Seven deadly words

DALE MUNHALL: Hi, Dan.

DAN BUELOW: It's great to have you back on our show. So Dale joined me a while back for a two-part podcast series on his AIA best practices paper titled, Why We No Longer Stamp Shop Drawings. If you haven't listened to those podcasts, I suggest you do. Also, we have available for all of our Willis A&E clients, the full webinar presentations that Dale did for us on why we no longer shop drawings as well as this program on the seven dirty words.

These are full webinars, good for CE credits that we've developed for our clients, for onboarding project manager development, and these can be found on the education center of our website, along with the podcast, and all our other stuff at www.wtwae.com. So Dale, why don't you tell us a little bit about yourself?

DALE MUNHALL: Well, Dan, I have been at this for more than four decades now, and most of it as an architect in the contract administration phase. But early in my career, about probably about first two decades, really, I was a design architect and a construction manager under agency M where designed it and would go out and build it. And that which does not kill you makes you stronger, yes.

And having survived that, I have some intense experiences with what can go wrong in the field, and how to avoid that, and be able to train our staff to try to avoid preventable things and changes a ultimate inevitability in any project, but the way you do it makes all the difference. And have a real interest in trying to get all the architects and engineers as well familiar with how to stay out of trouble.

DAN BUELOW: Yeah. And Dale, really does have a real passion for this. And I think you bring a unique perspective and you somehow make this subject interesting, I would say so. And so Dale, throughout many of our Willis A&E risk management education programs, we stress that words are important when it comes to negotiating contracts, generating meeting minutes, field notes, and of course, emails, and even marketing materials, words are important.

And many of our Wilson A&E programs where we address documentation and negotiating contracts, we have made reference to red flag words. These are words that design professionals need to be careful with, words such as administer control, inspect, warranty, certify, guarantee and supervise. These are words, depending on the context in which they are presented, can create significant liability issues for the design professional as they often can create exposures over and above the standard of care.

Now, Dale has seven more words for us that design firms need to be careful with when it comes to the CA process. So, Dale, the primary point that you make is that the AE must avoid making unauthorized instructions on submittals, shop drawings, and RFIs that are not reasonably inferable. And in doing so, you identify some specific words that can create real exposures to the design professional firm when it comes to reviewing shop drawings and RFIs. So what are your seven deadly words and why are they so problematic?

DALE MUNHALL: Well, Dan, you're right. The contract administration has lots of words. I know that as I am doing my training for the younger architects at our firm, I frequently run up against that, that there are very few drawings or pictures involved in contracts, but they are really important and the words are really important. And the ones that you just mentioned and in the webinar that I just did with Willis Andy, the key point was, how important it is for the architect and engineer to avoid unauthorized changes in the contract documents.

That is really what this is all about. The AE is not authorized to make those changes unilaterally in that contract that's between the owner and the contractor. So the seven deadly words are the ones that you don't want to use or even imply that you have the authority to change and alter those contract documents. And these are the list. It's certainly not exhaustive, but I think you'll see why when I list the words.

The ones that I focused on in my best George Carlin impression of the seven deadly words is: revise, change, modify, move, approve, add, or delete. If you use any of those words on shop drawings or RFIs and the responses or even informerly and emails or correspondence letters, meeting minutes, or instructions, or discussions on the job site, you're already inadvertently in the position of implying that you have the authority from the owner to act in their stead, which is really a deadly spot to be.

In my career is certainly I've never had or even wanted to have that signatory authority because if you do that and have agency to commit your client, you're now very deeply into fiduciary responsibilities are not even insurable. So what I'm advocating here is that you have to be careful the way you use the words and where you use them, and all of these things are subject to definition.

The one that's really, I think, most problematic that we encounter, and we did that with the earlier webinar on shop drawings as well is, the word approve. That one is not certainly intuitive in the industry standard AIA definition of approve because there in particular in the general conditions, a 201 and 4.2.7, which I have tattooed on the back of my hand, is the language saying that the architect approval is for the limited purpose of checking for conformance with the design intent expressed in the contract documents and for no other purpose.

And so that is not intuitive or another I word. And so we really have to make sure that, that is communicated clearly to not only the contractor but to our client, and understand why we are limited in that use of those words. We don't want to incur that liability for changing the documents at our own risk.

