required to follow “as one would
a road map.”
▫ Performance Specs = achieved standard, no warranty
 sets objective or standard to be achieved
 contractor uses ingenuity to achieve standard, selects means,
assumes responsibility
Traditional Design and Risk
• Does owner or contractor have “control” of the
design?
• With BIM, these risks may be harder to assess.
What BIM Does Not Change?
What BIM Does Not Change?
• Design still provided by licensed design professionals
• Contractor is still responsible for “Big Three”
▫ constructability
▫ means and methods
▫ shop drawings
What BIM Does Not Change?
• Growing concern in the industry about shifting legal
risks
• Properly implemented, BIM doesn’t shift risks
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Collaborative effort
Transparent processes and open-information sharing
May result in shared and decreased risk
But contracts must define roles, responsibilities, risks
BIM Creates Legal Issues
BIM Creates Legal Issues
• Contractors implementing BIM will suggest changes to
model
▫ BIM tools increase likelihood of this scenario
▫ Clash detection will require design modification
• Designers may feel less in control of design
• Owners may wonder about performance of designer
and software
Legal Issues
• No reported court decisions regarding BIM
▫ no legal guidelines or principles
• Litigation and court cases may help
▫ “law” includes statutes and court decisions
▫ court decisions help interpret statutes and their
application to facts
▫ this will take years
A Cautionary Tale
• Lawsuit involving life-sciences building at major university
is the first known claim involving BIM
• Architect and MEP engineers used BIM to fit the MEP
systems into ceiling plenum
• The tight fit depended on specific installation sequence;
never communicated to contractor
• 70% through assembly, no more room in plenum
• Insurer’s settlement totaled “millions of dollars”
• “If you don’t use BIM correctly, you can get into trouble”
Legal Issues
• Who owns the BIM model? Who manages it?
▫ Architect? Owner? Team?
▫ Should management responsibility shift?
▫ Who coordinates?
• Who owns the copyright to the information and
documents within the model?
▫ Each author? What about changes by others?
• Who can change the model? Who has access?
▫ Too restrictive, less BIM and more CAD
Legal Issues
• Who takes risk related to changes in the model?
▫ Who bears risk of transmitting incorrect information?
▫ If originator is unknown, how is that risk assigned?
• Who tracks the changes?
• Is there a snapshot of the model at each iteration?
▫ Large project produces potentially thousands of changes
and terabytes of data
▫ Enormous litigation cost might exceed value of claims
Legal Issues
• Insurance
▫ Carriers only beginning to come to grips with BIM; no or
limited BIM claims history
▫ Does A/E liability insurance adequately cover potential BIM
exposures?
▫ Is legal industry behind the curve?
• Third party disputes
▫ If pedestrian is hurt, if building collapses, answer may lie
within BIM model
▫ Proof may be difficult for plaintiff and defense
• Software maker
▫ What about defective algorithm? Is remedy limited to cost of
software? Should it be?
Risk
Risk
• Maximizing BIM involves giving each party access to
model
• Many or all may modify model
• What are the risks?
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Development, control, use of model
Design errors and omissions
Cost estimating and control
Facilities management and operations
Preserving the model
Risk: Development and Control
• Once architect develops model, subsequent changes
create exposures
• Multiple parties making changes raises intellectual
property issues for each user
• What if model is used and altered for other project?
• Where is model stored?
▫ One network? Multiple networks?
▫ Private project website?
▫ Drawings go in file drawer
Risk: Errors and Omissions
• Many jurisdictions allow contractors to sue architects
for poor drawings
▫ Negligent misrepresentation
• BIM demands closer relationships
▫ All parties not in privity of contract
▫ Negligence claims might increase on design standard of
care
Risk: Cost Estimating and Control
• BIM allows early collaboration
▫ Allows early cost estimating
▫ Allows early design modifications for cost control
▫ Make design comply with budget
• BIM might solidify owner cost/budget expectation
• Increased estimating accuracy doesn’t guard against
price fluctuations, bidding strategies, “race to the
bottom”
Risk: Facilities Management
• Increased BIM usage parallels shift to
energy-efficient design
• Energy efficiency can be measured against design
assumptions
• Reviewing designed efficiency against actual
performance critical in determining liability
Risk: Preserving the Model
• Final design isn’t saved to file drawer
• All changes have to be captured, backed up
• Before completion, what happens if:
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Network crashes
Data becomes corrupted
Significant delay to recreate model
Data preservation fails. Who’s responsible?
Risk Allocation
• Probably most important issue
• Two Approaches
▫ Rely on case law interpreting traditional design risk
▫ Include specific BIM risk allocation in contracts
Risk Allocation
• Case Law
▫ There isn’t any
▫ Might become a contest over traditional Spearin Doctrine
of implied warranty
▫ Results are unpredictable
Risk Allocation
• Contract Approach
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ConsensusDOCS 301 BIM Addendum
AIA IPD with BIM Protocol Exhibit
Draft BIM Rider
Defines and establishes
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Parties and definitions
BIM Scope of Work
Risk Allocation
Ownership Rights
Damages
Risk Allocation on Damages
• General concepts
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Each responsible for direct damages they cause
Avoid “intangible”(consequential) damages
Limiting range of damages might reduce incentive to sue
Address these issues in contracts
Risk Allocation on Damages
• Each responsible for direct damages
▫ Contributor can be sued for direct damages caused by
relying on the contributions to the model
• Each waives right to seek consequential damages
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Lost profits
Lost income
Loss of use of the project
Lost business
Overhead expenses
Insolvency
36
Q&A
Carlo Paciulli
Hunt Ortmann Palffy Nieves Lubka Darling & Mah, Inc.
Pasadena, California
September 28, 2011