Out-Law Analysis 11 min. read
Construction law terms: design development and design change
20 Jun 2023, 2:53 pm
The terms ‘design development’ and ‘design change’ are two commonly used terms used in construction law that are often confused.
This guide explains what each term means, examines how they are addressed in standard form contracts, looks at how they have been used in recent case law and offers some key practical takeaways.
Design development
Design development is the process by which a specification or a high-level design of a project is translated into detailed design documents. In the context of a design and build contract, the employer hands over the responsibility for the design and construction to the contractor. Usually, this means that the contractor has greater responsibility as well as the risk for the design development.
In practical terms, the contractor usually gets no extra time or money for this development process – or for building the end product – even if it is more complex or time consuming to do so.
Design change
Design change or variation describes an alteration to the scope of work that was originally specified in the contract. A design change can be created by omission, addition, or substitution to the works – or through a change in the manner in which the works are to be performed. Design change is, therefore, most often originated by the employer or the design team.
The difference between design development and design change
The main difference between design development and design change is who pays for them. A design change might entitle a contractor to more money and time, whereas a design development will give rise to neither. However, not all design changes would entitle a contractor to time or money.
Read more in our construction law terms series
- Construction law terms: general and liquidated damages
- Construction law terms: termination at common law and under contract
- Construction law terms: claims under contract vs breach of contract claims
- Construction law terms: assignment and novation
- Construction law terms: contractual notices and condition precedent notices
- Construction law terms: set off, abatement and counterclaims
As a result, in design and build contracts, the point of handover of the design is often difficult to establish. It is possible for an employer to use design development as a ground to reject a contractor’s application for a design change or variation.
Standard form contracts
JCT Design Build Contract
All standard form building and engineering contracts either define design change – or ‘variations’ – or define what constitutes variations under that particular contract. Clause 5.1 of the 2016 JCT Design Build Contract, for example, defines a “change” as a change to the employer’s requirements that necessitates the alteration or modification of the design, quantity, or quality of the works.
FIDIC
Similarly, in the 2017 International Federation of Consulting Engineers (FIDIC) Yellow and Silver Books, a variation is defined as changes to the works, which is instructed as a variation under Clause 13. This also includes a change to the employer’s requirements.
Therefore, whether any changes to the design are considered a design development or a design change will come down to what is included in the employer’s requirements and whether these have been “changed” or “just developed”. This may, in turn, depend on the level of detail and specificity within the employer’s requirements. If the design development solely fills in the blanks in the employer’s requirements, it is not considered a design change.
NEC contracts
In New Engineering Contract (NEC) contracts, there is no specific terms to cover variations or design changes. Clause 60.1(1) provides for a compensation event in the case of an instruction from the project manager changing the scope of the contract. One of the exceptions to this compensation event is where the contractor changes its own design either at its own request or in order to comply with the scope provided by the client.
The distinction between clarifying the interpretation of the works information – a design development – and an instruction which changes the works information – a design change – is a common area of dispute in relation to Clause 60.1(1).
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Standard Form Contracts |
Design Development |
Design Change |
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JCT Design and Build 2016 |
Clause 2.14.1. – in case there is discrepancy or divergence within or between the contractor’s proposals or the contractor’s design documents, the contractor is liable to resolve it after the employer approves the proposed remedy.
Effect - contractor would not be entitled to time and money.
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Clause 5.1.1 defines change as the alteration or modification of the design, quality or quantity of the works including: (1) the addition, omission, or substitution of any work; and (2) alteration of the kind or standard of materials used, plus removal from the site of any work executed or site materials. Clause 5.1.2 – change also includes the imposition by the employer of any obligations or restrictions in regard to the execution or completion of the work in a specific order.
Effect - contractor would be entitled to time and money |
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Clause 3.5 - contractor is obliged to comply with instructions issued by the employer, unless it’s a change under Clause 5.1.2.
Effect - contractor would not be entitled to time and money – unless the instruction truly is a change as above.
