10.08.02 - Errors & Omissions
CITY OF BOYNTON BEACH, FLORIDA ADMINISTRATIVE POLICY MANUAL CHAPTER: 10 Procurement Policy No. 10.08.02 SECTION: 08 Professional Services Page: 1 of 7 SUBJECT: 02 Errors & Omissions
Policy PURPOSE: The purpose of this policy is to set forth consistent procedures to assess: 1. whether an error and/or omission ( sometimes referred to herein as “E&O”) has been made
by a Design Professional who is performing services for the City, 2. create a record of error and/or omissions for the purpose of recovery of premium costs, 3. evaluate whether reimbursement
of premium costs is appropriate and, 4. evaluate Design Professional performance for consideration in future project selection processes. AUTHORITY: Administrative procedure. DEFINITIONS:
Definitions as used in this Policy, the following terms carry the meaning specified below. 1. Change Order. Any contract amendment which increases or decreases the value, or duration
of a contract, when approved by the City Commission. 2. Consequential Damages. Consequential damages are damages which do not flow directly and immediately from the acts of a party,
but only from some of the consequences or results of such acts and may include the City's cost of replacing or completing work resulting from a design error or omission, the cost of
providing extended project support and loss of use damages. 3. Delay Damages. Delay damages include the costs, which the City may have to pay a contractor as the result of Design Professional
caused delays. These damages can include increased labor and material costs, extended home and field office overhead, lost productivity and lost opportunity damages. 4. Department Director.
The head of any City department or division . 1
5. Design Professional. Design professionals are any consultants who provide services to the City whether or not they are hired pursuant to the Consultant Competitive Negotiation Act,
FSS. 287.055. This policy applies to the entire design team including all sub-consultants hired by a Design Professional who is in direct contract with the City of Boynton Beach. 6.
Error. An act that through ignorance, negligence, deficiency or accident departs from or fails to achieve what should be done. Nothing in this definition modifies the terms of the City's
contract with the Design Professional. 7. Insurance Carrier. The provider of the professional liability insurance coverage carried by the design professional. 8. Omission. An item of
design or contract work task, which was neglected or left undone. Nothing in this definition modifies the terms of the City's contract with the Design Professional. 9. Premium costs.
Premium costs consist of the increased cost to the City of having items of work added to a project after the contract has been bid and awarded and construction started. If work is added
because of an error or omission by the Design Professional, and the item is required for the project to function as anticipated, value is added to the project and some portion of the
cost of the item may properly be allocable to the City. However, when an error or omission in design is discovered after bid, some portion of the cost of adding the item frequently represents
the increased cost which a contractor incurs in constructing the added work out of sequence. In addition, the City loses the benefit of having the work required to overcome the design
error or omission competitively bid. These additional costs resulting from design errors or omissions constitute premium costs. Premium costs include the cost of the consequential and
delay damages as a result of the error and/or omission. 10. Professional Liability Insurance. That insurance which indemnifies against damages caused by the errors or omissions of the
design professional. 11. Project Manager. The City employee assigned to administer the contract of a Design Professional. 12. Standard of Care. The expected level of professional skill,
knowledge, expertise, experience and performance set forth in the Design Professional's contract. Nothing in this Policy modifies the language or terms of the City or Design Professional,
which are contained in their contract. 13. Unforeseen Site Condition. An actual physical characteristic which was not known or is different from the characteristic described in the construction
contract documents. Responsibility for unforeseen site conditions are described in the contract documents and may vary from contract to contract. 2
POLICY: It is the policy of the City of Boynton Beach to fairly and consistently review and evaluate the performance of its Design Professionals against applicable contract and industry
standards1. In the event that performance meets or exceeds the contract requirements, it is the policy of the City to record same in an objective manner for use in future selection processes.
In the event that performance falls short of the contract requirements, the City policy is to recover the premium costs, consequential damages, and delay damages resulting from the Design
Professional's failure to perform to the level required by the contract or by industry standards as well as record same in an objective manner for use in future selection processes.
A Design Professional is obligated to perform services in a manner consistent with the contractually required standard of care as well as industry standards. Neither industry nor contractual
standards of care require perfection. Therefore, some level of performance short of of perfection is anticipated. In each project where the City has costs associated with errors and
omissions, the City should determine if those costs reflect a level of performance less than that required by the applicable standard of care. If so, then the City should expect to be
reimbursed by the Design Professional for those costs. When the City incurs cost overruns on a project, an assessment should be made by the Project Manager to determine the impact of
such factors so that any City claim could be fairly adjusted. Such a determination would be made on a case by case basis by the City or consultants engaged for this purpose. PROCEDURES:
1. General Each project must be assessed on its own. No one standard can determine whether the City should expect reimbursement for E&O expenditures. Some errors or omissions may, standing
alone, evidence a lack of care sufficient to warrant reimbursement. A series of minor errors or omissions may or may not be indicative of a lack of care. In determining whether to seek
compensation from the Design Professional the City should first calculate and total the amount of premium costs. In the event that the standard of care has been exceeded, the Design
Professional will be responsible for only the premium value (non-value added costs). Secondly, the premium value needs to be compared to an applicable standard of care to determine if
the premium value exceeds the amount normally 1 Contracts, by their nature, cannot incorporate reference to all standards of care for a design professional. Reference to “industry standard”
in this policy imposes on design professionals a duty to perform the requested services in accordance with the standard of care used by similar professionals in the community under similar
circumstances. 3
expected on a project where the Design Professional was conducting itself in accordance with the standard of care contained in its contract. 2. Design Professional's Contract Language
Each contract with a Design Professional shall contain standard of care language. The language shall be consistent with the language which currently represents the City's position as
approved by the City Manager. Department Directors may recommend a higher standard of care for contracts which warrant same. This revised standard of care language must be approved by
the City Attorney's Office. In any event the individual contract language shall take precedence over the terms of this Policy. The Design Professional's performance will be recorded
and in part evaluated according to the provisions of this Policy. Project Managers shall provide a copy of this Policy to all professionals as part of their proposal or contract. 3.
