At a site meeting, an architect and a general contractor disagreed over the project's challenges. The owner, new to building, stepped in and said he'd oversee the work, handle the money, and manage both sides. A project owner's job runs well past writing checks.
Risk allocation in construction contracts
Construction contracts use risk allocation to define obligations, liabilities, and responsibilities. When obligations are transferred badly, the criticism, and often the financial hit, lands on a non-professional owner.
What a project owner is responsible for
- Providing financing. Owners have to secure the funds for construction payments and for unforeseen problems. Careful financial planning avoids scheduling and payment disputes.
- Site surveys. The owner is responsible for providing accurate survey data, including property lines and soil conditions. Bad information leads to disputes.
- Warranting plans and specifications. Owners are generally liable for design defects and warrant that the plans and specs are fit for purpose. Errors here cause expensive delays and litigation, so the documentation has to be accurate and complete.
- Owner-furnished materials. Materials the owner supplies have to be suitable for their intended use, delivered on time, with the necessary information provided.
- Disclosing superior knowledge. Owners must share any knowledge that could affect the project. Failing to do so can create legal exposure.
- Acting on clarifications and changes. Clarifications and adjustments need prompt resolution. Change orders are a common source of disputes and have to be handled carefully.
- Interpreting documents. Architects manage the technical side, but owners often have the final say on time, cost, and quality, so they need to understand how to read the project documents.
- Cooperating with the contractor. Owners have an implied duty not to hinder the contractor's work, which gets harder when priorities on time, cost, and quality clash.
- Selecting professionals. The owner's choice of architect, contractor, and legal counsel shapes the outcome, and those relationships need supervision and coordination.
- Dealing with government bodies. Owners have to work with zoning authorities, inspection agencies, and neighborhood associations. Regulatory issues left unresolved cause major delays.
Building well takes a range of skills and real risk management. With professional help and the right approach, an owner can carry these responsibilities and keep the project on course.
Frequently Asked Questions
What is a project owner responsible for in construction?
Financing the project, providing accurate site survey data, warranting the plans and specifications, supplying suitable owner-furnished materials on time, disclosing superior knowledge, resolving clarifications and change orders promptly, interpreting project documents, cooperating with the contractor, choosing the right professionals, and dealing with government bodies.
Is the owner liable for design defects?
Generally yes. Owners typically warrant that the plans and specifications are fit for purpose, so design errors that cause delays or disputes fall to the owner, which is why complete, accurate documentation matters.
What happens if an owner hinders the contractor's work?
Owners have an implied duty not to impede the contractor. Failing that duty, often through slow clarifications or conflicting priorities on time, cost, and quality, can lead to delays and claims against the owner.
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