Frequently Asked Questions on Design-Build Matters in New York State

Note: Please note that this post was recently updated on 3-18-15 and FAQ numbers 11, 12 & 13 were added based on questions received.

1. Can a contractor and design professional provide design-build services to a third-party in New York?
   1. Answer
      1. Design-build services in New York can only be provided when the project owner, contractor, and design professional sign a three-way contract.  The contract must expressly segregate design services and provide for payment to the design professional for such services (See question 11 regarding payment methodologies.).
      2. As further described in the responses to questions below, a design professional who provides professional services while under contract with the contractor could be charged with professional misconduct for aiding and abetting the offering of professional services by a party (the contractor) not authorized to offer or provide such services.
      3. To apply case law and to better ensure they are not offering professional design services illegally, some contractors are including the design professional’s name and fee in their contract with the project owner.  However, this practice does not assure that by entering into a contract with only the contractor, the design professional will not be charged with professional misconduct as described in responses to questions below.
   2. Applicable Laws or Regulations
      See Questions 7 and 8 below.
   3. Exceptions
      1. As described by the responses to questions below, there are a number of exceptions to the requirement of a three-way contract. The following examples do not require a three-way contract, and allows the design professional to provide a professional service to the contractor:
         1. design delegation (see Question 10 below);
         2. temporary structures and contractor’s means and methods ( e.g. shoring for footings);
         3. the legislature has expressly authorized the use of Design-Build ( e.g. 2011 November budget legislation permitting DOT and other agencies to use design build for projects such as the Tappan Zee bridge subject to a 3 year sunset) or the Governor suspends existing law due to an emergency (e.g. 2011 post hurricane Irene bridge and road repair);
         4. when the contractor is a “grandfather corporation” that is authorized to provide professional engineering services;
         5. when the “contractor” is a PLLC offering design and any other lawful service or product; and
         6. when the contractor is the project owner.
2. Is a contractor permitted to offer or provide professional engineering services in New York to a third party?
   1. Answer
      1. A contractor is not generally authorized to offer or provide professional engineering services in New York, except as noted in this FAQ.
   2. Applicable Law or Regulations
      1. Education Law, Title VIII – The Professions, Article 130 General Provisions, Subarticle 4, Unauthorized Acts
         1. Section 6512 Unauthorized practice a crime
      2. Education Law, Title VIII – The Professions, Article 145, Professional Engineering and Land Surveying.
         1. Section 7210 Certificates of Authorization
   3. Exceptions
      1. A contractor is authorized to provide professional engineering services if it is a grandfathered general business corporation, expressly authorized to provide professional engineering services within the meaning of Education Law Section 7209 (6) of Article 145, Professional Engineering and Land Surveying.
      2. See Questions 9 and 10 below which describe exceptions permitting contractors to provide design services for (i) temporary structures, and (ii) components of a project which are ancillary to the main project, provided the work is carried out by licensed design professionals (PEs or RAs) commonly known as “design delegation”.
      3. As an entity a Professional Limited Liability Company, owned exclusively by professional engineers (and/or other NY licensed design professionals), can offer professional engineering services and engage in other business activities, including serving as a contractor. (Limited Liability Company Law section 1206).
3. Can a contractor subcontract with a licensed professional engineer in order to provide professional engineering services to a public or municipal client?