DAN BUELOW: So Dale, when reviewing those red flag words that I had mentioned earlier in the contract formation process, we come up with softer, squishier words because we're design professionals. We're not responsible, we're not held to a standard of perfection, and we don't want to take on these warranty, guarantee type words. So we'll replace these words in these contracts when we can and use the words observe, or opinion of probable cost, or applicable, or endeavor, or perhaps.

You've identified these seven words now: revise, change, modify, move, approve, add, or delete, and you've told us why they are so problematic in this CA phase. How can design professionals avoid them in this CA phase? How to manage this?

DALE MUNHALL: Well, there's no substitute for proper training of the staff who are authorized by their firm to be the construction contract administration rep, CA rep on a project representing the interests of the firm and of the owner in enforcing those contract terms. The only thing that we can do is be sure that those words are defined clearly in the documents, particularly in the owner architect agreement.

I think this is one of the banes of our existence. It tends to be very vague, and in fact, it's even worse in letters of agreement. I think that most of the listeners are probably familiar with that, where shorthand gets to be used in those little short letters saying CA services. Well, CA services have identified 66 different activities that can be done, and some of them are very time consuming and very intense.

And if we don't explain to a client and have those defined in our owner architect agreement, the contractor certainly has no idea what we're doing. And so you want to be careful not to convey to them that you have authority to do things that you're not authorized to do. So training is important because none of us were really taught much of anything about contract administration in college.

That was something that we've had to do regularly. And it seems to be even less attention now than in the back of the 20th century when I was in school that we don't really know how to conduct ourselves out in the field and in those correspondence, so we have to train our staff. And we should actually put it on the wall saying with those seven words. And also say, no changes without the owner's signature.

If you can do those things, you can probably stay keep yourself as a reminder to stay out of trouble, train your staff, to not use any of those red flag words, and then these specific ones I've seen most frequently abused.

DAN BUELOW: And those are great points. And we've talked a lot about too of just educating your staff so that they're in a position to be comfortable and confident when it comes to working with not only their clients and prospective clients, but also the contractor and being in a position to hold their ground when it's necessary. And so understanding that standard of care and it's so important when you're talking about the site. And we'll get into this a little more, but just when you're out on that job site, everyone should understand what their roles and responsibilities are, and what the roles and responsibilities are of the contractor, right?

DALE MUNHALL: Yes. There's no substitute for the CA rep understanding every word of what is in those contract documents, not just our drawings, but our specifications, and as well as the contract for construction. That one is really important. And in fact, I say this in our training sessions all the time, what's the first word in contract administration? Well, that's sort of like the old semi facetious, who's buried in Grant's tomb. It's contract, and it starts with our contract with our client.

The owner architect agreement is what governs the authority that we have, and it should be very project-specific. Frequently it isn't, so we really want to make sure that we start off at the beginning. And I know, Dan, you just mentioned standard of care, and that's another one of the AIA articles that I wrote that they published as best practices, and it's still in effect. I still get calls on it all the time about the standard of care, starting with establishing shared expectations.

And then that taboo up front, talking about errors and omissions, you've got to start with your client. And very candidly, early on, right after being selected and before you sign your agreement, understanding exactly what we're doing, and design, and construction administration. We need to have those understood and defined clearly so that we are on the same page with our client about what problem is at hand and how we're going to do this together.

DAN BUELOW: Great points. And Dale, you've used the word architect, but it's important to note here that whatever we are preaching here, and advising, and all of this, it pertains to both architects and engineers. AIA, EJCDC, all have and will have similar language and recommended clauses. And the standard of care of an architect and engineer is essentially the same.

DALE MUNHALL: That is really essential, Dan. And the industry standard that the AIA documents. And sometimes you have to explain to a client that they're not just to protect the architect, what they are is to explain the rules to all parties. Architects and engineers is just usually the engineers are working under the architect and the architects first in line for authority and responsibility.

But we absolutely need to rely on those industry standard, court tested, hundreds year plus documents. And the biggest problems I ever encounter are the ones where we're forced. In fact, sometimes we could avoid when we have to use non-standard, proprietary, do it yourself documents for contracts and general conditions that are written by the owner's attorneys or institution, and they're different. And that is going to double our workload for our CA rep and probably quadruple our risk load.

