Design disclaimers: will you take the bait?(subcontractors)

Subcontractors, make sure that the staff person in charge of reviewing your contract documents understands how to identify design disclaimers and how disclaimers should change your bidding strategy. Why? There are documented cases in which a 20- or 30-word phrase buried in the subcontract agreement or the specifications have cost subcontractors tens of thousands of dollars by removing risk and responsibility from the owner and general contractor and shifting it to the subcontractor. Your safeguard against such a catastrophe is a staff person with a good eye for detail and knowledge of contract terms.

Consider how the following real-life story could have turned out differently had a "trained eye" been at work. A builder took a job to construct a dewatering system for a tunneling project in a lump-sum, $43 million bid. However, file bid specifications disclaimed any warranty for the effectiveness of the owner-designed dewatering system. The disclaimer wasn't labeled "design warranty" or "design disclaimer." Instead, the disclaimer was contained in a .section of the specifications providing that "the designed dewatering system may not eliminate all groundwater from the tunnel excavation." The same section went on to say that "The Contractor shall be prepared to support the tunnel face ... and to handle and convey groundwater from the tunnel to appropriate discharge locations," and that "additional dewatering wells may be required."

The builder's bidding strategy failed to properly contemplate this possibility, which proved disastrous when its costs proved to be nearly double the amount of its $43 million bid. The dewatering system, as designed, was grossly insufficient to reduce ...