   1. Answer
      1. A general business corporation, limited liability company or other business entity generally is not authorized to provide professional engineering services; accordingly a general building contractor, can not subcontract with a licensed professional engineer in order to offer or provide professional engineering services to a third party client.
   2. Applicable Law or Regulation
      1. The New York State Education Department – Office of the Professions, which regulates the conduct of licensed professional engineers, requires that the professional engineering services be provided directly from the professional to the client (project owner) without any unlicensed third party between the client and the professional.  See question 8 below.
   3. Exceptions
      1. Legislation has been enacted, in a limited number of instances, permitting the use of design build by state or local agencies.  For example in 2011 the legislature authorized a number of state agencies (DOT, Thruway Authority, Office of Parks etc., DEC and the NYS Bridge Authority) to employ design build on a three year trial basis.  (See See S20002/A40002 – 2011.)
      2. See Question 5 for instances when a contractor can subcontract with a licensed professional engineer for projects funded by Federal agencies.
      3. See Questions 9 and 10 for instances when a contractor can subcontract with a licensed professional engineer for discrete aspects of any project.
4. Can a contractor subcontract with a licensed professional engineer in order to provide professional engineering services to a private sector client?
   1. Answer
      1. No, for the same reasons stated in the answer to Questions 3 above.
   2. Applicable Law or Regulation
      1. Same as Question 3 above. See also Question 8.
   3. Exceptions
      1. See Question 5 for instances when a contractor can subcontract with a licensed professional engineer for projects funded by Federal agencies.
      2. See Questions 9 and 10 for instances when a contractor can subcontract with a licensed professional engineer for discrete aspects of any project.
5. If a Federal Agency is funding a portion of any public or private project can a contractor subcontract with a licensed professional engineer to provide professional engineering services to the client?
   1. Answer
      1. No, in the absence of a federal law expressly superseding state law, projects located on land within the State of New York must comply with New York State laws pertaining to the practice of professional engineering, notwithstanding the use of federal funding.
   2. Applicable Law or Regulation
      1. See Question 2.   
   3. Exceptions                                
      1. See exceptions set forth in Question 1.
6. Do the laws governing the practice of professional engineering in New York apply to projects on Indian reservations.
   1. Answer
      1. The answer depends on an assessment of the laws, treaties and agreements (State and Federal) pertaining to each reservation as of the date of the project.  A generalized answer is not possible.  Consult legal counsel.
7. What are the consequences for a contractor engaging in unlicensed or unauthorized practice of professional engineering?
   1. Answer
      1. The contractor can be prosecuted for Class E felony and/or face civil enforcement proceedings under the jurisdiction of the State Education Department resulting in civil penalties of five thousand dollars per violation.
   2. Applicable Law or Regulation
      1. Education Law, Title VIII – The Professions, Article 130 General Provisions, Subarticle 4, Unauthorized Acts
         1. Section 6512 (1) Unauthorized practice a crime makes it a Class E felony for anyone not authorized to practice, who practices or offers to practice, or holds himself out as being able to practice professional engineering/land surveying.  The New York State Attorney General has jurisdiction to prosecute these cases as criminal offenses.
         2. Section 6516 Civil enforcement proceedings and civil penalties vests ancillary jurisdiction in the State Education Department to bring civil enforcement proceedings in cases of illegal practice.
   3. Exceptions
      1. Contractor complies with a cease and desist order and civil and criminal prosecution is not pursued by SED or NYS Attorney General.
