The owners of facilities naturally want legal protection for all the activities involved in the construction. It is equally obvious that they should seek competent legal advice. However, there are certain principles that should be recognized by owners in order to avoid unnecessary pitfalls.
Legal Responsibilities
Activities in construction often involve risks, both physical and financial. An owner generally tries to shift the risks to other parties to the degree possible when entering into contractual agreements with them. However, such action is not without cost or risk. For example, a contractor who is assigned the risks may either ask for a higher contract price to compensate for the higher risks, or end up in non-performance or bankruptcy as an act of desperation. Such consequences can be avoided if the owner is reasonable in risk allocation. When risks are allocated to different parties, the owner must understand the implications and spell them out clearly. Sometimes there are statutory limitations on the allocation of liabilities among various groups, such as prohibition against the allocation of negligence in design to the contractor. An owner must realize its superior power in bargaining and hence the responsibilities associated with this power in making contractual agreements.Mitigation of Conflicts
It is important for the owner to use legal counselors as advisors to mitigate conflicts before they happen rather than to wield conflicts as weapons against other parties. There are enough problems in design and construction due to uncertainty rather than bad intentions. The owner should recognize the more enlightened approaches for mitigating conflicts, such as using owner-controlled wrap-up insurance which will provide protection for all parties involved in the construction process for unforeseen risks, or using arbitration, mediation and other extra-judicial solutions for disputes among various parties. However, these compromise solutions are not without pitfalls and should be adopted only on the merit of individual cases.Government Regulation
To protect public safety and welfare, legislatures and various government agencies periodically issue regulations which influence the construction process, the operation of constructed facilities, and their ultimate disposal. For example, building codes promulgated by local authorities have provided guidelines for design and construction practices for a very long time. Since the 1970's, many federal regulations that are related directly or indirectly to construction have been established in the United States. Among them are safety standards for workers issued by the Occupational Health and Safety Administration, environmental standards on pollutants and toxic wastes issued by the Environmental Protection Agency, and design and operation procedures for nuclear power plants issued by the Nuclear Regulatory Commission.Owners must be aware of the impacts of these regulations on the costs and durations of various types of construction projects as well as possibilities of litigation due to various contentions. For example, owners acquiring sites for new construction may be strictly liable for any hazardous wastes already on the site or removed from the site under the U.S. Comprehensive Environmental Response Compensation and Liability (CERCL) Act of 1980. For large scale projects involving new technologies, the construction costs often escalate with the uncertainty associated with such restrictions.
by Chris Hendrickson, Department of Civil and Environmental Engineering, Carnegie Mellon University, Pittsburgh, PA l52l3 Copyright C. Hendrickson 1998
First Edition originally printed by Prentice Hall, ISBN 0-13-731266-0, 1989 with co-author Tung Au.
Second Edition prepared for world wide web publication in 2000.
Version 2.2 prepared Summer, 2008.
