March 1, 2001

By Dean B. Thomson

As any vendor of internet services will tell you, e-Construction is the next “wave” of change in the construction industry. In fact, an ENR article recently predicted that 10% of construction procurement will occur on-line by 2004. [1] What does e-Construction have to offer?

In the language of consultant-speak, e-Construction is a “new paradigm”, a vision of integrated solutions that will simplify processes, reduce bureaucracy, eliminate redundancies, and improve efficiency. E-Construction is not merely automating existing processes or posting design and construction documents to web pages. Instead, the goal is to create an internet hub where project information can be exchanged. The hub can be used like a giant “chat room” in which all project participants can expedite RFI responses, collaborate on design and value engineering, share budget, schedule and project management information, and work together on a host of project-related issues. Proponents extol the ability to instantly track on-line all sorts of project data that will lead to cost reductions, greater efficiencies, and faster time cycles. [2]

Whether these claims are true or the hype of pony-tailed software designers is the “$64,000 dollar question.” In fact, skeptics claim the question will cost much more than $64,000 to answer due to the tremendous capital investment, learning curve, and training costs required before a company can participate in e-Construction. Only time and results will determine whether the infusion of the internet into construction will produce greater collaboration and efficiency or merely insert another level of costly information managers between the parties.

If you are currently engaging in e-Construction or planning soon to take the plunge, then you should be aware that this new territory could be more risky and problematic than you had hoped. This month’s Briefing Paper will highlight some of these issues so that you can avoid them before you “log-on”.

One of the buzz words of e-Construction is “collaboration”, which can take many forms. Web-based products allow participants to organize, track, and store key documents. A document can be posted for general notice and review for all in the chain of construction and design. Alternatively, access to the document can also be layered and controlled to limit participants’ ability to view, modify or create a particular document. Productive synergies could result from this on-line collaboration, but as one commentator questioned, “If all can contribute, who should lead and who is responsible for failure?” [3]

Ownership of the web site and its data and responsibility for errors are key issues that need to be addressed in internet construction. The Owner is paying for the project, which gives the Owner a credible claim to ownership of all project data. On the other hand, an Owner-controlled site may inhibit a Contractor or its Subcontractors from posting confidential or self-critical but important data on the site. Yet if the site is Contractor or Designer controlled, they can block or limit Owner access to important data in the site. Thus, there is no simple answer to the question of data ownership; it requires a unique response to every project depending on the participants’ needs. The goal is to avoid inhibitions or disincentives that discourage participants from fully realizing the system’s potential and reducing the website to a glorified e-mail system.

E-Construction will also likely lead to contract supplements allocating new types of risks among project participants. For example, electronic design is becoming ever more data-rich. Designers can select pre-designed objects, such as walls, roofs and foundation elements, the components of which have already been designed by others. Not only are these objects self-sufficient in their design, but they can also “communicate” with each other so that if a change is made in the load of a wall, the software will make a corresponding, appropriate change in the selected foundation object. This object-oriented design increases design efficiency and flexibility, but who will be responsible for any design errors in the pre-designed object? Requests for complicated indemnities by pre-designed object users and the offer of limited warranties and disclaimers of liability by object vendors will be essential negotiation points that need to be resolved before object-oriented design technology is utilized.

A sobering illustration of this issue is M.A.Mortenson’s experience with a bidding software company. Mortenson bid a $70 million hospital in Seattle only to later discover a $1.95 million dollar error in its bid, which Mortenson blamed on a glitch in the computer bidding software it used. The software vendor defended itself by claiming that it was a seller of goods, not a professional, and that Mortenson agreed to waive all consequential damages stemming from use of the product in the license agreement accompanying the software. Like most such licensing agreements, it was placed on the outside of the diskette pouch and on the inside of the instruction manual. Mortenson claimed never to have seen the waiver of consequential damages.

Nevertheless, Washington’s Supreme Court ruled that even if Mortenson never saw the terms of the license, Mortenson’s use of the software constituted its assent to the agreement, including the license terms. In short, the Court concluded, “it was not necessary for Mortenson to actually read the agreement in order to be bound by it.” [4] Thus, before you completely rely on technology, make sure you have acceptable remedies if technological failure occurs. Alternatively, if the software vendor refuses to offer a meaningful warranty, you may have to resort to relying on a human being to check for errors.

As discussed, equipment vendors are beginning to offer designs associated with the equipment they sell for the convenience of the lead designer in hopes of inducing the designer to specify the vendor’s equipment. While this practice might be good for business, licensing issues can nevertheless arise if the equipment vendor’s design was produced by a designer not licensed in the location of the project. It is also important for the equipment vendor to maintain ownership of its design once it is incorporated into the equipment to be purchased and posted on the project’s website. Protection of intellectual property through copyright and other laws will be essential before participating in e-Construction.

The fluidity and speed by which an electronic design can be changed is both exciting and troubling. When is the ever-evolving electronic design upon which contractors are bidding finalized? Does instantaneous notice of a design change equate to instantaneous knowledge of and agreement to the change? Communications or agreements entered into over the Internet can be binding if made in conformance with the Electronic Records and Signatures in Global and National Commerce Act enacted by Congress on October 1, 2000. In order to avoid disputes, some definition of the design for the project and a protocol for sending binding communications must be developed or the project participants may not have a meeting of the minds concerning what has been offered and what has been accepted.

The collaborative development of e-design is enticing, but it also raises issues of who the designer is. If the contractor suggests design modifications on-line that are adopted, does the contractor become the designer or part of the collaborative design team? Is the contractor licensed to provide design services? Does the contractor carry E&O insurance for design-related errors? Was the contractor’s design prepared under the “responsible supervision and control” of a licensed design professional?

These important issues need to be addressed in supplements to standard industry contracts that were developed before e-Construction became an option.


In Shakespeare’s “The Tempest”, Prospero’s daughter, upon meeting young men for the first time, innocently exclaims, “How beauteous mankind is! O brave new world that has such people in it!” In reply, her more worldly father cautions, “‘Tis new to thee.”

At first glance, e-Construction appears to offer a brave new world of possibilities. Without dampening enthusiasm for the new technology, it is nevertheless prudent to be aware of the risks involved in this new paradigm. This Briefing Paper has touched on only some of the potential pitfalls associated with an excursion into e-Construction. Thoughtful planning and appropriate contract language can serve as a good road map to make your venture a success.

[1] . Engineering News Record, Buyers Expect Systems Will Soon Deliver for Them, December 11, 2000, p. 23.

[2] . For a good summary of the costs and benefits of e-Construction, see Betty L. Hum, E­-Construction: An Integrated Solution or Ahead of its Time?, paper delivered to the American College of Construction Attorneys, February 2001.

[3] . See Howard W. Ashcroft, Jr., Vendors in an Internet World: Design with a Little “d”, paper delivered to the American College of Construction Lawyers, February, 2001, for a thoughtful discussion of legal issues involved in e-Construction.

[4] . M.A. Mortenson Co., Inc. v. Timberline Software, Sup. Ct. Wash., Cause No. 67766-4, May 4, 2000.

This discussion is generalized in nature and should not be considered a substitute for professional advice. © FWH&T