8. What are the consequences for a professional engineer participating in a project where the contractor has engaged in unlicensed or unauthorized practice?
   1. Answer
      1. The professional engineer can face charges of professional misconduct. A finding of professional misconduct can result in suspension or revocation of a professional engineering license and/or a monetary fine.  If the conduct is repeated a criminal charge could be lodged.
   2. Applicable Law or Regulation
      1. Education Law, Title VIII – The Professions, Article 130 General Provisions, Subarticle 4, Unauthorized Acts
         1. Section 6509 Definitions of professional misconduct defines professional misconduct as, among other things, permitting, aiding or abetting an unlicensed person to perform activities requiring a license.
         2. Section 6512 (2) Unauthorized practice a crime makes it a Class E felony, including a public official, to knowingly aid or abet three or more unlicensed persons to practice a profession requiring a license. The New York State Attorney General has jurisdiction to prosecute these cases as criminal offenses.
      2. Rules of the Board of Regents, Part 29, Unprofessional Conduct
      3. 1. Part 29.3 General provisions for design professions defines unprofessional conduct as permitting any person or entity that is not authorized to provide professional engineering service to share fees for professional services.  (Exemptions apply to design professional partners and associates, employees, subcontractors and consultants (e.g. a geologist.)
9. When can a contractor subcontract with a licensed professional engineer?
   1. Answer
      1. On any project the contractor can subcontract with a licensed professional engineer to design features that will be used by the contractor during construction of the project; and will not become a permanent feature. For example:
         1. A contractor can hire a professional engineer to design the shoring for an excavation being made to build a footing.
         2. A contractor can hire a professional engineer to design a temporary bridge to transport construction equipment to and from the construction site and or transport the public on a temporary basis during construction.
         3. A contractor can hire a professional engineer to design an ancillary component of the project when the project owner’s professional engineer delegates the design of that component as further described in the answer to Question 10.
10. What is ‘design delegation’?
    1. Answer
       1. The New York State Board of Regents adopted a revision to Section 29.3(b) Rules for Unprofessional Conduct for the Design Professions. This revision, which became effective June 14, 1996, describes activities of licensed professionals which will not be considered to be unprofessional conduct. In order to assist design professionals to better understand its meaning and applicability, the following “plain language” interpretation of the revision has been prepared.
          1. Subject to c through f below, it is not unprofessional conduct for a licensed professional to delegate or assign the performance of a professional service through an unlicensed third party, such as a contractor or subcontractor, to another licensee.
          2. Subject to c through f below, it is not unprofessional conduct for the licensee to whom the work is delegated to accept and perform such work and the unlicensed third party would not be considered to be engaging in illegal practice, provided that:
          3. The work that is delegated must be limited to work that is “ancillary” to the main project components.
          4. The licensee delegating the work must specify all of the design parameters that the design must meet.
          5. The licensee, who has delegated the design function, upon receiving the design, must review and approve the design as meeting the design parameters that were specified and ensure that the designed element can be integrated into the overall project.
          6. A licensee is always responsible for his or her work even if such work has been endorsed or accepted by another licensee.
    2. Applicable Law or Regulation
       1. Rules of the Board of Regents, Part 29, Unprofessional Conduct
          1. Part 29.3(b) General provisions for design professions
    3. Exception
       1. None.

