PHILADELPHIA – What should attorneys be looking for when reviewing delegated design agreements? Third Thursday sat down with Anthony L. Byler, partner, Cohen Seglias Pallas Greenhall & Furman PC, Philadelphia, to explore the nuances of the topic.
Third Thursday: You spoke on Delegated Design at Construction Super Conference (CSC) 2024 in Hollywood, Fla. Eight months later, how prevalent is delegated design?
Byler: The practice of delegated design is gaining momentum. I recently received, reviewed, and revised a substantial electrical contracting subcontract agreement between a general contractor, who I do not represent, and an electrical subcontractor who I do. The work is for a major waste water treatment plan, part of a public utility. In the contract between the general contractor and my electrical subcontractor, I noticed that the general had included a whole series of delegated design contractual requirements—and I suspect that my client does not have any responsibility for design.
Third Thursday: What’s your advice to fellow attorneys reviewing these types of subcontract agreements?
Byler: Keep an eye out for these delegated design provisions, because it assigns, as you might expect, a tremendous amount of responsibility to the delegated entity, which in this particular case was the electrical subcontractor. A contractor who does not expect to receive an assignment of Delegated Design does not want to have anything to do with those responsibilities. And for their benefit, I crossed out most, if not all, of the delegated design clauses because I didn’t think that they applied. And if in fact there is going to be some design aspect that is subsequently required of my client, then we could revisit those clauses and negotiate them as necessary. I don’t want those delegated design clauses to be in place if my client has not priced, or otherwise expected, that it would be carrying out any design responsibility on the project.
Anthony L. Byler
Third Thursday: How would you describe what you do?
Byler: What I do, and what many of the construction lawyers here at this firm do, is we pursue a purpose. That purpose is to keep the money in the pockets of our clients, and to obtain money from the pockets of others for our clients when our client has been damaged. With that very simple purpose in mind, we end up representing, and I end up representing entities in the various construction tiers—owners, general contractors, trade subcontractors, and suppliers. My clients and the matters that I handle are fairly diverse and can range all over the place.
Third Thursday: What creative ways have you used for dispute resolution?
Byler: I recently pursued claims and defended claims for one of the nation’s largest electrical contractors on two pieces of litigation that were pending in Washington and Idaho. The dispute concerned a telecommunications provider and our client who was asked to perform fiberoptic insulation in those two geographic areas. Disputes arose between the parties. We developed a good relationship with counsel for the telecommunication provider and we ultimately agreed to consolidate the matters and transfer them to the American Arbitration Association (AAA) for dispute resolution.
As part of the AAA’s procedures, we were invited to mediate the dispute, which we did to a successful conclusion and the mutual satisfaction, or mutual dissatisfaction, of the parties involved. It’s an interesting and challenging way to resolve what would have become many years of very expensive litigation. The alternative dispute procedures afforded by the AAA are available to parties who are open enough to embrace those means, even though it wasn’t scripted into their respective contracts.
Third Thursday: Beyond the specific scope of delegated design, what other cases (w/out revealing names) have been interesting of late?
Byler: We represent trade subcontractors on a major project in Pennsylvania. The project is the construction of new lab facilities for major pharmaceuticals to use and to lease for periods of time. It’s also available for educational purposes for the major universities in our area—for grants to carry out studies and experiments.
Unfortunately the project has run out of money midway through the construction of the various facilities and we now represent mechanical contractors, electrical contractors, and general trade subcontractors in pursuing what is now millions of dollars’ worth of claims for work that they perform—but there is no money left in the till. From a legal perspective, we are pursuing our clients mechanics lien rights against the property. We’re coordinating and facilitating with the developer and the general contractor on the project to support their efforts to secure necessary and new financing. It’s a hybrid task.
