REFLECTIONS ON SOME LEGAL AND CONTRACTUAL IMPLICATIONS OF BUILDING INFORMATION MODELING (BIM)

by Dan Haynes Partner Pepe & Hazard LLP

Even before the economic chaos of recent months, the construction industry had been laboring in an effort to increase productivity, reduce inefficiencies and waste, and find a way to make the design and construction process more productive. Driven primarily by owners who are largely dissatisfied with an industry which has changed very little over the years in the way in which it delivers services, an exciting new technology - Building Information Modeling or BIM - has emerged on the scene. Known in some sectors as Virtual Design and Construction, BIM has been defined by the National Institute of Building Sciences as: Building Information Model or BIM utilizes cutting edge digital technology to establish a computable representation of all the physical and functional characteristics of a facility and its related project/life-cycle information, and it is intended to be a repository of information for the facility owner/operator to use and maintain throughout the life-cycle of a facility. This new technology has been seized upon by designers, contractors, owners and suppliers as a manner in which to reduce costs, inefficiencies, claims and conflicts on projects. BIM involves the development of three-dimensional modeling which allows a virtual or digital simulation of a facility to be created, viewed, changed and evaluated. In the evolution from more traditional computer-aided design (CAD), BIM has been deemed to be an intelligent representation since it allows for detailed information about the various building elements to be included within the design. For example, an entry for a structural member will know its weight, width, length, and potentially even the cost of that element, so as the design evolves and changes, this information is also automatically changed. As particular building spaces are lengthened and the subject element is increased in length, then the corresponding increase in dimensions, and resultant weight and cost will also be reflected in the BIM model.
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As BIM software has developed, various specialties such as the architect, MEP subcontractors, structural steel subcontractors and others have developed their own models which are often then combined into what is commonly termed as a federated or composite model allowing the various designers to evaluate how the different design elements coordinate with one another and to identify and resolve potential clashes and conflicts which appear early in the design process. Some applications of the 3D BIM representations models can be created by contractors and suppliers as their shop drawings and submittals; again, allowing an on-going and very real time coordination and evaluation of how everything fits together. BIM software also provides the capability to provide 4D dimensional models which will allow the contractor to evaluate and prepare its construction schedule. Applications of models have even been created which contain enough information for a contractor or supplier to generate its cost estimating i.e. 5D modeling. While the industry continues to appreciate and expand the potential value of BIM in the design and construction process, the emergence of this technology has also accelerated interest in the development of the integrated project delivery system which embraces the owner, architect and the contractor and other entities in a very highly collaborative project. Together, BIM and integrated project delivery are seen by many as the wave of the future; with an objective to reduce cost, eliminate waste and unnecessary expenses, and improve productivity in the delivery of design and construction services. As BIM technology evolves even further, it is apparent that there are a number of legal and contractual issues which warrant careful consideration; unfortunately, the newness of BIM leaves us with more questions than definitive answers at the present time. To the owner, designer, or contractor participating in a BIM project for the first time, these questions should be carefully weighed and, where practicable, understandings reached and memorialized in appropriate contract documents.

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1. Role Reversals Perhaps the most fundamental concern of design professionals and contractors alike is whether the type of collaborative relationship envisioned by BIM with the involvement of the contractor and even trade contractors early during the design process, providing continuing evaluations, critiques, and commenting upon the evolution of the design can create the potential risk for the contractor to unwittingly assume responsibility for the design; and, conversely, whether the design professionals exchange of information with contractors, subcontractors and suppliers and review and commenting upon engineering models which may affect the evolution of the design could lead the design professional to become entangled with responsibility for the contractors means and methods. For the contractor, the question that is raised is whether the contractors intimate involvement with the design process will nullify the protections which it has enjoyed for so many years as the beneficiary of the implied warranty of the adequacy of the design that has burdened owners as a result of the U.S. Supreme Court decision in United States v. Spearin, 248 U.S. 132 (1918). The Spearin doctrine has required owners to impliedly warrant to contractors the adequacy of their detailed design plans and specifications. There is no question that embracing the contractor interactively in the design process can raise issues as to whether the contractor has not assumed a greater risk for design responsibility; even to the level of being deprived of some or all of the protections under Spearin. However, this is not an issue unique to the application of BIM technology since, for example, the involvement of construction managers and contractors during the pre-construction phase where there are extensive constructor reviews and dialogues with the architect and the owner can also raise questions as to the degree of the elevated design responsibility that may have been assumed by the contractor. That doesnt even consider the boilerplate contract language whereby such design responsibility can be expressly delegated to a contractor. Conversely, the contractors early involvement including the preparation of construction models which may encompass information normally set forth in shop drawings and submittals can raise a question in some design professionals mind as to whether this will somehow transfer to them responsibility for construction means and methods; responsibilities which traditionally rest with the contractors. 2. Elevation of Standard of Care As BIM technology expands, and the wealth of information that can be incorporated into the design and the interfacing of various design and construction models become more commonplace, the inevitable question will arise as to whether this elevates the standard of care to be imposed on participants in the design and construction process. Perhaps of most significance to the design professional will be the question whether
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the standard of how a reasonable architect will perform will now be measured by a brand new BIM standard; requiring a fully coordinated and complete design model devoid of any conflicts and clashes between various elements of the design. While there is no question that expectations will be raised, the issue is how far behind that will the legal liability follow. As technology enhances performance capabilities of designers, expectations will undoubtedly soar. Is this a risk that the design professional is capable of assuming? 3. What Is The Design? Of fundamental importance to all parties is a clear definition in the contract documents of what the various BIM models will be and how they would be used. Will they be contract documents or used only for information? Is the contract design embodied only in the BIM models or in a composite of the models and other specifications and drawings? What will be the interplay of 3D or 4D BIM models with 2D drawings? Which will take priority? Will the models be only be used for cross-checking? The status of the BIM models and products must be absolutely clear so that all parties know the extent to which they can rely upon any of the BIM models and for what purposes.