DAN BUELOW: Yeah. And I always think it's a good advice. I like to say that you should have a dramatic reading of every contract with the project team before you send them out because as you stated there, a lot of these agreements are modified, heavily modified, and they all can be unique and different. And sometimes I'll often see where a design professional has somebody very good, understands contracts, does a great job negotiating the contract, and then they put it in a drawer and they send the folks out there.

I think they've missed a great opportunity to educate the staff and review, at least, the scope of services, how best to manage scope, creep, if you will. And how do you do that if you don't have folks out on the site that really understand the nuances of that specific agreement? And think it goes to where you're saying here too, around understanding, being educated, and educating your staff about these responsibilities, and these words, and then taking that further and managing the expectations with the client.

DALE MUNHALL: As a CA rep, you have to understand the contract completely inside and out, and then you have to be able to communicate it or explain it because if the owner could really do this, they would need us in the first place. So you really have to be articulate, you have to understand all the documents of the contract, the general conditions, the specifications are all loaded with words. But they're really important and they should be jobs project specific. And that means you have to take good notes, highlight them yourself.

And here's one of the things that I think can't be overemphasized. So many clients somehow, and I see this more lately feel like the contract for construction is somehow a secret private document and doesn't want to share it with the contract administrator who is supposed to be administering it. How in the world can anybody administer a contract they can't see? It's crazy.

DAN BUELOW: Yeah. Right. There should be a lot more transparency than I think there is often. So we often stress the importance of the design professional taking responsibility and educating their clients as to their standard of care, to have a clearly defined scope, and to actively manage the scope through effective documentation, and communication practices.

And we stress this because we can't take for granted the owner's level of sophistication or understanding of the construction process or their understanding of the standard of care of the design professional. And we stress this also because the vast majority of claims against design professionals are not due to actual technical error, but are, in fact, rooted in client expectations not being defined and actively managed.

And so, Dale, you brought this up already that the CA process is often vague and even misunderstood. Can you offer some advice on how the design professional can best address the confusion and lack of clarity as to their role for CA services with both the owner and the GC?

DALE MUNHALL: Yeah, with the owner. It absolutely has to start with sitting down before we sign our contract. And particularly to understand, to define the tasks that are going to be appropriate and to feel it's appropriate to do them too. Because these things can be time-consuming, and we need to be specific in our agreement, and have to have that shared expectation with the client about where we anticipate the bumps and bruises that might happen in that task, and how difficult it may be, and where we see the problems.

And when we understand that we can execute our agreement. But with the contractor, they are not privy to the agreement between the owner and the architect. The way you communicate to the contractor is through the front-end specifications, division 0, 0 and 0, 1 with the general conditions. And the AIA 8 to 1 general conditions are not only just the industry standard, but every contractor knows them inside out on the part that affects them.

And so the-- our CA rep has got to know those inside out, even if they're using some proprietary documents that are by the client institution, and we need to supplement that. Here's a fact. I have never had a client, no matter how sophisticated, who could write the front-end specs completely themselves in an adequate way to address the whole process. So since they can't do that, you have to take their requirements that are important to them, incorporate them into the front-end division 0, 0 and 0, 1 specs, and also modify the 801 general conditions, and then supplement them because the owner's proprietary ones are never complete.

DAN BUELOW: So what does administration of the contract for construction really mean in all this?

DALE MUNHALL: I think we just touched on all of those about how you have to have the copy of the first place and the AIA owner architect agreements. Every one of them requires the owner to share that document, executed document and general conditions with the architect. Secondly, you have to communicate that with the owner and with the contractor, and be able to explain those terms and interpret them, that's one of the I words.

And then you have to enforce them. And you need to know them and have it at your fingertips because just what you said earlier, Dan, about too many times I've seen it happen where all those words get bound up and put in a drawer. And they only come out when there's a disaster and it's always too late, and it could have been prevented. That is by far the preference is to prevent those problems not come in and bayonet the wounded after they happen.

DAN BUELOW: And there's just, again, some vagueness and some misunderstandings even with words such as, stamping versus sealing drawings. Can you break that down for us a bit?

DALE MUNHALL: Yeah. And that's why we stopped doing a stamp of a shop drawing because it got confused with our seal by a lot of owners. It's by choice, by a lot of contractors. Sometimes even the ACA or their attorneys don't understand it. So now we specify a cover page for every submittal that is stand alone, and it has all the exculpatory language that's contained in the AIA 201 regarding submittals, and that now has the disclaimer.

