Ends Not Means

The design for a project is the template for all the participants to follow. The design professionals obviously must prepare their work with that in mind, and must charge a fee in accordance with the risks being assumed and the complexity of the task. These days, however, the issues can be complicated. Clients are adopting methods of contracting such as design-build to shift the risks round the basic triangle of owner, contractor, and design professional.

Regardless of the terms of the contract or the method of contracting used, it is always crucial to keep uppermost in mind the purpose for which the design was requested. It is this focus on the ends, rather than the means, which has led to an upsurge in performance-based contracts. The term really means no more than that the owner is specifying it wants a facility that will perform the job it has to. In legal jargon, the construction will be “fit for the purpose for which it is intended.”

The challenge is for the owner and the design professional to set out in language what exactly that intention is. They must also engage a contractor who understands that intention and has the technical competence to execute it. Laying the foundation for the assumed conditions can be as important as the design itself. For example, a design of a temperature control system for an office building to maintain temperature within a specified range, given a location in a specified city with known temperature gradients, no longer accomplishes the task where the internal use of the building could vary from law firm to internet service provider. The number of computers generating heat can be significant enough to destroy the level of performance.

On the perhaps unfair assumption that parties are trying to maximize profit and minimize expenses, the underlying assumptions and end use must be clearly set out to ensure that the owner gets what it bargains for, and that the contractor bids on what actually is to be built.

Because there is no such thing as perfect communication, and because pre-contract meetings do not always bring design issues to light, it is also crucial to provide for a measurement mechanism to determine contractual compliance. These can be based on “scientific” thresholds, where a professional or scientist will be designated as the determiner of compliance, or on test-run criteria, with specified variances permitted. As a second layer of protection regarding dispute resolution, a specialist in the area can be designated as an arbitrator to decide between different views.

It is difficult to create the perfect performance criteria contract in the construction field. Below are two examples where imprecise language in result-oriented or performance contracts led to costly litigation.

Industrial Door Co. Ltd. v. Shanahan’s Ltd.

The plaintiff contracted to supply doors for B.C. Place Stadium in Vancouver, a large edifice whose roof is held aloft by pressurized air. The doors were unable to withstand the pressure in the building without deflection. The problem stemmed from the specifications provided to the supplier, which read: “All sectional overhead doors shall be reinforced to withstand 146 kg. per square metre air pressure towards the exterior with a maximum deflection of 1/180 span.”

The critical phrase was “air pressure towards the exterior.” While one party interpreted the phrase to mean “to the exterior of the building,” the supplier interpreted the phrase to mean “to the exterior face of the door.” Accordingly, it supplied doors that would not withstand the pressure emanating from the interior of the stadium. The Court of Appeal concluded that as the phrase was ambiguous, the plaintiff who supplied the specifications had to bear the consequences of the ambiguity. The court explained that it was inappropriate to require those who received the specifications to guess at their meaning and, consequently, they were entitled to be paid for supplying the doors.

This case illustrates the point that the more the supplier knows about the particular structure the less able he is to avoid responsibility, i.e. had the supplier known that the stadium was pressurized, it would likely have been found liable for the supply of the inadequate doors.

Fame Construction Ltd. v. 430863 B.C. Ltd.

Among the contentions made in this case, the contractor plaintiff alleged that it had agreed to construct a strip mall containing discrete occupants’ improvements to agreed specifications, and unassigned space to “mall standard” specifications. The defendant owner pleaded that the contractor was to construct a building fully finished according to agreed specifications. There was clearly a misunderstanding between the parties as to the scope of the work agreed upon.

The court explained that the misunderstanding arose because the contractor failed to appreciate the difference between a “design-build” project and a contract to do work according to agreed plans and specifications. The owner was entitled to believe that by accepting it was to construct a design-build building, the contractor had agreed to design and build the entire facility.

In the course of its reasoning, the court explained the commercial purpose of a design-build contract by citing a passage from a document published by the Canadian Construction Association: “The Design-Build Method differs from the more traditional forms of contracting in that the client deals with one single administrative entity, the prime contractor, who provides the design and the construction under one contract package…. The prime contractor prepares the total design and thereby retains architects, engineers, and other specialists as required.

“Under the design-build method, the client makes known that he requires a certain facility and, in general terms, outlines the parameters relating to architectural and/or engineering design, social-system site planning, time of occupancy, together with the basic structural, mechanical and electrical requirements. The proponents then submit preliminary designs including sketch drawings and outline specifications together with a price for the project.

“Unlike the lump sum tendering system, the proponents are not making proposals on a common set of fixed plans and specifications. Each proponent must decide how best to satisfy the client’s needs using his skills to produce the facility placing emphasis on those factors he considers most desirable to the client….”

Evidently, traditional construction practices are giving way to more of a “product” or commodity approach. That means consulting engineers have to ensure more than ever that they are clear about what their clients have in mind.CCE

Julian Heller, LL.B., B.C.L., is a construction litigator at Julian Heller and Associates, Toronto. E-mail: jheller@hellerandassociates.on.ca