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Building vs. Construction Risk
Because building project risk does not begin or end with construction

The Scope Warranty Paradigm

Although design professionals can indemnify owners against harm resulting from gross negligence, the Spearin decision established that owners impliedly warranty the plans and specifications as a party to the construction contract. This landmark SCOTUS case illustrates the 'scope warranty paradigm.'

Spearin risk emerges from ambiguities and gaps carried forward from planning and design, which compromises the owner's 'construction readiness.'

Where there is commissioned design, there is Spearin risk!

The Spearin Doctrine
The United States v. Spearin, 248 U.S. 132, also referred to as the Spearin doctrine, is a 1918 United States Supreme Court decision. The Owner impliedly warrants the information, plans, and specifications which an owner provides to a general contractor. Although Spearin is U.S. case law, the scope risk illustrated by the landmark decision is a global problem.

Scope – the Origin of Construction Risk

Construction risk flows from planning and design.

Owners typically underestimate their building projects' cost and magnitude by routinely allowing scope ambiguities to be carried forward from planning and design to construction. Owners often want a favorable but fictitious price for construction based on the incomplete scope represented by the plans and specifications.

At contract, owners often transfer hidden scope-escalation with construction risk to a third party who has neither the means nor the commercial interest to control the risk.

When latent unspecified and unresolved scope is discovered during construction, the results can be disruptive. This 'confrontation' ultimately leads to cost overruns, claims, and project delays. Post-contract scope-related changes make it challenging to control project quality, cost, and schedule.

Punitive contract clauses such as 'liquidated damages' cannot mitigate scope-related escalation.

Incomplete Plans, Specifications and Contracts

Agree to agree.

Incomplete plans and specs lead to incomplete contracts and become the basis of ongoing renegotiation and contract amendments (change orders).

Performance specifications establish performance measures without establishing mutual assent or a 'meeting of the minds' regarding a staggering range of details. Contracts based on performance specifications lay the groundwork for an adversarial project delivery process.

MIND-i agreements eliminate this adversarial relationship, making it possible to develop complete plans and specifications.