The contractor's work plan is what that is, and it makes that very clear. We don't use the A word for approval on those. We do the appropriate actions, which is basically exceptions noted, or no exceptions, or revise, resubmit, rejected, and so forth. But those kinds of things need to be defined in your specifications.

DAN BUELOW: OK. So what are the limitations to a design professional, an architect, engineers authority when it comes to altering the contract documents?

DALE MUNHALL: Yeah. That's a tough one because it is extremely limited. The role of the architect is strictly advisory, and it states that over and over again in the AIA documents and the EJCDC documents as well. We are an advisor to the owner, we are not a party to the contract between the owner and contractor. We advise and consult with the owner, and we shall have the authority to act only to the extent provided in the agreement, which is basically to interpret our documents and to enforce the terms of those conditions that are in that contract. We are not allowed to ever to change them ever without the owner's signature.

DAN BUELOW: And that's a very important point in all this. And you brought up earlier the I words. And whenever you refer to RFI, I see that you will often spell out request for interpretation versus the more commonly used request for information. Why is that? And what are the differences among the I words in CA instruction, information, interpretation, and inferable?

DALE MUNHALL: Well, there's an enormous difference, as you well know, Dan, because in the limitations of the authority contractually for the architect, we are not authorized to instruct the contractor directly, we're not-- we're in a parallel relationship with them, with the owner. And I would love it if the AIA would finally change the word in the architect supplemental instructions, ASI, and change it to architect supplemental interpretations.

We do that ourselves in our specifications which define the RFI as a request for interpretation, not for information because that can just bleed us dry. And also some contractors do it as a fishing expedition for a change order. And we don't want to authorize them to exceed the scope. Information we don't want to use, we don't want to use instruction. Interpretation is the only thing we can do after we've turned our babies loose and they become contract documents, we can no longer alter them anymore.

It simply got to be interpreting, but we can only interpret what is already in those documents. And here's the last I word, which is really crucial. Now, it gets to be legal time when we say it has to be reasonably inferable because if we just can't make stuff up and say, we want to-- oh, yeah, you include this and do any of those seven deadly words of add, or modify, or delete things, we have to only interpret. And if it goes beyond that, then it's change order time.

And even in substitutions or VE, no matter who recommended it, if we accept it into our documents, we're responsible for it just as though we put it in originally. And so change order always has to have the owner's signature and the contractors as well, we can never change anything ourselves.

DAN BUELOW: So is there any way for the AE, the architect engineer or the contractor to change contractual requirements via shop drawings, RFIs, or ASIs since the owner does not traditionally sign those documents?

DALE MUNHALL: In a word, no. There's no way. The architect can only interpret things or to say that a minor modification that doesn't affect project cost or time, and there's almost nothing in that category. Even changing a color or dimension can have cost and time impact. So essentially, and for all practical purposes, that's a dangerous tool, and it should only be used for interpretation. Unless the owner signs it, and then it becomes on its way to executing a change order eventually.

DAN BUELOW: And you said in our earlier program, if the contractor doesn't point out that they are doing something different than what was in the sealed plans. And as you say, slips one or tries to slip one past the goalie, and the design professional doesn't catch it, that does not relieve the contractor of their responsibility.

DALE MUNHALL: No. And that's why you want to have that cover page for every submittal individually that spells that out because in the AIA A201 general conditions, if you're lucky enough to be able to use those because they have all that in there. And that's why the word approved is so intuitive. It's only for the limited purpose of checking for conformance with the design documents. It's not-- specifically, not for checking for quantities, or dimensions, or anything like that.

So once you have that limitation, you don't want to have the contractor thinking that you're approving it because you're not. You want to make sure that, that responsibility remains with them. That's again, why the A201 general conditions are so important.

DAN BUELOW: And can the AE ever sign and certify the contractors applications for payment without having gone to the site to observe the work?

DALE MUNHALL: No. In a single word.

DAN BUELOW: No. Yeah.

