In FAR clause 52.236-22 Design Within Funding Limitations (APR 1984), it states when bids for the construction contract are received that exceed the estimated price, the contractor (A/E Firm) shall perform such redesign and other services such as are necessary to permit contract award within the funding limitation. What does this mean???
Federal government design contracts typically include clauses related to a designer’s obligations and potential liabilities. One clause is FAR 52.236-23, Responsibility of Architect-Engineer Contractor, which addresses claims against a design professional for non-performance. Current case law interprets this clause as holding design professionals to a professional negligence standard. A second commonly used clause, FAR 52.236-22, Design Within Funding Limitations. This obligates the A/E design contractor to prepare a design for the project, which will allow the award of a construction contract at a price that does not exceed the estimated construction price set forth in the contract with the A/E designer. If the bids or proposals exceed that estimated price, the Design Within Funding Limitations clause obligates the A/E contractor to perform redesign services at no cost to the government in order to permit a contract to be awarded within the stated funding limitations.
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A recent decision of the Civilian Board of Contract Appeals, Moshe Safdie and Assoc., Inc. v. GSA, CBCA No. 2386, 11-2 BCA ¶ 34,851 clearly indicates that a designer’s potential liability may well extend beyond a duty to re-design the project at no cost to the government. In this case, it was ruled that “Concerning the redesign claim, we examined the reasonableness of the original target, the actions of parties as to estimating, and the effect of the Government’s earlier changes. We conclude that the Government had a right to direct redesign. We find that appellant should have realized during the initial design phase that its design would not yield bids in line with the target number and, therefore, it had an obligation to have either modified its design to meet the target or, at a minimum, notified GSA as to the probability that the design would not secure adequate bids. Accordingly, we conclude that the costs of redesign are to be borne by appellant.”
This particular case went on to address GSA’s claim against the contractors for consequential damages (escalation costs) caused by the late start of construction. We conclude that for GSA to recover it needed to establish professional negligence on the part of MSA. The court did not find that GSA could prove that standard. The court rejected GSA’s argument that the designer could be held to plain breach, finding that such would be inconsistent with the remedies identified in the Design within Funding Limitations clause, the Responsibility of Architect/Engineer clause, and case precedent. While this goes beyond the question you asked, it is an issue that could emerge from a case like yours and needs to be considered.
Link for court case: