What Is SPR Contracting?
Kegler Brown Construction Newsletter May 1, 2002
A local law firm which represents many public owners, including school districts, has begun to promote single point responsibility (SPR) contracting as a panacea for public owners. This new delivery system for public project contracting is supposed to provide public owners with greater protection and still meet public bidding requirements, including the requirement of multiple prime contracts.
Under SPR the design professional and construction manager are to "team up" early on and assume single source responsibility for all problems that may arise during design or construction.
In essence, the design professional and construction manager under SPR contracting are to assume all of the risk traditionally assumed by owners. For example, if claims are encountered, those claims are to be satisfied by the design professional and construction manager.
What are the consequences of such a contractual arrangement on the rights of all members of the construction team? Is such an approach practical?
First, one must seriously question the sanity of any design professional or construction manager that wants to assume open ended risk for everything from construction defects to late completion. Even if such an optimistic design professional or construction manager could be found, they would presumably have to mark up their fee an inordinate amount to reflect this increased risk and as a result they would likely not be competitive with respect to the pricing of their services. Further, many commonly used construction contract documents (such as AIA) place meaningful responsibilities upon the design professional to be the "fair and impartial" arbiter of disputes on the project, including claims. While many design professionals do not fully appreciate the significance of these responsibilities as they endeavor to keep the owner (their customer) happy, wouldn't this situation deteriorate even further if the design professional knows that he is going to be out of pocket for any dollar that he might honor on a change order or claim?
In addition, where will public owners be when they look to design professionals and construction managers to cover all of the losses on a troubled project and discover that there is no performance bond or other security to stand behind that obligation? An owner who attempts to shift all of the risk to the design professional and construction manager may well end up with an unsatisfied judgment against an uncollectible entity without a bond or applicable insurance to cover the loss.
In short, SPR contracting, while a creative and novel concept, appears destined to create practical problems for all of the members of the construction team. Therefore, it is hoped that few public owners will enter into these agreements. On projects where SPR is adopted, subcontractors and contractors may want to consider bidding elsewhere or placing an additional contingency in their bid price to account for this additional risk.