DALE MUNHALL: I know I counted that way too often where a lot of clients will be trying to reduce our fee in the final parts of negotiation. And what they'll do is try to cut back on the reimbursables for site visits, particularly when travel is involved. And I keep reminding our principals, if you let them reduce the number of our trips to the site below what is the probable number of months of construction, then we're doing it on our own cost and we can't reimburse.

But we're got to do it anyway because what you mentioned earlier, Dan, about those certifying of applications for payment. Specifically that said, that is a legal act, incidentally certifying, and it's also if you look at the AIA G702703, the language right above the architect signature is saying, based on firsthand observations on the job site, the contractor is entitled is on schedule and entitled to the following. So it's all based on-site observations and you have to perjure yourself if you haven't been there and it's too dangerous, we don't let our staff do it.

If you're not on the site, at least, once a month to verify that progress there are other tools too, like cost loaded CPM schedules and so forth. But you cannot certify anything without some severe legal liability if you have not been to the site to see that it is appropriate. Because if that contractor goes south and there's a bond involved, the surety is going to come out to the architect that let them get ahead of the payments, and that's another risk you don't want to have. But basically, you've got to see the work. If you don't, you can't certify it.

DAN BUELOW: Everything we've talked about that you've touched on here really, Dale, is specific to traditional design-bid-build. And we have certainly a lot of our clients now getting into some design build work, a lot of design firms. And the vast majority of that work and design build is contractor led, right?

DALE MUNHALL: Yes.

DAN BUELOW: And so talk to us a little bit, because I know you're very active with the DBIA, and what are your points around specific to when the design professionals contracting in this case with the contractor?

DALE MUNHALL: Yeah. Basically, everything changes in a word. There is no similarity. A couple of years ago, I went through and rewrote all of our construction contract administration manual, and then training everything, and went through it with our legal staff and everything else, and had to add some of those things for alternative project deliveries. Because in the old days, in the blessed 20th century, we were pretty much doing things to design-bid-build, pretty much traditional policies and practices.

But when you get a contractor led design-build, here's the biggest change. The owner no longer is in the picture. The client is the general contractor. The design professional owes all allegiance, care, and services, and therefore, you cannot even communicate with the owner. And you certainly can't hold the contractor accountable to the owner in any way. So I had to go through and modify a separate section for each one of those policy practices and procedures that we do, and saying in design-build, we have to follow the terms and conditions of whatever we've agreed to in the design subcontract.

We are just like the concrete contractor, the window supplier, whatever else we sign, an agreement with that general. We owe our services to them at their direction, and they are now directing us, not the owner. That's the biggest difference. And when we do shop drawings and RFIs, we have to do it under the general contractor's terms. And sometimes that's a lot of extra work because they will try to substitute everything to try to keep the cost down.

But when we do that, we're taking on additional work, additional hours, additional liability, so we don't do most of the things that a normal CA rep would do. We don't inspect, we don't certify pay ups, we don't do any of that. But we do really get our work out in doing extra diligence and extra consideration for shop drawings and RFIs, especially in every design subcontract I've ever seen with the design builder.

DAN BUELOW: Great points. And we recently completed our Willis A&E biannual survey of 14 professional liability carriers on emerging risks and claim trends in the design profession, which is quite interesting. And one of the emerging risks certainly that keeps popping up on that particular survey was specific to AI. And I'm just curious of what you see as the emerging impacts on CA with the emerging trends in general, including AI?

DALE MUNHALL: That's the elephant in the room, and it's going to be the shadow that's going to be lurking over all of our shoulders very soon, and it's just coming on like gangbusters. The other things that we've done with CM at Risk and complications of design assessed and delegated design have been pretty well established. Now, I really prefer CM at Risk, it's a great method.

In design build, there's a good, current thing. And yes, I was involved with DBIA very heavily on this steering committee, was a co-founder of the Nebraska chapter of DBIA. I've done a lot of presentations to their national organizations. But I was always advocating for a qualifications based selection and no free work up front. And to their credit, they've come out with a system of progressive design build, they call it. It used to be called qualifications based in the days when was trying to get them to adopt it as the standard way.

But it is working with the team selection as designer and builder, and then doing the design until you hit the GMP and we get paid for that, and then the design is paid for. I think it's qualifications and no free work is a great progressive advantage. Integrated design delivery is-- and integrated project delivery had about a flurry about 10 or 15 years ago. It got used on some very big projects, and maybe used sometimes for P3, but it's very few.

