Question

Under a Design-Build delivery method, who holds the primary legal and financial responsibility for cost overruns resulting from design errors that occur after the guaranteed maximum price is established?

Accepted Answer

Under a Design-Build project delivery method, the Design-Build entity—which is a single firm or team contracted to provide both design and construction services—holds the primary legal and financial responsibility for cost overruns caused by design errors. In this arrangement, the owner enters into one contract with the Design-Build entity, effectively shifting the risk of design-related defects away from the owner. Because the Design-Build entity is responsible for the design, they are contractually obligated to rectify errors at their own expense, regardless of whether the Guaranteed Maximum Price (GMP)—the contractual ceiling on the total cost of the project—has been established. If a design error is discovered that requires additional materials or labor to correct, the Design-Build entity cannot pass these costs to the owner as a change order, as they are legally liable for the quality and adequacy of the design they produced. This structure differs from traditional design-bid-build projects where the owner typically holds separate contracts with the architect and the contractor, often leaving the owner to mediate responsibility when design errors lead to increased construction costs.

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Under a Design-Build delivery method, who holds the primary legal and financial responsibility for cost overruns resulting from design errors that occur after the guaranteed maximum price is established?