4. Reliance By Project Participants On BIM

Models Or Contributions Closely related to the clarification of the status of the various BIM models is the question of the extent to and the manner in which any of the participants can rely upon the accuracy and completeness of the BIM models in the performance of their duties. Limitations of liability or disclaimers included in the contract documents intended to fetter reliance on BIM models are obviously inconsistent with the ultimate goal; to foster freer collaboration among all parties. However, at the same time, it is important that understandings are confirmed in the contract documents concerning by whom the BIM models can be used, for what purposes, and furthermore, providing how inadequacies in the BIM models will be handled. Related thereto is also the question of the extent to which a relying party may take a model and adapt it or modify it for its own purposes; creating what is sometime termed a derivative model. To what extent can derivative models be created without exposing the author or creator or contributor of the original model to legal liability? Will indemnification agreements and releases need to be included in the contract agreement to deal with such contingencies? 5. Management Of The BIM Models As more and more models are developed for different purposes and exchanged among different parties, there will be a need for some individual or entity to be in charge and responsible for managing this ever increasing flow of information. This entity may very well be the architect as the designer, but it could also be a third party.
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In any event, an individual or entity will have to be identified and an assessment will have to be made concerning which additional risks are created by such individual or entity performing these duties. The risk allocated to this manager should also be evaluated. The specific protocol and procedures for managing such electronic information flow will also have to be created and then disseminated to the project participants. 6. Ownership Of BIM Data The creation of additional BIM models and databases being produced by various participants exacerbates an already difficult existing issue concerning the legal ownership and copyright for instruments of service. Without modification in the underlying contract documents, the normal principle will be that the party that creates the BIM model would retain ownership of and the copyright in the model. This is consistent with the approach adopted by the AIA in their standard agreements whereby ownership and copyright is retained by the drafting party which, in turn, agrees to license its instruments of services subject to certain conditions. However, in some instances owners may insist that the various data and deliverables provided by the design professional be owned by the owner. What is more difficult in the BIM context is the fact that there may be numerous designers creating models and various data bases and exchanging such models and information among various project participants, and even engaging in the modification or alteration of such models through creation of derivative models. In such an environment it is even more important that the intellectual property interests in BIM models and data be very clearly addressed up-front by the parties. What compounds this problem even more is the utility of the BIM model, particularly a full design model as that term is defined in ConsensusDOCS 301, which consists of a combination of the architectural, structural, MEP and other specialty design models produced by the parties. Such a model may be transferred to the owner of the project to be used as a deliverable to the owner for purposes of maintaining, operating, renovating and expanding the project. 7. Interoperability Concerns The term interoperability refers to the ability of various project participants to share and exchange information electronically through the use of different software systems. While significant advances have occurred in recent years with BIM hardware and software, there are no guarantees that the different software that may be used by various participants will function flawlessly together. Efforts underway to standardize the language interfaces of various BIM software will undoubtedly mitigate this problem. In the meantime, provisions must be made and understandings reached among the parties concerning the consequences of inPepe & Hazard LLP

