ARGE - construction partnership in Germany: legal issues in cooperation of different engineering firms

Text Sample: Chapter 2, Problem Definition: Usually there are different persons involved in the construction of a building. There are the principal, who could be the building owner or investor, the architect, planners and building contractors. Architects and planners are assigned by the building owner to consult him and to consider building laws and technical regulations. Architects and planners act on behalf of the principal on the construction site. Based on this frame conditions, they are practically the contact persons for contractors and building authorities. Planners are employed in engineering firms. In Germany there are more than 35.000 engineering firms for building services. They are responsible for the different parts of the technical systems within the building. In general, the services are divided in mechanical engineering and electrical engineering. The majority of the companies only offer one of the before mentioned services. Many builders expect to have one contractor for consulting and planning the building services. Therefore many companies organized themselves by commissioning or subcontracting the missing half. However, subcontracting can also be problematic. First of all, subcontracts are independent of the main contract. The principal has no contractual access to the subcontractor. One example from market is a constellation which is common and wide spread: an engineering office for HVAC - Systems has none specialist for electrical systems, in consequence they have to engage an engineering firm for the electrical engineering. Nevertheless there may come up difficulties in the construction phase. For example the contractor for the electrical system may deliver and install the wrong devices. Because of bad construction site management the subcontracted engineering firm for electrical systems is involved. Due to the main contract between building owner and engineering firm for HVAC - systems they are also involved. Additionally there could arise some more problems at the end of the project. The acceptance and handover of the building is difficult in two ways, on the one hand due to the handover from the subcontractor to the main contractor and on the other hand due to the handover from the main contractor to the building owner. It could be that the subcontractor has finished his work earlier than the main contractor and wants to accomplish the acceptance in order to issue his final invoice. Another problem could come up when the builder runs into financial difficulties and is not able to bring up the project costs, which leads to insecurities with regards to the overall project funding. In this case the subcontractor could only deal with his contracting entity. These described problems are not minor losses. On the construction site all parts of constructing a building are closely linked to each other. That means that the end date for the hand over to the builder could be delayed and cause significantly higher costs. At this point, mistakes become very expensive. And due to the contractual constellation - the engineering firm for HVAC - Systems is also involved. A possible solution for remediation could be an ARGE. In Germany ARGE is known as a partnership between contractors for large construction projects which cannot be accomplished solely by one contractor. Organizing engineering firms in ARGE cooperation like contractors do could be a better instrument in working relationship for construction projects. The partners of the ARGE would then have a direct contract with the building owner. Nevertheless an ARGE contract also incorporates risks and difficulties. There are internal and external regulations which to be taken into consideration. For example there could come up problems with external authorization, internal and external rights and obligations of the ARGE partners. But also more difficult problems like the situation when one partner of the ARGE could not fulfill his contract by less service provision. Another question is: How to cope with the insolvency of one ARGE partner? The main problem for engineering firms in ARGE partnerships is that they are jointly and severally liable with other partners. Engineering firms want to handle or limit their share in liability . Literature is more focused on ARGE for contractors. Special literature for ARGE of engineering firms is not available. The regulations must be adapted to engineering firms, but not all subjects can be transferred. Engineering firms underlie different laws and regulations than contractors