1. Scope of Work Strategies & Solutions David A. Ericksen, Esq. Severson & Werson March 25, 2015

2. An Opening Question What type of contract do you execute most often? - Standard AIA, AGC, or similar agreement - Client Generated Agreement - Short Form Agreement Incorporating Another Agreement - Letter Proposal/Agreement - Notice to Proceed - Handshake & Hope

3. Agenda — Contract Fundamentals — The Sixteen and the Six — Scope of Work Essentials — The Scope of Work as a “Work Around” — The Scope of Work as a Blocking Tool

4. A Tale of Two Scopes Minimal: “Design a K-8 School for District’s Use” Maximum: AIA B101 with specific allocation of tasks and incorporating design-builder agreement with owner, master programming document, and all existing project records.

8. Four Contract Fundamentals Elements of a Contract Meeting of the Minds Integration Clause & Parole Evidence Rule Appropriate Risk/Reward Allocations

9. Elements of a Contract Three Elements: 1-Offer 2-Acceptance -By stating “yes” (preferred) -By conduct (last resort) 3-“Consideration” Writing not required, but always better.

10. Meeting of the Minds An agreement is to reflect “a meeting of the minds” -Establishes reality, expectations, and accountability -Enforceable reference point -Generally, only mutual mistakes may be corrected

11. Integration Clauses & The Parole Evidence Rule Integration Clause: “This Agreement represents the entire and integrated agreement between the Owner and the Architect and supersedes all prior negotiations, representations or agreements, either written or oral.” (AIA B101, 13.1) Parole Evidence Rule: Absent ambiguity, if it isn’t in the agreement, it doesn’t exist.

12. Appropriate Risk Allocation The party with the ability to control a risk, should bear that risk. Risk should follow reward.

13. Essential A/E Contract Elements (1) Client & A/E identification; (2) Description of services and schedule; (3) Basis of compensation & method of payment; (4) Procedure for additional services; and (5) Termination procedures for either party. (Based on California Statutes)

14. Common Contract Structure Most design professional agreements are organized by: — Chronology — Compartments Both formats typically leave a miscellaneous “grab bag” at the end. Many overlap provisions. To correlate all the terms, functionality may be the best organization for analysis.

15. Dominant Functions in Contract Clauses — Relationship — Scope of Responsibility — Performance Standards — Procedures — Financial Rights & Responsibilities

16. Sixteen Clauses You Need to Know

17. Sixteen Clause Checklist — Parties — Scope of Work — Additional Services — Owner Rights/Duties — Standard of Care — Ownership of Docs — Payment Terms — Warranty/Guarantee — Assignability — Third Party Rights — Communications — Limitation of Liability — Indemnity — Insurance — Dispute Resolution — Consistency with Other Agreements

18. A Contract Evaluation Matrix - Perfection Denied - Improvement Pursued ClauseOpen- Ended Vague Third- Parties External Factors & Events Risk Exceeds Control & Reward OtherResponse Scope of Work Other

19. The Pragmatic Priorities -(The Pareto Principle) — 80% of the liability claims against design professionals are based on or made worse by 20% of the typical contract provisions; or — Focus on 20% of the typical design professional contract provisions can successfully avoid or limit 80% of claims.

20. Six Core Issues (The Key 20%) 1.Standard of Care 2.Scope of Work 3.Warranty & Guarantee 4.Third Party Relationships & Rights 5.Indemnity & Defense 6.Dispute Resolution Provisions

21. Scope of Work Esssentials A good scope of work is: - Realistic - Professional service oriented - Educational - Qualitatively and quantitatively detailed - Sequential/Process-oriented - Limited & closed - Based on a solid/reliable set of expectations

22. The Scope of Work as a “Work Around” Enhancement Elements for a Contract/Risk Management Scope of Work: — Intended Beneficiaries & Uses — Standard of Care — Assumptions & Additional Services — Closure & Inclusion

23. The Scope of Work as a “Work Around” – Parties & Uses Consultant’s services are intended for the Client’s sole use and benefit and solely for the Client’s use on the Project and shall not create any third party rights. Except as agreed to in writing, Consultant’s services and work product shall not be used or relied on by any other person or entity, or for any purpose following substantial completion of the Project.

24. The Scope of Work as a “Work Around” – Standard of Care Consultant’s services shall be provided consistent with and limited to the standard of care applicable to such services, which is that Consultant shall provide its services consistent with the professional skill and care ordinarily provided by consultants practicing in the same or similar locality under the same or similar circumstances.

25. The Scope of Work as a “Work Around” – Close & Include Consultant’s services shall be limited to those expressly set forth above, and Consultant shall have no other obligations or responsibilities for the Project except as agreed to in writing or as provided in this Agreement. All of Consultant’s services in any way related to the Project shall be subject to the terms of this Agreement.

26. The Scope of Work as a “Work Around” – Stated Assumptions — Via “excluded” or “additional” services or via “assumptions” — Consultant’s services are based on the following assumptions. In the event of any ultimate facts or events differ from such assumptions, Consultant’s services, schedule, and compensation shall be adjusted accordingly.

27. Scope of Work – Blocking Dangers/Blocking Strategies Are you blocked from using the scope of work to define and limit duties & responsibilities? -Contract states either: -“scope establishes only duties and cannot limit or modify contract terms” -“contract terms control in the event of any conflict”

28. Scope of Work – Blocking Dangers/Blocking Strategies Can you use the scope of work to nullify a meeting of the minds? - Example: Indemnity or limitation of liability Can you use the scope of work to shape a responsibility? - Examples:Standard of Care Responsibility for Others Intended uses/beneficiaries

29. Additional Resources Available — 16 Contract Clauses You Need to Know — Skating on Thin Ice: Surviving and Succeeding on Projects with Precarious Contract Terms — Making the Grade: Testing Design Professional Indemnity Obligations — Prevailing Party Clauses: The True Pandora’s Box for Design Professionals — Could You Be a Cash Flow Hostage: Keys to Avoiding Mid-Project Fee Impasses

30. Questions & Answers Thank You! David A. Ericksen, Esq. Severson & Werson (415) 677-5637 dae@severson.com www.severson.com