DBIA Risk Management and Allocation Questions and Answers 2

Question 1

What is DBIA's recommended approach to risk allocation in design-build contracts?

Accepted Answer

Allocate each risk to the party best able to manage, mitigate, or absorb that risk

Answer

Transfer all risk to the design-builder

Answer

The owner should retain all project risk

Answer

Risk allocation should not be discussed until problems arise

Question 2

Which risks are typically retained by the owner in a design-build contract?

Accepted Answer

Risks related to differing site conditions beyond what was indicated, owner-directed changes, regulatory changes, and force majeure events

Answer

All construction risks

Answer

No risks transfer to the owner

Answer

Only design-related risks

Question 3

How should professional liability insurance be addressed in a design-build contract?

Accepted Answer

The design-build entity should carry professional liability (E&O) insurance with coverage limits appropriate to the project's complexity and value

Answer

Professional liability insurance is not needed

Answer

Only individual architects need professional liability

Answer

General liability covers all design-build risks

Question 4

What is a 'limitation of liability' clause, and how does it function in design-build?

Accepted Answer

It caps the design-builder's maximum financial exposure for certain types of damages, negotiated based on project value and available insurance

Answer

It eliminates all liability for the design-builder

Answer

It prevents the owner from filing any claims

Answer

It only applies to warranty claims

Question 5

How should design-build contracts address warranty obligations?

Accepted Answer

Contracts should distinguish between construction warranties (typically 1-year correction period) and the designer's ongoing professional standard of care obligation

Answer

Design-build projects do not have warranties

Answer

Warranties expire at substantial completion

Answer

The owner waives all warranty rights

Question 6

What is 'consequential damages' waiver, and why does DBIA recommend it for design-build?

Accepted Answer

A mutual waiver where both parties agree not to claim indirect damages like lost profits or lost revenue from each other

Answer

A waiver of all project damages

Answer

A waiver that only benefits the design-builder

Answer

A prohibition on filing insurance claims