Source: http://www.constructionexec.com, July 27, 2017
By: Gina M. Vitiello
Is it reasonable for a subcontractor bidding on a design-build project to assume that the designer has followed the owner’s requirements in preparing the preliminary design documents? The answer is yes, according to a recent ruling by the U.S. Court of Appeals for the 11th Circuit, which affirmed a jury verdict from the District Court. The ruling was in favor of two paving subcontractors against the project engineer, Jacobs Engineering Group, Inc.
The case involved a U.S. Army Corps of Engineers roadway project at Fort Benning, Ga., which included the widening of an existing road and the construction of a new road to accommodate the weight of military “Heavy Equipment Transport” vehicles (HETs) used to transport Army tanks. In addition to providing design information about the HETs in the request for proposal, the Corps gave specific instructions to bidders to “assume 10 HETs per day” for bidding purposes.
Jacobs teamed up with design-build contractor Sauer, Inc. to submit a proposal containing a preliminary design of 4.5 inch thick pavement. Jacobs instructed subcontractors bidding on the roadwork to assume 4.5 inches of pavement throughout the project for pricing purposes.
Jacobs acknowledged that it was aware of the Corps’ pre-bid instructions to assume 10 HETs per day for bidding purposes when it prepared its preliminary design. However, Jacobs’ project manager testified at trial that he ignored the HET requirement when designing the pavement thickness. Instead, he simply used the pavement thickness of a prior roadway project at the Army base, which did not include any HET requirements. The project manager explained that he thought the requirement was “odd” and “imaginary,” so he disregarded it in calculating the pavement thickness at 4.5 inches.
Relying on the accuracy of the bidding information provided by Jacobs, Alexander Contracting Company, Inc. submitted a bid that included pricing for 4.5 inches of pavement. Alexander’s owner testified he could not have known that the preliminary design did not accommodate 10 HETs per day, and Jacobs did not advise bidders that its preliminary design did not meet the Corps’ requirement. Alexander was awarded a subcontract, which included the paving and subcontract price based on its bid for that work.
After the project was under way, the Corps discovered the non-compliant 4.5-inch pavement thickness. Jacobs redesigned the
roads to meet the HET requirement, causing the pavement thickness to increase between 1 and 1.5 inches throughout the project, thereby increasing Alexander’s costs by more than 30 percent. Alexander submitted a change order request to the design-build contractor, but it was denied based on provisions of the subcontract in which the contractor expressly disclaimed any warranty of the design or any liability for errors or omissions in the design.
Negligent Misrepresentation
Although Alexander did not have a contract with Jacobs, it ultimately sued and recovered from Jacobs for the increased costs of the additional pavement under a legal theory known as negligent misrepresentation.
Negligent misrepresentation is a legal claim that allows a subcontractor that does not have contractual privity with a designer to sue the designer directly for negligently providing false information to the subcontractor, if the designer intended for the subcontractor to rely on that information, and if the subcontractor reasonably relied on the information to its detriment.
At trial, Alexander entered evidence of an email from Jacobs advising that bidding subcontractors should assume 4.5 inches of pavement for pricing purposes. Alexander also showed that it relied on the pavement thickness information from Jacobs because its bid was based on the 4.5 inches of pavement. Finally, Alexander demonstrated that it incurred approximately $356,000 of additional costs due to the increase in pavement after the roads were redesigned to meet the Corps’ prebid HET requirement.
At the end of trial, Jacobs made a motion to the court before the case was sent to the jury asking the judge to dismiss the claim on the grounds that Alexander did not meet its burden of proof as to Jacobs’ negligence because it had not provided expert evidence demonstrating “professional negligence” (i.e., that Jacobs failed to meet a special standard of care applicable to similar engineers in similar circumstances).
The District Court judge denied the motion and ruled that Jacobs’ failure to follow the Corps’ explicit instructions to assume 10 HETs per day for bidding purposes was ordinary negligence rather than professional negligence, and that expert testimony regarding whether Jacobs’ met a professional standard of care was not necessary for Alexander to prove its claim for negligent misrepresentation.
Jacobs argued to the jury that Alexander “should have known” that the preliminary design was subject to change, and that it was not reasonable for Alexander to have relied on the 4-inch pavement thickness in pricing its bid. However, the jury entered a verdict in favor of Alexander, awarding it the entire amount of its claims for additional costs.
Jacobs appealed the decision to the U.S. Court of Appeals, arguing that the judgment against it should be overruled because the District Court judge erred in ruling that expert testimony was not required, and because evidence didn’t support the jury’s verdict. The panel of three judges hearing the appeal issued a unanimous decision affirming the decisions of the District Court and upholding the judgment against Jacobs.
This case demonstrates that under certain circumstances, designers can be held directly liable to contractors and subcontractors—even in the absence of a direct contractual relationship—for errors or omissions in the design. Additionally, it’s unique that the U.S. Court of Appeals upheld a decision finding that a designer’s failure to follow the owner’s explicit instructions breached the standard of care of an ordinary prudent person, rather than a professional standard of care applicable only to engineers.
Gina M. Vitiello is a partner practicing construction law in the Atlanta office of Chamberlain, Hrdlicka, White, Williams & Aughtry. For more information, call (404) 588-3426 or email gina. vitiello@chamberlainlaw.com.