As a general rule, when there is a breach of contract, the injured party—in the case of a building owner and architect/engineer, the owner—must receive what they had a right to under the contract, but no more. A windfall or a benefit greater than would have been received had the contract been performed correctly is not allowed at the expense of the performing party or architect in this case. 

Black’s Law Dictionary describes betterment as:

“An improvement of a … building that goes beyond repair or restoration.”

For example, suppose an owner realizes that a standard built-in (plaster/painted) receptionist station is facing the wrong way on the drawings and was built as such. In that case, the owner cannot now ask for the station to be faced with marble or add a planter or other enhancement. This additional work, called “betterment,” is outside the scope of the original contract, and its costs are not allowed.

In another example, no light fixture has been shown in an entry closet. During construction, the owner adds a light fixture in the entry closet. All expenses related to adding the fixture are betterment. 

Betterment depends on what is reasonable. If an improvement is necessary and reasonable to complete the terms of a contract, then it will be allowed. If it is unreasonable, it will be considered betterment; thus, the amount of damages that constitute the upgraded improvement is not allowed. 

For example, if a city ordinance required the sidewalk around a building to be 48”wide, and it was only constructed 40” wide, the owner would benefit from the additional 8,” and it was required. The cost of the additional 8” is betterment, but demolishing pavement, for example, to allow for the additional 8” would be a cost for the engineer as it is reasonable and necessary to bring the sidewalk up to code. 

Betterment in the case of omission in design. Design professionals frequently invoke the betterment or added value defense in the context of claims involving omissions in design documents. Generally, courts require owners to pay what the omitted item would have cost had it been included in the original design. Accordingly, if the error is not discovered in the design stage, the owner should not have to pay for any additional labor or materials necessary to correct the error or the cost of necessary retrofitting demolition that would not have been part of the original design.

For example, an engineer was sued for designing an inadequate tank-drain septic system with a 1,000 sq ft drainage field instead of the required 1,200 sq ft drainage field. The owner would have had to pay the costs of the additional 200 feet required, and the engineer is not obligated to pay for that cost, but only any additional costs incurred, if any. 

Timing is crucial for the betterment defense. Traveler’s Risk Management Advisory Bulletin states:

“Timing plays a crucial role in the availability of the betterment defense and to what extent it can apply to reduce monetary liability. The key timing components are whether the project has been bid and a contract signed with the contractor, and if so, has this design element been constructed? If not, the owner may not have suffered compensable costs, at least not yet. With no compensable costs in play, a design change may fix the problem; however, the design professional will generally not be compensated for their re-work. On the other end of the spectrum, if the owner or contractor has spent money to construct all or a part of a deficient design, and must spend more to remediate the constructed design, the owner will attempt to recover these costs from the design professional who may have both a betterment defense and an associated defense of limitation of expense to the owner’s ‘first costs.’”

The concept of betterment is a highly complex but potentially money-saving defense. Consultation with the insurance company’s legal counsel and your construction lawyer is necessary to determine the correct structure of the claim, precedents, and arguments to use. Architects must understand that consulting engineers may also use this defense against them in suits. 

Want More Information? 

Click here for a video by Baker Law, “What is Betterment – The “No Free Lunch” Rule – in Design and Construction,” by Jeremy Baker, 2/26/2021.

Click here for a Federal Highway Administration (FHWA) overview and examples of transportation betterment under emergency relief.

References:

Atkins, FAIA, James B. & Simpson, FAIA, Grant A. AIArchitect, Vol. 13, November 3, 2006, “A Loss Cause Too:  Betterment.”

Travelers Advisory Bulletin: A Risk Management Publication for Design Professionals.

NOTE: SDA does not endorse any products or services mentioned, and SDA does not assume responsibility for any circumstances arising out of the interpretation, application, use or misuse of any information presented.  SDA recommends the reader consult the appropriate legal, financial or human resource counsel before implementing information contained herein.  

April 24 was National Administrative Professionals Day. And this year, we’re taking a different approach. At SDA, we’re celebrating how business professionals in the A|E industry with roles in marketing, finance, human resources, project management, and operations keep the firm in business. Instead of spotlighting individual achievements, we’re diving into the collective essence of our firms, celebrating the interconnectedness of diverse business functions that underpin design endeavors. Much like the celebrated Architecture and Engineering Weeks, let’s delve deeper all week into the intricate business ecosystem of our firms. Today's focus is Operations.

In the intricate world of architecture and engineering, the design process often takes center stage, with its creative endeavors and technical innovations capturing the spotlight. Yet, behind the scenes, two critical functions quietly ensure the success and viability of every project: contract administration and risk management.

