Claims against design engineers - beware the rocky road
- No one warms to the idea of being in a position of needing to sue their design engineering consultants. These are the people who have often helped you the contractor win the project, then help to deliver the execution of the project ultimately through to practical completion. But where projects tend to live and die is in the design phase. Constructing to well prepared and thorough “issued for construction” drawings is, comparatively, relatively straight forward. However it is the design phase, where there are a host of consultants, competing interests (from the principal, contractor and designer) where real delays can mount.
- Typically there are two kinds of claims levelled to design engineers:
- breach of tender support services;
- breach of design phase services.
- Both have difficulties.
- In the former, the contractor is alleging that, by reason of poor tender support/advice, the contractor undercooked its tender price in its upstream bid to the Principal. Immediately that means the contractor is in a position where it is having to prove a counterfactual: that if the consultant’s tender phase services were superior, it would have priced the project differently, and it would have won the project. Usually this claim is predicated on a breach of contract or alternatively, breach of section 18 of the Australian Consumer Law, as applied by the Competition and Consumer Act 2010 (Cth). However when you dig a little deeper, and when you truly understand contracting, you might find that contractors may not have actually priced the upstream bid differently. You might find that, regardless of if the contractor knew the design was substandard, the contractor still may have accepted the risk of that design and pitched to win the project at the price that it submitted its tender at. This is not uncommon for a contractor to make a commercial decision, at the late stage of a bid, in an effort to offer a competitive bid.
- The second kind of claim, for breach of the design phase services, often involves factual complexity. Usually there are a host of inputs and quite possibly preferential engineering requests which manifest during the design development process. Good contracts will require a design “freeze” at the 30% design, such that only details can be changed after the 30% design stage. Any other changes, other than detailing, drives a variation and therefore presumably time and cost relief events under the contract. The dispute descends into a “he said, she said” quagmire, where detailed and specific affidavit lay evidence is needed by particular individuals involved in every element of the design stage, to demonstrate one party’s culpability for a deleterious decision over the other party’s. Of course the designer will usually be on the hook for design risk and ensuring the design satisfies the principal’s project requirements, but that risk allocation may not entirely absolve a zealous principal or head contractor from their preferential engineering requests – and with it, the consequences of such requests.
- The final point to note in respect of such claims against design engineers, is that the counterparty is an insurer, being instructed by engineers. Insurers are painful to litigate against because they rarely cough up until the 11th hour before a hearing date. It is simply in their interest to hold onto the cash, have it invested elsewhere, and avoid paying claims for as long as possible. Then add to that, the insurer’s lawyers will be taking instructions from the design engineers themselves. Design engineers, for all their faults, are perhaps among the most meticulous professionals. They have a keen eye for detail and recording design decisions made. Usually, more so than the contractor’s personnel, who tend to be spread more thinly across a greater scope of the project.
- Except in respect of the clearest of design errors, contractors should heed some caution before jumping into a protracted dispute with an insurer about the services provided by design engineers. Beware the rocky road.
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