Project Delivery

This message has been cross posted to the following Discussion Forums: Project Delivery and Small Project Practitioners .
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Christopher,

I have an Architect-led Design-build firm in San Francisco and have been practicing with this project delivery method for fifteen years. Obtaining E&O insurance has always been extraordinarily difficult.

We have two separate Sub-S Corporations set up; one is for Tekton Architecture and the other is for Artisan Builders Corporation (the construction arm for Tekton). Each corporation has its own professional liability insurance (Tekton has an E&O policy and Artisan has a general liability program). We use completely separate agreements with each corporation to firmly establish a line in the sand where the architecture stops and the construction begins.

We build about 85-90% of what we design. All the team members essentially work for both companies based on the task they are performing. Sometimes we receive one check per pay period, sometimes we receive two checks per pay period.

The main point with the two separate Sub-S corporations is that they each contract individually and separately with the client, there is no single design-build agreement (this not a favorable place to be). The E&O carriers will block you out if you do everything under one roof, i.e., one company. My greatest problem with my own E&O program is that I have an ownership position with a separate construction company. This places me out of the box and into a "high-risk" arena with regards to potential liability. My E&O policy premiums went from astronomical to now barely manageable and are at least 50% higher than someone who only does straight architecture.

Unfortunately, the actuary statistical modeling the insurance industry has on this project delivery is really in its infancy so the premiums are on a very conservative weighting scale. This is the price you pay to work as a "master-builder".

Please feel free to reach out to me for further discussion if I can be of any additional help in navigating through this quagmire.

All the best.

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James Walbridge AIA
Tekton Architecture
San Francisco CA
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It's hard to "ease" into design-build we have found, due to the insurance aspects. If you want to do one house/year that way it is not economically feasible here.
Instead, after building a track record the past 5 years of CM'ing projects in which we had an ownership stake and thus could directly manage and subcontract out, we have been able to work with owners and banks in a different strategy called "agency construction management." This was suggested by our insurance agent, and the services are already covered under our professional liability policy, being really an extension of architectural services. We act as the owner's agent, assisting with estimating, bidding out packages, coordinating subs and timing all on behalf of the owner. The owner signs all contracts with all subs. All subs have their own insurance, and the owner carries general for the property as well as buys the builder's risk. One of the main subs is a builder/supervisor, with whom we have a long relationship, and who will be on the job site throughout. A partner or project architect from our office is on site once a day if needed to keep on top of things. But our firm is not "building" the project directly.

The owner, in the first project done this way, was an insurance agent. Rather than feeling uncomfortable, she understood the risk-rewards ratio and chose to proceed this way. There have been a lot of efficiencies in the design process and the communications with other subs, especially beneficial given this project's aiming for LEED for Homes Silver.

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Rick Hauser AIA LEED AP
In.Site: Architecture
Perry NY and Geneva NY
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James,

Thank you very much for describing how you have been able to do what I think will a fundamental part of our professional.  Your technique for handling the liability insurance issue is prudent and at same time innovative.  So as a team, your companies agree to deliver the project yet each entity is separately contracted by the owner.  Thank you for sharing.

It occurs to me that if we as a profession do not follow along the path that you've been leading, the leadership role in design and construction will be taken away from us, and we'll all be working (as consultants) for construction firms large and small.  I would very much like to continue this discussion, especially on thoughts on the dynamics between the designer and the constructor when the final decision is made on a design issue.

Thank you again.
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James Cooper AIA
Principal
Cooper Architectural Works
Portland, OR



Original Message:
Sent: 10-06-2010 09:57
From: James Walbridge
Subject: design build insurance

This message has been cross posted to the following Discussion Forums: Project Delivery and Small Project Practitioners .
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Christopher,

I have an Architect-led Design-build firm in San Francisco and have been practicing with this project delivery method for fifteen years. Obtaining E&O insurance has always been extraordinarily difficult.

We have two separate Sub-S Corporations set up; one is for Tekton Architecture and the other is for Artisan Builders Corporation (the construction arm for Tekton). Each corporation has its own professional liability insurance (Tekton has an E&O policy and Artisan has a general liability program). We use completely separate agreements with each corporation to firmly establish a line in the sand where the architecture stops and the construction begins.

We build about 85-90% of what we design. All the team members essentially work for both companies based on the task they are performing. Sometimes we receive one check per pay period, sometimes we receive two checks per pay period.

The main point with the two separate Sub-S corporations is that they each contract individually and separately with the client, there is no single design-build agreement (this not a favorable place to be). The E&O carriers will block you out if you do everything under one roof, i.e., one company. My greatest problem with my own E&O program is that I have an ownership position with a separate construction company. This places me out of the box and into a "high-risk" arena with regards to potential liability. My E&O policy premiums went from astronomical to now barely manageable and are at least 50% higher than someone who only does straight architecture.

Unfortunately, the actuary statistical modeling the insurance industry has on this project delivery is really in its infancy so the premiums are on a very conservative weighting scale. This is the price you pay to work as a "master-builder".

Please feel free to reach out to me for further discussion if I can be of any additional help in navigating through this quagmire.

All the best.

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James Walbridge AIA
Tekton Architecture
San Francisco CA
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