CM at Risk – Owner Still Impliedly Warrants Design
A public authority argued that the CM’s obligation to review and comment on the design in process meant that the authority did not impliedly warrant the sufficiency of that design. And thus the CM would have no claim against the authority when a subcontractor pursued a claim based on improper design. But the Massachusetts Supreme Judicial Court has held that the implied warranty remains intact in a CM at risk setting unless the authority expressly disclaims any such implied warranty.
The Massachusetts high court discussed the nature of CM pre-construction activities, including the CM providing input and feedback during the design phase. And it also addressed the fact that the CM may take into account, in establishing the GMP, risks arising from incomplete design. But it then noted:
As significant as these differences in relationship are [from traditional design-bid-build], we are not persuaded that the relationships are so different that no implied warranty of the designer’s plans and specifications should apply in construction management at risk contracts made pursuant to [the Mass. CM at risk law] and that the CMAR should bear all the additional costs caused by design defects.
An implied warranty is based on the concept that responsibility for a problem rests on the one who controls (or represents that it can control) the issue giving rise to the problem. The court noted that “the owner, through the designer, ultimately controls the design …” So this ultimate control with owner and designer meant that the CM could still pursue a claim based on the implied warranty theory. Also, the CM at risk procurement law provided that the CM “may” provide “consultation” concerning the design. Relying on Webster’s definition of “consult”, the court found that the law did not translate into any guarantee by the CM against design defects.
But the court did note that the CM’s role during design might affect the scope of the owner’s implied warranty. It remains to be seen whether any of the major public authorities in Massachusetts will now seek to modify some of the contract terms going forward, to dilute the owner’s implied warranty in a CM at risk setting. The case is Coughlin Electrical Contractors, Inc. v. Gilbane Building Company, et al, Mass. SJC-11778 (Sept. 2, 2015).