, Building
The steelwork is up. The mechanical subcontractor arrives and finds the plant room has 300mm less headroom than the air handling unit needs. The drawing says 3,200mm. The unit needs 3,500mm including the connections.
Under a traditional contract, this is the architect's error, the contract administrator issues an instruction, and the additional cost is a variation. Under a design and build contract, you employ the designer, the design is your obligation, and the cost of raising the slab is yours. Same error, same drawing, same architect. Entirely different bill.
The procurement route decides who owns the mistake
Traditional procurement separates design from construction. The employer appoints an architect and engineers, the design is developed, the works are tendered against that design, and the contractor builds what is drawn. The contractor's obligation is workmanship and materials. If the design is wrong, that is the employer's problem and, through the employer, the designer's professional indemnity insurer's problem.
Design and build collapses the two. The employer issues Employer's Requirements setting out what they want, the contractor responds with Contractor's Proposals setting out what they will provide, and the contractor takes responsibility for completing the design and constructing the works. The JCT Design and Build Contract is the most common form for this in the UK, and the 2024 edition is now in use alongside the 2016 one it replaced.
The attraction for employers is straightforward: one point of responsibility, a price fixed earlier, and less exposure to the gap between design and buildability. The attraction for contractors is buildability control and, in a competitive market, the chance to value engineer within the requirements. The risk transfer is the price of both.
Novation hands you a design you did not commission
Pure design and build, where the contractor designs from a brief, is rare on anything that has to look like something. What usually happens is a developed design, produced by the employer's consultants up to RIBA Stage 3 or thereabouts, followed by novation.
Novation substitutes you for the employer in the consultant's appointment. The architect who has been working for the client now works for you, under the same contract, and is treated as having always worked for you. That last part is the trap. You inherit liability for design work that was done before you were involved, by a team you did not select, to a brief you did not write, at fees you did not negotiate.
Two things follow. First, do proper due diligence on the consultant's appointment before you accept novation: the level of PI cover, whether it is each and every claim or aggregate, the excess, whether there are net contribution clauses, and any caps on liability. A cap of £2 million sounds generous until you are dealing with a facade. Second, check what the consultant has actually done, because your ability to recover from them is limited to their contractual obligation, and their obligation will be reasonable skill and care, not a guarantee of correctness.
Reasonable skill and care is a lower promise than fitness for purpose
This is the single most important distinction in design liability, and it is routinely glossed over in negotiation.
A professional designer's ordinary obligation is to exercise the reasonable skill and care of a competent member of their profession. If they did what a competent architect would have done, they are not liable even if the outcome is poor. Professional indemnity insurance is written to respond to exactly that standard.
Fitness for purpose is an absolute obligation. If the thing does not work for its intended purpose, you are liable, regardless of how careful you were. Employers' Requirements frequently contain performance specifications that amount to fitness for purpose, sometimes explicitly and sometimes by requiring that the works "shall achieve" a stated outcome. JCT Design and Build limits the contractor's design liability to the same standard as an architect's, but that limitation can be and often is amended by the employer's solicitors.
The danger is the gap this creates. If you accept fitness for purpose and your PI policy only covers reasonable skill and care, you have taken on an uninsured liability. Your insurer will tell you this if you ask. Very few firms ask before signing.
The employer's requirements and your proposals will not agree
Both documents run to hundreds of pages, drafted by different people at different times, and they will conflict. The contract will contain a priority clause saying which prevails, and the answer determines what happens when the conflict surfaces.
Under the JCT Design and Build form as published, the Contractor's Proposals do not override the Employer's Requirements, and a discrepancy within the Employer's Requirements is resolved by an instruction that may be treated as a change. Employers frequently amend this so that their requirements always prevail and you carry any inconsistency. If that amendment is in your contract, every discrepancy is a cost you absorb.
The practical defence is unglamorous. Schedule the derogations. If your proposals differ from the requirements in any way, whether because you value engineered something or because their document asked for two incompatible things, list the differences in a clearly identified schedule and get it incorporated into the contract documents. A derogation nobody agreed to is a defect.
The Building Safety Act changed the shape of design liability
For anything touching higher-risk buildings, and increasingly for everything else, the Building Safety Act 2022 and the regulations made under it have added a competence and dutyholder regime on top of the contractual position. There are now duties on principal designers and principal contractors under the Building Regulations, distinct from and additional to those under CDM 2015, with gateways controlling progress on higher-risk buildings and a requirement to maintain a golden thread of information.
Section 135 of the Act also extended limitation periods for claims under the Defective Premises Act 1972, retrospectively to 30 years for buildings completed before commencement and prospectively to 15 years. A design decision taken in 2004 can be litigated now. That is a longer tail than most firms' record keeping, insurance history or corporate memory.
Where this shows up in the game
Construction firms and architecture practices arrive in Business Baron with the Property & Construction Track, an add-on to the full game. The terms you trade on are a setting with consequences, and when a job turns into a dispute, what was agreed before the work started decides how it resolves. The drawing that is wrong is cheapest to find before you sign.