USA – LOUISIANA Law and Practice Contributed by: Jeffrey P. Good, Susan M. Tyler, B. Trevor Wilson and Parker Hufft, Jones Walker LLP
Design-Bid-Build Under the traditional design-bid-build model, a project is divided into three phases that proceed sequentially. The design and construction responsibilities are strict - ly segregated, and the commonly used industry form contracts specifically provide that the design profes - sional is not responsible for construction means and methods, and that the contractor is not responsible for providing design services. Design-Build In the design-build delivery method, the lead prin - cipal is typically a contractor, who is then responsi - ble for engaging the design professional, giving the owner a single point of responsibility for all services. In industrial projects, engineering, procurement and construction (EPC) contracts are common, whereby the general contractor assumes full responsibility for delivering a “turnkey” facility. Spearin Doctrine Louisiana has adopted the Spearin Doctrine, under which the owner warrants the adequacy of the plans and specifications to the contractor, as defined in contract documents. If the project calls for the use of specific materials or equipment and they are installed in accordance with the plans and specifications, the contractor cannot be held responsible for the insuf - ficiency of the specified item. This warranty, however, has been eroded through the adoption of performance specifications, under which the contractor is obligated to achieve a result and where the means of achieving that result are left to the contractor. 7.3 Management of Construction Risk Appropriate contract terms and conditions represent a significant tool for the management of construction risk. Ideally, contract terms should allocate the project risks to the party best able to control and manage the risk, and which derives some benefit from doing so. Some of the more important contract provisions regarding risk allocation are as follows. Scope of Work Definition One of the best ways to avoid financial risk and dis - putes between the parties is by establishing a clear definition of the scope of work being undertaken, and
how differences in the parties’ interpretation of that scope will be resolved over the course of the project. Dispute Resolution Provisions Parties must structure the dispute resolution process in these provisions before their relationship becomes contentious over the course of the project. Items to consider include step negotiation, the employment of dispute review or dispute adjudication boards, and whether the ultimate dispute resolution mechanism should be litigation or arbitration. Indemnity Indemnification provisions, an important compo - nent of risk management, make one party financially responsible for the occurrence of a specified risk. Under Louisiana law, construction contracts cannot contain “broad-form” indemnity provisions, whereby a party indemnifies another against personal injury and property damage claims arising out of the indem - nitee’s own negligence. Rather, indemnity obligations are limited to occurrences arising out of the negli - gence of the party giving the indemnity. Damage Waivers It is common for construction contracts in Louisiana to include waivers of consequential damages, which are defined as damages that may arise directly but not necessarily from breach of the construction contract. Examples include loss of revenue, production, profits, use and rental income. 7.4 Management of Schedule-Related Risk The first line of defence in managing schedule risk is the institution of appropriate reporting requirements and other project controls to ensure that the contrac - tor is performing the work in a timely fashion, and that project risks that affect the schedule – such as differing site conditions or material delivery problems – are identified early and their impact on the schedule mitigated. Contractually, Louisiana law permits an owner and a contractor to stipulate the damages to be recovered in case of non-performance, defective performance or delay in performance of an obligation in the construc - tion contract. Most commonly, stipulated damages provisions relate to late completion of milestones or
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