Change Order Administration a. Construction Administration Services The Design Professional shall immediately be made aware of any change, which may be considered an error or omission
by the City so that the Design Professional can evaluate the condition and participate in mitigating impact of the error or omission. 1) If construction administration services are included
in the Design Professional's contract, the construction contract will include language directing requests for information and change proposals to the Design Professional with simultaneous
copy to the City, or simultaneous notification to both the City and Design Professional. 2) If construction administration services are not included, the Project Manager will notify
the Design Professional within 24 hours of being made aware of a condition which may be an error and/or omission. This notification may be verbal or written. If verbal, notification
must be to a person employed by the Design Professional holding a position at least of engineer. b. Change Order Brief A change order brief is required for all change orders prior to
City approval. The change order brief contains a field to identify whether the change order, or each change item contained within a change order (if 4
multiple change items within a single change order) was a result of an error/omission. The Project Manager must identify whether the change or individual change item is a result of an
error or omission. This change order brief shall be provided to the Design Professional upon approval of the change order. The change order brief shall not be provided to the Contractor
as an attachment to the change order, however, must be provided to the Contractor if requested. c. Evaluation of the Value of Errors and Omissions Within 30 days of the approval of a
change order, all change items which have been identified as an error/omission will be evaluated to identify the premium costs. The premium costs should include all costs identified
in the definition of premium costs above. Independent consultants may be used to assist the Project Manager in determining the premium costs. d. Contract Payments to the Design Professional
To the extent possible, the Project Manager shall ensure that sufficient funds are available (based on contract balance) from payments to the Design Professional to cover the value of
the premium costs identified and transmitted to the Design Professional. This provision of the Policy may be waived with the approval of the Department Director. This provision is not
intended to provide for the implementation of a "retainage" provision. e. File The Project Manager will maintain a file which contains the change order documents, all related correspondence
and work papers, the evaluation identified in “b” above, the Design Professional's response to the evaluation, and any other materials related to the an error/omission. 4. End of Construction
Evaluation and Assessment a. Cumulative Review Upon completion of construction, the Project Manager will compile the results of all E&O evaluations for the purpose of determining whether
the standard of care identified in the contract has been met. This compilation will be referred to as the cumulative review. If determined to be warranted, the Project Manager can initiate
an interim cumulative review at any time during the contract. b. Assessment Against Standard of Care 5
The Project Manager will compare the cumulative review to the standard of care in the contract of the Design Professional to determine whether the contract requirements have been met.
This comparison is to be performed on a case by case basis considering the items set forth earlier in this Policy. c. Review of Final Evaluation and Recommendation 1) If the Project
Manager's evaluation indicates that the standard of care has been met, the Project Manager can recommend final payment. Final payment and recordation of the Design Professional's performance
shall be made in accordance with “4d” and “4e” of this Policy. 2) If the Project Manager's evaluation indicates that the standard of care has not been met, a copy of the evaluation shall
be sent concurrently to the Division Director as well as the Design Professional. The Division Director shall review the evaluation and schedule a meeting with the Design Professional
prior to concurring with the recommendation of the Project Manager and sending same to the Department Director. Should the Department Director agree with the evaluation of the Project
Manager and Division Director that the standard of care has not been met, the cumulative review, along with the Department Director's recommendation shall be forwarded to the Design
Professional. This communication to the Design Professional shall indicate the monetary penalty, if any, that the City intends to impose and shall afford the Design Professional the
opportunity for a meeting with the City to discuss the City’s findings and conclusion. In the event the Design Professional disputes a monetary penalty imposed by the City pursuant to
this policy, the dispute shall be settled by mediation under the Construction Industry Mediation Rules of the American Arbitration Association. A demand for mediation must be in writing
and must be made prior to final payment. The acceptance of final payment by the Design Professional constitutes a waiver of the dispute. If within 45 days after service of a written
demand for mediation, the mediation does not result in settlement of the dispute; then, any unresolved dispute shall be settled by arbitration administered by the American Arbitration
Association in accordance with its Construction Industry Arbitration Rules. Fast track procedures shall be followed when the disputed amount is less than $50,000.00. A single arbitrator
shall be used. 6
7 An award rendered by the arbitrator shall be enforceable under the provisions of the Florida Arbitration Code, Chapter 682, Florida Statutes. d. Final Payment of the Design Professional's
Contract 1) If the Department Director concurs with the Project Manager that final payment in accordance with the terms of the contract. 2) The Project Manager shall hold the final invoice
for services, if a contract balance remains. The amount withheld from final payment will be in an amount equal to or less than the estimated premium value. If there are insufficient
funds remaining in the contract balance, the Department Director will determine the most appropriate manner to recover same from the Design Professional and/or their Professional Liability
Carrier. 3) If the matter proceeds to negotiations for resolution, the final invoice for services shall be processed upon conclusion of the negotiations and in accordance with the agreements
resulting from same. e. Recordation of Performance Evaluation Form The information contained in the cumulative review shall be permanently recorded on the Design Professional's Performance
Evaluation Form, which is one of the factors considered for future selection. DEVELOPED BY: John Guidry, Utilities Director EFFECTIVE DATE: March 1, 2001 Kurt Bressner Kurt Bressner
City Manager