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Clause 2.14.2 - in case of discrepancy or divergence within the employer’s requirements, the contractor’s proposals shall prevail. In case the contractor’s proposal do not address the discrepancy, the contractor shall propose amendments and this will be treated as a change to the contract. Effect - contractor would be entitled to additional time but not money. |
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Clause 3.13 - if the change is necessary as a consequence of any works, goods or materials that are not in accordance with the contract, the employer may issue instructions. Effect - contractor would not be entitled to time and money. |
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NEC 3 and 4 |
Clause 60.1(1) - in case the contractor changes its own design either at its own request or in order to comply with the works information or scope, it is not a compensation event under Clause 60.1(1). Effect - contractor would not be entitled to time and money |
Clause 60.1(1) - compensation event includes an instruction from the project manager changing the works information or scope. The project manager has the power to change the works information under Clause 14.3. Effect - contractor would be entitled to time and money. |
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Clause 17.1 - in case of ambiguity or an inconsistency in the contract documents, and the contractor has notified - the project manager’s instruction to resolve the ambiguity or inconsistency is not a compensation event. Effect - contractor would not be entitled to time and money |
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FIDIC Yellow Book and Silver Book, 2017 |
Clause 3.5 - engineer can issue instructions to the contractor which are necessary for the execution of the works. The contractor must comply with them, unless the instruction is actually a variation under Clause 13 or is not compliant with the applicable laws. Effect - contractor would not be entitled to time and money. |
Clause 1.1.86 - variation is defined as any change to the works, which is instructed as a variation under Clause 13. It also includes a change to the employer’s requirements. Effect - contractor would be entitled to time and money. |
Design development and design change case law
The following cases are examples where the courts have distinguished design development from design change.
Skanska Construction v Egger Ltd
In this case, Skanska were responsible for the design in the employer’s requirements together with such further design work as was necessary to develop the employer’s requirements into fully workable designs.
A dispute arose over an additional water main and whether it was merely design development or a design change for which payment was due. The employer argued that a second water main was not a design change. Another issue was whether steelwork, which was later constructed by Skanska, was simply a design development, since the design and supply of the steel was one of Skanska’s obligations.
The Court of Appeal agreed with Skanska and held that the instruction to provide a second water main was a design change because the employer’s requirements only provided for one water main. However, it also held that the additional steelwork design was part of the design risk that Skanska had assumed, even though there was no detailed design included in the employer’s requirements.
Co-operative Insurance Society v Henry Boot Ltd
Henry Boot was required to develop a design based upon an outline design produced by a consulting engineer employed by the Co-operative Insurance Society (CIS) Ltd. During the works, water and soil flooded into the sub-basement excavations and one of the preliminary issues was the contractual liability of Henry Boot for the design of the piled walls.
Henry Boot submitted that its only contractual obligation in relation to the design of the piled walls, which formed part of the works, was to prepare working drawings in respect of the concept devised by the consulting engineer.
The court held that the obligation of Henry Boot under the contract was to complete the design of the bored piled walls and to develop the conceptual design into a completed design that is capable of being constructed. This obligation included a duty to check the adequacy of any preliminary design by others.
In effect, Boot had assumed responsibility for making the employer’s preliminary or concept design work – so this was ‘design development’ not ‘design change’.
Key takeaways
A duty to complete a design can mean a contractor takes the risk for the underlying design. Design development usually means no time and money – that only happens when there is a change to the underlying design. Because of this, how that original design is defined and specified – as well as the wording of responsibility for completing and developing a design – is key to the extent of risk adopted.
All parties need to ensure that the scope of works is sufficiently detailed and cover additional matters that may arise during the construction of the project. Contractors should ensure that there is sufficient time in the tender period for them and their specialist supply chain to properly consider what their design obligations are. They also need to identify whether a particular contract imposes wider design development obligations and whether a higher threshold is needed to demonstrate a design change.
Employers should identify risks and minimise the potential for design changes by ensuring – as far as possible – that uncertainties are eliminated prior to the contract.
Co-written by Arpan Gupta of Pinsent Masons.
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