Who is responsible for design?

Design responsibility in a building contract will rest with either the principal or the contractor.

In the traditional form of building contract, the principal will engage professional designers (ie architects and engineers) to carry out the design work specified in the building contract. The principal will enter into a contract with the designers separate from the building contract. The principal retains the ultimate responsibility for design under the building contract. The contractor’s responsibility is limited to constructing the completed design.

Alternatively, the design may be performed by the contractor as part of its ordinary functions as contractor or under its contractual obligations under a design and construct contract.

A design and construct contract is a modified version of the traditional contracting model. In this form of contract the contractor assumes responsibility for the design/ design documentation and construction of a project.

In design and construct contracts, the scope is defined by a design brief (sometimes called the ‘principal’s project requirements’) which sets out only the broad parameters of the principal’s requirements. The contractor is free to work within the design brief to achieve the contractual objective.

In design and construct contracts, the contractor will either procure and engage professional designers in separate contracts, or assume responsibility for the professional designers (and their design work) initially engaged by the principal and subsequently novated over to them. Even if the contractor had nothing to do with the initial preparation of design but assumes responsibility for the design under the building contract, the contractor will be liable to the principal. This liability is absolute.

The standard format design and construct contracts (eg AS4300, AS4902) are commonly amended by the principal to allocate most, if not all, of the contractual and design risk to the contractor. These amendments are normally made by the principal prior to the contractor sighting the document. The increased apportionment of risk to the contractor will usually be reflected in the tendered contract price.

By contrast, the standard of obligation owed by the designers to either the principal or the contractor is only to exercise reasonable skill and care when carrying out the design functions. Standard conditions of engagement in the design contracts will often attempt to limit the designer’s liability both in respect of quantum and duration.

To protect themselves against liability incurred for errors in the design, either the principal or contractor will expect the design professional to take out professional indemnity (PI) insurance prior to commencing the works, and to maintain this insurance for a specified period following completion of the works. PI insurance will protect a party against a claim made for loss or damage occasioned by a failure of the designer to exercise reasonable care.