The Critical Path: Tools for Resolving Construction Disputes : California Construction Lawyer & Attorney for Dispute Resolution in Los Angeles, San Diego & the S.F. Bay Area

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The 800 pound gorilla in every room of contractors or architects contemplating a design-build project is this: how do you pursue a design-build contract that may require some form of joint enterprise with other professionals and protect  your proprietary information at the same time?  Patrick Miller of Baker & Daniels  answers this and other related questions in an outstanding post about  drafting "teaming agreement," which includes the following nine points

1. Choose the Right Business Relationship. The team must figure out – before pursuing a contract with the owner – how it is going to come together. There are three basic options: limited liability companies, joint ventures, and subcontracts. As a general rule, if the plan is to pursue work in a given geographical area (like the State of Illinois), then an LLC is probably best. If it is to pursue a single project, then a joint venture or subcontract will work.

2. Understand the Owner's Contracts. Design-build calls for two parties to sign one agreement. AIA's version of Integrated Project Delivery calls for three parties to sign one agreement. Still another integrated delivery method – CM-At Risk – requires at least three parties to sign at least two agreements. In order to choose the best contractual relationship, the owner will need to consider the sector (public bidding laws may make all three options impossible), the market (a Chicago high rise office building may not be suitable for design-build), and the talent pool (if there are not any qualified design-builders in the immediate area, then once again, design-build may not be best). The teaming agreement should anticipate the proper contractual framework and assign responsibilities accordingly.
3. Put it in Writing. The biggest mistake your company can make in participating on an integrated team is to do it on a handshake. There is too much at stake, and you cannot leave basic terms undefined and important information unprotected (see items 4 through 9, below).
4. Make it Exclusive. If your company is putting forth the time and effort to pursue a project with other firms, it probably doesn't want to find out – after losing the contract – that two of its core team participants are on the winning team. Eliminate this risk by adding an exclusivity provision to your teaming agreement.
5. Make it Confidential. Participating on an integrated team will undoubtedly involve exchanging proprietary design and pricing information. If your company hands this over without restricting its use in a written agreement, then it is likely gone for good. Eliminate this risk by clearly establishing the confidentiality of such information and the penalties for disclosing it to outsiders, especially other teams.
6. Call Your Insurance Broker. With integration comes: 1) an evolving standard of care for the design community; and 2) potential design responsibility for the contractor. Does being part of the team void the architect's errors and omissions coverage? Is the owner unprotected if he or she doesn't have a contract with the architect? The answers are no, so long as the agreements and insurance are updated to accommodate the integrated project delivery model. Contact your insurance broker to confirm that your new arrangement has the proper coverage, and update your teaming agreement accordingly.
7. Check Your Licensing Laws. All states have laws defining what it means to practice "architecture" and "engineering." They also impose harsh penalties for offering to perform these services without a license. And some courts will void contracts where a party offers to perform these services without a license. Check these statutes, contact your State's licensing officials, and include language in your teaming agreement requiring the licensed professionals to be responsible for offering these services.
8. Identify the Team in the Agreement. The agreement should identify each team member and state the member's role: a) in pursuing the contract; and b) after the contract is won. Each identified member must sign the agreement.
9. Spell out the Scope, Time, and Cost. Pursuing design-build and other integrated projects is much more time consuming and expensive than simply negotiating a design contract or bidding on a set of construction drawings. The teaming agreement should contemplate these concerns by explaining the team's objective, how long it will take to meet the objective, and how costs in getting there are to be allocated. It should also deal with distributing stipend proceeds if the owner is offering a stipend.

There has been much written about the legal ramifications and risks associated with design-build contracts. Patrick's practical advice on the benefits of a teaming agreement and his nine points to consider before signing one add valuable insights to the discussion. Teaming agreements should  include provisions to give you the peace of mind to aggressively pursue the work while protecting your proprietary interests, trade secrets, and other competitive advantages.

Carefully drafted agreements are at the core of risk avoidance strategies. Many construction disputes are the result of ambiguous contract provisions or incomplete and unclear  plans and specifications. Ideally,  the design-build project delivery method minimizes conflicts between owners and contractors  by pairing the construction and design professionals on the same team and making them responsible for the design and construction of the project. Teaming agreements, on the other hand, can minimize the disputes that could otherwise arise between the architect and contractor if the terms of the joint enterprise are left unclear. Go team!