Our artificial intelligence, however, is really going to be the wild card. I tell my colleagues I'm trying to get them motivated to pay more attention to the words because a lot of the graphic things can be done right now. Everybody's seeing those spectacular graphic rendering things that can be done with even text prompts. And also there's algorithms now that are beginning to be able to incorporate the Revit type software, the 3D because anything can be programmed, can become an algorithm.

And it's only going to be those algorithms are going to be directed by experienced architects. I kind of fear for the interns and the young people coming up because if they're only able to do some basic mouse clicking, that can be done by an algorithm, I'm afraid, and very soon. I don't think it's going to be over five years, it'll be sooner.

And so those are the things that we're having to understand how to direct the AI. And I think one of the good quotes I read from a conference on that was done by Autodesk. And they said, really, AI isn't going to replace architects. It's not going to eliminate their jobs. But those jobs will be eliminated by architects who can use AI. So there's probably about anywhere from 30% to 40% reduction potential of that have been predicted by various technical authorities, saying that it's going to speed things up and it's going to weed out all the repetitive actions. So architects better learn how to use it.

And those are going to be the experienced architects. I kind of fear for some of our young people and the education process that that's to be hammered out in the next five years are going to be a wild ride.

DAN BUELOW: Yeah. There's a lot more to come and it's coming fast. I agree. So Dale, thanks again. I mean, once again, you've given us a lot to think about, and you've stressed the importance of having a clear understanding among the parties as to their respective responsibilities. Some key points in all of this that you made.

I think too important to recap here is that, the purpose of the AE review of shop drawings, aka, as you like to say, contractors work plan is to check for compliance with the design concept, not to check dimensions and quantities, those remain with the contractor. That's a key point. Another key point that you made is that, the AE and the contractor simply cannot alter the contract documents. They cannot affect the contract price or the contract time without the owner's written signature. Their consent needs to be--

DALE MUNHALL: At square one.

DAN BUELOW: At square one. Another key point and all of this is that the design firm needs to train their staff and take responsibility to educate their clients and their contractors. We need more transparency that noncontract documents cannot change any part of the contract between the owner and the contractor. Again, only a written document with the signatures of the AE and the owner resulting in the change, or again, just stressing that last point.

And nor can the design professional even change their own designs during the construction by altering the drawings or specs which are, after all part of the contract documents for which they are also professionally liable without issuing, again, a change order or a limit ASI, Architects Supplemental Instructions. I don't know what you call them, an ESI for engineer supplemental instructions. I don't know, but that's another key point that you made.

And then lastly, the point I'd stress here is that the design professional must be careful with the words they use throughout the CA process, given the problems that can arise where the AE can pierce that veil of non-liability when they use the seven deadly words of revised, change, modify, move, approve, add, or delete. And all these points are really nicely expressed in Dales article, of which we'll include a copy of that when we issue out this podcast, Dale, with your permission.

DALE MUNHALL: Sure.

DAN BUELOW: But I think those are all very important points. You got any final words of wisdom for us on this topic?

DALE MUNHALL: No, just I guess my old heroes, Grant Simpson and Jim Atkins would say, be careful out there.

DAN BUELOW: Right. Dale, it's been a pleasure, a real pleasure. You always are fun to talk to, and you always somehow, again, as I said earlier, make this topic somewhat interesting. And seriously, thanks again for sharing your time and expertise with us. It really is great to have you.

DALE MUNHALL: It's my pleasure, Dan.

DAN BUELOW: And I also want to Thank our listeners for tuning in for another episode of Talk to Me About A&E. Again, for a full listing of all of our Willis A&E podcasts and education programs, check out our website at www.wtwae.com. I hope you enjoyed our program. I'm Dan Buelow, and I will talk to you soon.

SPEAKER 2: Thank you for joining us for this WTW podcast, featuring the latest thinking on the intersection of people, capital, and risk. For more information on Willis A&E and our educational programs, visit willisae.com. WTW hopes you found the general information provided in this podcast informative and helpful. The information contained herein is not intended to constitute legal or other professional advice, and should not be relied upon in lieu of consultation with your own legal advisors.

In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, WTW offers insurance products through licensed entities, including Willis Towers Watson Northeast Incorporated in the United States, and Willis Canada Incorporated in Canada.