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New AIA D-B Docs Place Risk and Uninsurable Exposures to D-B that are Not Flowed Down

Thursday, July 17, 2014   (0 Comments)
Posted by: Joe Sapp
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By: Brian Perlberg, AGC Sr. Counsel for Construction Law and Contracts

AIA just released 7 new design-build standard contract documents. In 2004, some commentators pointed out that they thought there was a mistake in the AIA A141, which provides a complete warranty for the Work to include both the design and construction of a project. Unfortunately for design-builders, this risk warranty DOES NOT flow down to the design professional that is likely stamping the design documents (see AIA B143, Section 2.2). Therefore, the design-builder appears to be left with all of the risk of giving a warranty that is both elevated beyond the standard of care and uninsurable. In contrast, the architect is protected with the ordinary and lower professional standard of care.  Considering that a core value of publishing standard construction contract documents is to provide predictability and consistency, this inconsistent treatment of risk is quite surprising.

The terms and conditions of the new AIA design-build document are generally consistent with the 2007 AIA A201 General Terms and Condition document.  AGC’s membership unanimously declined endorsement of the 2007 document (along with other industry associations who expressed grave concerns), which was the first time in at least 50 years (See comparison chart below).  Consequently, the design-build agreements contain many of the same objections, mostly notably a failure to allow the request of project financial information without a special showing once dirt is moved.

Also troubling is the AIA’s requiring a design-builder to provide written certifications for all design documents to not only meet legal requirements, but also certifying consistency with the owner’s program (3.1.10). An owner can rely upon these certifications and can use any information in these certifications against the design-builder. Is this an extra layer intended to create a trap for the design-builder and owner?

AIA generally takes 10 years to update their standard documents and this 2014 edition sticks to this long established tradition. Significantly, AIA keeps flip-flopping how many parts their design-build documents should include.  Before 2004, it had two parts, and then in 2004 it was one part, which locked an owner early in the process, and now as revised in 2014, it is back to two parts. Unlike other standard design-build documents, AIA only has one contract agreement with a menu for either a lump sum design-build project or cost of the work with a GMP. Since the development of design documents and approvals, as well as cost provisions including fees, are significantly different in different project cost arraignments, this one size fits all approach is not favored.

ConsensusDocs standard design-build agreements, give users a choice of a cost of the work agreement (ConsensusDocs 410) or a lump sum version (415).  The ConsensusDocs 400 also give users flexibility to develop schematic design and help develop the Owner’s program. AIA prefers a one type of agreement fits all approach.  Anecdotal information informs AGC staff that ConsensusDocs have been reported as the most used standard design-build documents in the country, followed by DBIA and then AIA. In its press release AIA claims their documents are used most often, but that doesn’t seem to be consistent with general impressions in the design-build field. AGC, along with 40 other construction organizations, write and endorse ConsensusDocs.  It should be noted that the AIA design-build documents made at least one change imitating ConsensusDocs standard documents.  AIA has integrated its terms and conditions into the agreements, which follows the structure of all ConsensusDocs agreements.  You can find more info on ConsensusDocs at www.consensusDocs.org, and use AGC100 promo code for a 20% discount on all purchases. If you have specific questions you can contact Brian Perlberg, AGC Sr. Counsel for Construction Law and Contracts at perlbergb@agc.org

Below is an at a glance comparison of ConsensusDocs and AIA standard documents.

                                                AIA vs. ConsensusDocs Contract Documents at a Glance

 

AIA A201

ConsensusDocs

Drafted By

AIA architects and staff

Written and endorsed by 40+ leading design and construction associations

Philosophy

Advance the profession of architect and protect architect’s

Incorporate best practices and fair risk allocation to advance better project results

Results

Over a hundred years of lawsuits requiring judicial determinations of contract language.

Remarkable decrease in projects winding up in formal disputes, case law and arbitration decisions.

Communications

Funneled to and through the architect. The word architect is mentioned almost 300 times

Direct Party communications are encouraged.

Role of the Owner

Passive, except to pay for work and change orders

Active to help ensure the owner’s goals are met, including time, cost and schedule.

Dispute Resolution

Creates an Initial Decision Maker which defaults to the Architect. Conflicts between issue handled by IDM and Architect. A/E plays a central role in trying to resolve all conflicts. If claims by the IDM are not objected to (double negative) then claims are forfeit.

Tiered mitigation process is employed between the Parties with direct communications by decision-makers, which facilitates communication, understanding and cooperation to resolve problems early while avoiding unnecessary time and expense

Lien Waivers

Permits complete waiver, even if only partial payment has been received.

Requires lien waiver to be commensurate with the work put in place.

Ownership of Design

Design documents are owned by A/E and can prevent project completion or renovation if there is a dispute. A dispute leads to project stopage

Gives owner rights to complete or renovate the project, but indemnifies the A/E if not used for such work

Waiver of Consequential Damages

Complete Waiver

Limited Waiver.

Indemnification

Contractor is only responsible for their negligence.

Contractor is only responsible for their negligence, and is not responsible for attorney’s fees beyond their share of fault.

Arbitration

Default choice when using the AIA software. Litigation is the default for Paper AIA documents. Requires the old AAA rules.

Default to litigation. Requires use of the most up to date arbitration rules.

Order of Precedence for Conflicting Documents

No order, so likely to be whatever is most expensive.

Determined in the contract and likely to be the most recently generated document.


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