consistencies or errors that arise as a result of interoperability or data interface issues. Who will be responsible for identifying and correcting such glitches? Who will bear the cost and time consequences of such interoperability problems? This issue of software compatibility also flows into a concern with respect to remedies for defects in software. In light of the limited recourse against software manufacturers due to the rigid terms and conditions of the typical software purchase agreement, care must be taken to address the rights and remedies among the various project participants and with third parties, when major defects in BIM software occur. 8. Insurance Considerations Just as the BIM technology is evolving, so must the insurance industry evolve to consider whether its current products adequately cover the new risks created by this technology or whether additional instruments are necessary to allow project participants to manage these risks in a prudent manner. From the design professionals perspective, there is an obvious importance to carefully examine the adequacy of its professional liability insurance coverage to ensure that there is no exclusion or limitation with respect to liability arising out of negligence of the design professional in the preparation of any BIM models. To the extent the design professional assumes additional responsibility as gatekeeper or model manager, then the additional risks undertaken thereby must be covered under the standard professional liability policy. Similarly, when a contractor involved in creating BIM construction models utilizes them for planning its means and methods, fabrication, estimating, or scheduling, the need for contractors professional liability coverage may become even more important. In this regard, some of the duties performed by the BIM contractor are analogous to the pre-construction role of a general contractor or a construction manager where adequate amounts of professional liability coverage may be required to deal with risks arising from the performance of professional services such as estimating, budgeting, scheduling, constructability analyses and the like. Risk of damage or corruption to models and other electronic data which will be created, gathered and exchanged as part of the BIM process also needs to be carefully examined to determine whether existing property or general liability insurance provides adequate protection against such losses or whether there is a need to secure additional electronic data coverage. 9. Status of the Model Closely related to the issue of whether design models produced will be deemed to be contract documents is whether the creation of one or more models which may be transferred to the owner for long term operation and maintenance purpose creates new legal risk. Specifically, while deliverables produced by the design professionals have traditionally not been treated as a product, there is a possibility that in the future the
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design model mandated by the owner can take on a different legal hue. If such model is considered to be a product transferable to the owner, then there is a potential for significant additional legal risk to be assumed by the architect or other entities responsible for the creation or management of such models. Potential product liability and warranty exposures could change the legal environment significantly for those BIM project participants. Perhaps a re-affirmation of the intent of the parties not to regard any models as a product and an express disclaimer of any implied or express warranties with respect to the adequacy or completeness of these models may be prudent measures to be considered. 10. The Suretys Perspective Limited experience with the application of BIM technology makes it difficult to assess exactly how the surety industry will evaluate and respond to any new or increased risk that should arise from the use of BIM technology on projects. The underwriting of performance bonds for such projects will surely require careful consideration of the nature of the contracts BIM requirements and the competency and the level of BIM experience of those project participants which are involved in that process. Since the allocation of risk will be critically important to any such analysis, to the extent that the BIM Technology is embraced within one of the more collaborative types of delivery systems such as the integrated project delivery as set forth in the ConsensusDOC 300 or in the AIA C195 with their waivers of consequential damage, mutual indemnities, and limitations of liability then this analysis by the sureties may be an easier one. 11. Cost Consequences With BIM technology in large part prompted by the owner component of the industry, a key question which remains to be answered is how the cost for utilizing the new technology will be handled. For the designer who is developing a design model for the first time, the cost of procurement of the software and training of personnel can be significant. To what extent these costs can and should be passed on directly to the owner or to what extent they will have to be absorbed as a cost of business going forward is a critical issue. Perhaps as owners better appreciate the value of the design model as a deliverable to be used for life cycle analysis and future operation and maintenance, then they may be more willing to reimburse separate line items for these BIM costs. As the technology becomes accepted on a more widespread basis, the amortized cost of software and training can reduce the designers burden. Obviously, this is also a consideration for the contractors, construction managers, structural steel fabricators and other subcontractors who are engaged on projects where BIM
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is a requirement. The learning curve costs of software and training must be carefully considered before the contract is signed and the commitment made to utilize BIM. 12. Adequacy of Contract Documentation While building information modeling technology has been around for a number of years; one of the restraints which has undoubtedly inhibited its growth to date has been the lack of any standardized contract documentation in the industry to address the various legal and contractual issues raised in this article. Fortunately, within the past year both the AIA and the new ConsensusDOCs organization have issued their respective BIM documents which address, at least in a preliminary manner, many of the legal and contractual implications of utilizing BIM technology. ConsensusDOCs 301 Building Information Modeling (BIM) Addendum was released by the ConsensusDOCs organization in June 2008. This document is intended as an exhibit to be appended to a standard construction or design agreement, to address certain key legal and contractual questions, and give the parties a platform on which to reach an agreement on how to manage the various risks derived from this technology. ConsensusDOCs 301 was followed later in 2008 by the AIAs issuance of its E-202 Building Information Modeling Protocol exhibit, which like its predecessor outlines a number of practical issues and formulates certain procedures and protocols for the parties to follow with respect to the development of their BIM models. Again, both the CD301 and the E-202 are designed as exhibits to be appended to an existing design or construction services agreement. As BIM technology gains even more widespread acceptance within the design and the construction industry and becomes even more interwoven with some of the more collaborative integrated project delivery agreements which have recently emerged, many of the issues addressed in this article may be resolved, but it can be expected that even more questions will arise. Perhaps it is too early to respond to critics concerns that BIM stands traditional allocations of risk and responsibility on their head and fundamentally changes the relationships between and among the parties. However, as parties more fully understand and embrace BIM technology and learn how to use it more effectively perhaps this is an evolutionary step and not a revolutionary one. The only thing that is clear is that the prudent project participant who openly embraces the BIM concepts, at the same time must be careful to identify early the important contractual and legal issues in an effort to resolve them at project onset.

June 2009