Source: http://www.irmi.com, July 2015
By: Jeff Slivka, New Day Underwriting Managers LLC

If you have ever attended one of my seminars, you know I like to begin with a little test. I call it the Slivka Aptitude Test or SAT! I use it to gauge (sort of) the knowledge and backgrounds of the individuals in the audience as well as to have a little fun. After writing numerous articles on design liability and contractors professional liability, I figured it was time to change it up and offer the test to all.

Over the past few years, I have spent much of my time discussing project delivery methods and the professional liability risks a contractor faces within each delivery method. I believe that, to truly understand the professional liability risks of a construction firm, you have to understand the basics, at minimum, of each project delivery method. So I thought it would be best if we start there and test your knowledge on project delivery methods. Good luck, and have fun!

The Questions

1. According to the Design Build Institute of America (DBIA), what is the most common project delivery method used in the United States today?

A. Design-bid-build

B. Design-build

C. Engineering, procurement, construction

D. At-risk construction management

2. What project delivery method typically involves design being 100 percent complete?

A. Design-bid-build

B. Design-build

C. Public/private partnerships

D. At-risk construction management

3. Who is ultimately responsible for design errors on a construction project?

A. Contractor

B. Owner

C. Design professional (DP)

D. All of the above

4. When construction begins before the design is 100 percent complete, it is commonly referred to as

A. fast-tracking.

B. fast-balling.

C. fast-talking.

D. fast-designing.

E. engineering, procurement, construction.

5. What type of construction specifications present contractors with a higher degree of professional liability risk?

A. Design specifications

B. Prescriptive specifications

C. Performance specifications

D. Lean specifications

6. Under the construction manager at risk (CMR) delivery method, which of the following entities holds the primary contract for design of the project with the DP?

A. Owner

B. General contractor (GC)

C. Finance company

D. Agency construction manager

7. Which of the following project delivery methods involves a multiparty agreement where the common procurement option in selecting the team is qualifications based?

A. At-risk construction management

B. Design build

C. Public/private partnerships

D. Integrated project delivery (IPD)

8. Contractors perform a variety of services that expose their organizations to professional liability. One type of service provided by a subcontractor that involves supplementing the engineer of record’s design by providing supporting engineering services either in house or subcontracted is often referred to as

A. bridging services.

B. systems engineering.

C. design assist.

D. construction means and methods.

9. The legal doctrine that holds one entity (the GC) liable/accountable for the negligent actions of another entity (the subcontractor), even though the first entity was not directly responsible for the resulting harm or damages, is generally referred to as

A. vicarious liability.

B. nothing important in our lines of insurance.

C. strict liability.

D. prudent person defense.

E. Spearin doctrine.

10. Techniques created/used/applied by contractors to assist them in constructing the permanent structure/project are typically referred to as what?

A. Construction principles and services

B. Construction means and methods

C. Prescriptive specifications

D. IPD

E. All of the above

SAT IQ Scale

Hopefully that wasn’t too bad. Now page down for the answers, but before you do, I have created a scale on which you can measure your intelligence:

10 out of 10—Exceptional. You are EXCEPTIONAL!!

9 out of 10—Gifted. Your family will still be proud of you. Print this out, show everyone in your office, and then pin it to your desk. Then take a picture of it and send it to me because I want to see the sorry person who would do that over a simple little quiz.

8 out of 10—Bright but obviously not THAT bright!

7 out of 10—Upper normal. I guess it’s just another way of saying you did average. Okay if you want to be “normal.”

6 out of 10—Borderline. Borderline what?? I don’t know, but I know you are borderline!

5 or less—Duuuuuude!

Caveat: Before you go any further, you have to understand that there is no arguing over answers or partial credit. I am the answer board, and the answers are final, so if you don’t like it, tough.

Answers

1. A. Design-bid-build. Although various project delivery alternatives have come into greater use in recent years, especially in the case of design-build, the traditional design-bid-build method is still the dominant delivery method preferred by owners. The DBIA predicts design-build will surpass design-bid-build as the dominant method sometime before 2020.
2. A. Design-bid-build. In design-bid-build, the owner of a project first contracts with a DP or DP team. The DP performs and completes the design plans and specifications. The 100 percent completed plans and specifications are then advertised by the owner for bid. GCs compete for the construction contract, and once awarded, the GC will construct the project according to the 100 percent completed plans and specifications.
3. B. Owner. While it is natural to want to choose the DP or the contractor (in the design-build delivery method), it’s the owner who ultimately retains responsibility for damages associated with design errors. Of course, the owner may attempt to shift the risk via proper selection of design firm/team, contract language, insurance, and so forth, but if any or all of these techniques fail, they retain the ultimate responsibility.
4. A. Fast-tracking. It can sometimes sound like fast-talking, but the answer is fast-tracking.
5. C. Performance specifications. Performance-based specifications focus on outcomes or results rather than on the construction process. Conversely, design or prescriptive specifications are detailed and outline exactly how the contractor must construct a project. When performance specifications are applied, the contractor is free to use his/her expertise, experience, and knowledge to determine what products, equipment, materials, or process is best suited to provide the required outcome. This can expose contractors to professional liability risk.
6. A. Owner. In the CMR project delivery method, the owner typically still holds two contracts. One contract is with the design DP, and the second is with the CMR, who then holds contracts with the subcontractors and is responsible for the performance of the construction work and typically under a guaranteed maximum price.
7. D. IPD. The selection process for all answers listed is qualifications based, but the key phrase with IPD is “multiparty agreement.” There are several variations of the definition of IPD, but the simplest is—a collaborative process or delivery method that joins the owner, architect, and contractor (and, in some cases, other entities such as major subcontractors, suppliers, and engineering firms) under a single contract so that the risk and responsibility are collectively managed and appropriately shared.
8. C. Design assist. Design assist is a collaborative team-oriented technique that draws upon the specialty expertise of certain subcontractors by engaging them early in the design phase to optimize project cost, value, and constructability efficiency.
9. A. Vicarious liability. If there are still GCs that hold design-build contracts (or may have specialty subcontractors who hold contracts with engineering firms) and don’t think they can be liable for the design just because they didn’t design, they need to better understand this concept.
10. B. Construction means and methods. It’s important to understand there is professional liability risk associated with means and methods. Whether it’s a GC hiring an engineer to design a tower crane base, falsework, or scaffolding system (to name a few), contractors are exposed to various professional risks not insured through the commercial general liability policy, especially the economic damages associated with such errors in services.
I hope you enjoyed this little test, and I appreciate you taking the time to complete it.