These functions are often seen as the unsung heroes of project execution, handling the intricate details that can make or break a project’s outcome. Imagine, for a moment, the complexity of an 18-month project with four critical milestones spaced every four months. Here, the intricacies of contract administration come into sharp focus. Do you prefer invoicing four times throughout the project’s duration, or would you opt for the flexibility of monthly progress billing? The answer might seem trivial, but it has profound implications for working capital management and project liquidity.

Trained contract administrators are pivotal in navigating these intricacies, scrutinizing every clause and provision to ensure alignment with project goals and objectives. One of their critical tasks is to zero in on the Payment Clause, as well as the Limited Liability and Rights of Use clauses, to control professional liability and financial risk.

Furthermore, operations specialists are instrumental in securing signed contracts with all subconsultants, a crucial step in mitigating professional liability insurance costs. Ensuring that all subcontractors have the requisite certificates of insurance helps shield the firm from potential legal and financial liabilities.

SDA recognizes the paramount importance of effective contract administration and risk management. That’s why we’ve partnered with industry leaders like Berkeley Design Professionals to offer comprehensive webinars and conference sessions on these critical topics. Through these educational initiatives, we empower our members to stay abreast of the latest best practices and industry standards, equipping them with the knowledge and tools to navigate complex contractual landscapes confidently and precisely.

In essence, contract administration and risk management are the bedrock upon which successful projects are built. By investing in these fundamental functions and arming our members with the necessary knowledge and resources, we position them for success in an ever-evolving industry landscape.

Want to know more about contract administration and risk? Check out these SDA programs:

SDA Webinars:

Did I Say That? Managing Claims & Liability in Electronic Business Communication – Karen Serger & Bruce Miller

Risk Management Essentials of the New Normal – Diane Mika, Berkley Design Professionals

April 24 is National Administrative Professionals Day. And this year, we’re taking a different approach. At SDA, we’re celebrating how business professionals in the A|E industry with roles in marketing, finance, human resources, project management, and operations keep the firm in business. Instead of spotlighting individual achievements, we’re diving into the collective essence of our firms, celebrating the interconnectedness of diverse business functions that underpin design endeavors. Much like the celebrated Architecture and Engineering Weeks, let’s delve deeper all week into the intricate business ecosystem of our firms. Today's focus is Marketing.

Even before a project starts, the marketing team is at bat for the designers. From researching markets, developing business through networking, adhering to go/no-go processes, and developing project-winning proposals, the marketing team is crucial in bringing work in the door. But once in the door, the marketing team can shine in client management.

In the fast-paced world of architecture and engineering (A|E), where project timelines are tight and deliverables are critical, ensuring exceptional client experiences is paramount. After all, great experiences often translate into repeat clients, constituting 80% of any successful firm. While the design and technical teams are pivotal in delivering projects that delight clients and meet their goals, the marketing team is uniquely positioned to listen to and advocate for client needs.

One of the critical roles of the marketing team is to maintain a pulse on client satisfaction throughout the project lifecycle. Unlike project teams, who may be deeply immersed in the day-to-day challenges of execution, the marketing team operates at an arm’s length from these ups and downs. This distance allows them to gather feedback that clients may not always feel comfortable delivering directly to the project team.

Successful firms understand the importance of proactive client engagement and feedback collection and rely on the marketing team to schedule regular touchpoints throughout the project lifecycle. These touchpoints provide valuable opportunities to solicit feedback, address concerns, identify areas for improvement, and set the stage for the next project.

As part of your ongoing effort to stay at the forefront of management best practices, you can learn from A|E industry experts during SDA events like EDSymposium, our annual in-person conference, and EDConnect, our annual virtual conference. SDA shares best management practices at both conferences. By bringing together professionals from both the back and front office, EDConnect provides a platform for learning and collaboration, enabling the entire firm to advance its goals together. Topics have included A|E market updates, go/no-go processes, interview skills, SWOT analyses, and successful CRM implementation.

Your marketing team’s proactive engagement with clients, expanded by taking advantage of SDA’s commitment to ongoing learning and collaboration, underscores the dedication to delivering exceptional experiences and helping firms foster long-term client relationships.

Join us at EDSymposium24 in Colorado Springs, CO (June 11-13, 2024) and begin your path to advancing your knowledge. Learn more here. 

SDA Webinars:

Get Smart Marketing Edition: Maximize the Funnel – Jennifer Stutts

Go/No Go Process: Promoting Effective Marketing & Risk Management - Diane Mika & Julie Stanton