       Note:  This post was prepared by the NYSSPE Design-Build Committee and Mark C. Kriss, Esq. (NYSSPE Legislative and Legal Counsel).  None of the information contained herein should be construed as legal advice or the practice of law.  If you need legal advice, please seek the advice of independent legal counsel.

       NYSSPE facilitates posting on this blog, but  the views and accounts expressed herein are those of the author(s) and not the views or accounts of NYSSPE, its officers or directors whose views and accounts may or may not be similar or identical.  NYSSPE, its officers and directors do not express any opinion regarding any product or service by virtue of reference to such product or service in this blog.

11. With regard to the use of a three way contract executed by an owner, contractor and design professional for design build services, can the design professional be paid directly by the contractor?
    

    Answer

    Such a payment methodology is permissible provided the contract contains a provision which in sum and substance states that in the event that payment(s) for professional design services are transmitted to a contractor/builder, or a third-party, by the owner, such contractor/builder or third-party shall be deemed an agent for the purposes of receipt and payment of monies and shall immediately pay such funds to the authorized entity or licensed design professional; and that the use of this payment methodology shall not alter the duties and responsibilities governing each of the signatories to the contract.

     

12. Are there specific quality assurance standards applicable to public sector design built projects?
    1. Answer
       1. While formal quality assurance safeguards have not been incorporated into state law pertaining to the use of design build in the public sector despite efforts by the design community and the State Education Department (SED), the broader design community and SED Boards overseeing the design professions have endorsed a design build methodology for the public sector.  The methodology is set forth in a position statement set forth below-

 DRAFT POSITION STATEMENT – DESIGN BUILD 04.19.2013

The following draft document is a joint effort of the State Boards representing the design professions in New York. The State Boards’ position is that design build, with the proper safeguards, can be a viable project delivery method for publicly funded projects; one that protects the public’s health, safety and welfare while helping to control project costs, schedule, and quality. The requirements, roles, and responsibilities of the design professionals and contractors and the requirements of the RFP design build submission outlined below comprise the parameters around which the State Boards believe the design build method of project delivery may be performed in the State of New York in a manner that will protect the public’s health, safety, and welfare. Of important note to improve accountability to the public, the State Boards support a new licensure requirement for contractors, but only for those contractors who want to use the design-build method of project delivery.

Requirements, Roles and Responsibilities

Depending upon the complexity of the project, the Owner has the flexibility to hire or use multiple Design Professionals/firms for different scopes of professional services

DCP – Owner’s Design Criteria Professional

-The DCP must be a New York licensed and registered design professional and/or firm authorized to provide design professional services in New York

-The DCP may be either Owner’s qualified in-house staff or the Owner may hire a New York licensed and registered design professional and/or firm authorized to provide design professional services in New York

-A DCP must be retained/serve as Owner’s representative for duration of the project

-The DCP assists in the preparation of the RFP package to allow the DB Team to submit a proposal that meets the requirements of the DB RFP submission identified below

-Sets the quality assurance/control requirements for the DB Team and monitors the DB Team during design and construction

-Identifies preliminary list of permits required for projects

-Assists Owner with selection of DB Team

-Provides review for the Owner while the DB Team advances the design, including the construction documents phase, construction phase, and the project closeout phase, to check compliance with RFP requirements and to ensure design intent is met

DB Team – (DP – Design Professional + Contractor)

Depending upon the complexity of the project, the Design Build Team may consist of multiple Design Professionals/firms to provide different scopes of professional services

-DP must be a New York licensed and registered design professional and/or firm authorized to provide design professional services in New York

-Contractor must be a licensed and registered contractor qualified to do design-build in New York (contractor only needs to be licensed for design-build projects)

-DB Team fixes final cost of project and final schedule

-DP develops the final design and stamps/signs final Construction Documents for regulatory approvals

-DP reviews submittals and does construction site visits during construction

-DB Team is responsible for Quality Assurance/Control, Inspection and Oversight requirements as defined in the RFP*

(*While the consensus draft requires the DP to secure inspection services during construction, NYSSPE’s preference is for DCP to secure inspection services with inspection reports to be forwarded to both the DCP and the DP.)

-DP conducts final inspection and does punch list, verifies project has been constructed in accordance with New York codes/laws/regulations, and obtains certificate of occupancy and/or completion

Requirements of the DB RFP submission provided by the DCP

-Design performance criteria and design standards

-Quality Assurance/Control, Inspection and Oversight parameters

-Concept/schematic documents to establish design intent

-Scope of work and Performance specifications

-Proposed project schedule for design and construction (in milestones)

Key Additional Requirements

-Hiring of the DB Team should be a two step quality-based and best-value selection that includes, but is not limited to, the DB Team’s experience, qualifications and financial capability.

-DP on the DB Team may not be an employee of contractor

-DCP and the DP on DB Team must be employed at an entity authorized to provide professional design services in New York, including a Certificate of Authorization from the State Board for Engineering/Land Surveying if required or a New York licensed and registered design professional acting as a sole practitioner

-DCP cannot be the DP

-DP must be named in the DB contract and cannot be terminated from the project without the Owner’s consent

-The DP is the design professional of record for their defined scope of work.

Notes:

Nothing in this document is intended to limit grandfathered corporations from providing those professional services that they are authorized to perform.

13. To what extent, if any, do the guidelines respecting public sector design build set forth in the answer to question 12 above apply to the private sector?

Answer

To date neither the State Education Department nor NYSSPE have provided specific guidance for design build practice in the private sector beyond the use of a three way contract agreement as detailed in this FAQ.  When additional guidance is available NYSSPE will provide updated information.