Risk Management and Allocation Questions and Answers Flashcards
6 cards from real DBIA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Risk Management and Allocation Questions and Answers flashcards as text
What is DBIA's recommended approach to risk allocation in design-build contracts?
Answer: Allocate each risk to the party best able to manage, mitigate, or absorb that risk
DBIA advocates that risks should be allocated to the party best positioned to manage them, producing lower overall project costs.
Which risks are typically retained by the owner in a design-build contract?
Answer: Risks related to differing site conditions beyond what was indicated, owner-directed changes, regulatory changes, and force majeure events
Owners typically retain risks they are better positioned to manage or that are beyond the design-builder's ability to anticipate.
How should professional liability insurance be addressed in a design-build contract?
Answer: The design-build entity should carry professional liability (E&O) insurance with coverage limits appropriate to the project's complexity and value
Professional liability insurance specifically covers design professional negligence and is essential in design-build.
What is a 'limitation of liability' clause, and how does it function in design-build?
Answer: It caps the design-builder's maximum financial exposure for certain types of damages, negotiated based on project value and available insurance
A limitation of liability clause establishes a maximum amount the design-builder can be required to pay.
How should design-build contracts address warranty obligations?
Answer: Contracts should distinguish between construction warranties (typically 1-year correction period) and the designer's ongoing professional standard of care obligation
Design-build warranty structures must address both the construction correction period and the professional standard of care for design services.
What is 'consequential damages' waiver, and why does DBIA recommend it for design-build?
Answer: A mutual waiver where both parties agree not to claim indirect damages like lost profits or lost revenue from each other
DBIA recommends mutual consequential damages waivers because indirect damages are unpredictable, potentially catastrophic, and difficult to insure.