A DESIGN-BUILDER'S LOOK AT THE NEW AIA DESIGN-BUILD FAMILY OF DOCUMENTS

Transcription

1 American Bar Association Forum on the Construction Industry A DESIGN-BUILDER'S LOOK AT THE NEW AIA DESIGN-BUILD FAMILY OF DOCUMENTS Matthew A. Gillies Stites & Harbison, PLLC 400 West Market Street, Suite 1800 Louisville, KY mgillies@stites.com October 12 & 13, 2006 Hyatt Regency Gainey Ranch Scottsdale, AZ 2006 American Bar Association

2 A DESIGN-BUILDER S LOOK AT THE NEW AIA DESIGN-BUILD FAMILY OF DOCUMENTS Matthew A. Gillies Stites & Harbison PLLC 400 West Market Street, Suite 1800 Louisville, KY mgillies@stites.com In March 2005, the new (2004 edition) American Institute of Architects ( AIA ) design-build documents became widely available in both paper and electronic form. A Design-Builder familiar with the previous (1996) AIA design-build documents that reviews the new 2004 version will find numerous differences. The two-part agreement is history, replaced with an integrated agreement. Mandatory arbitration is no longer the sole dispute resolution mechanism to follow mediation, but if arbitration is chosen by the parties, then the contract specifically allows joinder of disputes involving related parties/facts. A new party, the Owner s Consultant, is added into the mix. The new AIA design-build family of contracts contemplate the parties selecting a third-party neutral to make initial decisions as to disputes as they arise. Quite simply, these documents are not merely upgrades of their predecessors, they are complete replacements. Until recently, both the 1996 AIA design build documents (the A191, B901, and A491) and the 2004 AIA design-build documents were available from the AIA for purchase and use. 1 During the slow roll-out of the new design-build forms, several quality papers and presentations have been made by members of the Forum. The inertia of many design-builders and owners, however, has kept them using the old forms or - 1 -

3 "other" standard industry forms (such as those promulgated by the AGC, EJCDC or DBIA). On August 31, 2006, however, ceased making the 1996 documents available to its users. I. THE DOCUMENTS The following is a brief description of each of the new 2004 AIA design-build documents and comments to each from a Design-Builder s perspective. The order of introduction is meant to approximate the order that each document would be executed for a design-build Project, starting with the new agreement between the Owner and its Consultant and ending with the new form for acknowledgement of substantial completion. OWNER B142 Standard Form of Agreement Between Owner and Consultant where the Owner is Contemplating the Design-Build Method of Project Delivery < New> A141- Standard Form of Agreement Between Owner and Design-Builder <Replaces A191 (Part I and Part II)> OWNER S CONSULTANT DESIGN-BUILDER B143 Standard Form of Agreement Between Design-Builder and Architect <Replaces B901 (Part I and Part II)> A142 Standard Form of Agreement Between Design-Builder and Contractor <Replaces A491 (Part I)> + ARCHITECT CONTRACTOR - 2 -

4 A. AIA B142, Standard Form of Agreement Between Owner and Consultant, Where the Owner Contemplates Using the Design-Build Method of Project Delivery One of the most notable changes included in the new AIA design-build family of documents is the insertion of a new party, and hence a new contract, into the mix. While the Design-Builder is not a party to the B142, Standard Form of Agreement Between the Owner and Consultant, Where the Owner Contemplates Using the Design-Build Method of Project Delivery, its terms and usage can certainly affect the Design-Builder. The B142 is a totally new document, and concept. The B142 is meant to be used when an Owner contracts with a Consultant to assist the Owner with any upfront services required when planning to use the design-build method. Although it resembles the AIA B141 standard Owner-Architect agreement in many ways, the B142, as described below, does not limit the Consultant to traditional architectural roles and does not exclude other professionals from taking on the Consultant role. Under the B142, the Consultant can perform a wide range of duties for the Owner. It appears that the primary duty intended by the B142, however, is for the Consultant to establish the Project Criteria for the Design-Builder to follow in the design and construction of the Project. Depending on the needs of the Owner, which are memorialized in Exhibit A to the B142, the Project Criteria can range from very - 3 -

5 simple parameters to detailed preliminary design. While clearly identifying the Owner s wants and needs through a preliminary design is beneficial, the more detailed the Project Criteria and given to the Design-Builder, the less flexibility enjoyed by the Design-Builder in performing its own value design and value engineering, and the closer the process resembles traditional design-bid-build construction. Flexibility in the usage of the B142, and all of the new AIA designbuild documents, is the key to success. Unlike the previous two-part system where the Design-Builder creating the preliminary design retained all rights to it, the Consultant cannot force the Owner to choose between scrapping the preliminary design or paying an exorbitant amount for it. 2 The B142 is arranged as a primary contract document with two exhibits. Exhibit A provides the Owner and Consultant an opportunity to document all the assumptions, parameters (financial, schedule, insurance, etc.) and team members. The provisions of Exhibit A guide the Owner to clearly identify its understandings, expectations, and objectives for the Project. Once these Owner parameters are clearly defined and documented, the Consultant is better able to perform its Work for the Owner. B142 s Exhibit B is the primary scope of services document. Exhibit B utilizes a check the box approach to the selection of the Consultant s scope of services. Such an approach facilitates thought and negotiation between the Owner and the Consultant and ensures that everyone is on the same page with respect to the expectations of the parties. While the Design-Builder is not directly involved with the Owner-Consultant relationship, the greater communication on every Project is - 4 -

6 better for everyone, including the Design-Builder. The various duties outlined in Exhibit B are ALL optional, but their inclusion as potential selections ensures that the Owner think of the myriad of items for which it may need assistance throughout the design-build process. Such potential duties include Project administration, initial data gathering and site investigation, review of the Design-Builder s design, approval of the Design-Builder s payment application, design of Project Criteria, Project budget creation and review, and public relations. The following table lists many of the scope item options available for checking on the B142 Exhibit B : - 5 -

7 POTENTIAL B142 CONSULTANT SCOPE OF SERVICES ITEMS Project Administration Project Flexibility Requirements Discipline Coordination Energy Requirements Owner-Supplied Data Coordination MBE/WBE/DBE/Other Similar Requirements Agency Consultation/Review/Approval Performance Specifications Schedule Development/Monitoring Architectural Design Submissions to Owner Structural Design Presentations Mechanical Design Preparation of Draft Data Gathering Report Electrical Design Preparation of Final Data Gathering Report Fire Protection Design Site Investigation Civil Design Site Surveying Landscape Design Environmental Studies and Reports Interior Design Geotechnical Studies and Reports Code Analysis Existing On-Site Utilities Survey Accessibility Analysis Existing Off-Site Utilities Survey Preliminary Estimate Existing Facilities Survey Updated Estimate Identification of Reviewing Agencies/Groups Advise on Adjustments to Previous Estimates Identification of Applicable Regulations Recommendation to Adjust Project Parameters Marketing Studies Cost Research/Advice Economic Feasibility Studies Budget Development Services Project Financing Studies Cost Plan Development Review of Planning and Programming Value Analysis Services Requirements Preparation of Draft Program Document Life Cycle Cost Analysis Preparation of Final Program Document Advise on Selection Process/Evaluation Criteria Space Adjacencies/Flow Diagrams Advise on Contract Type Site Analysis and Selection Advise on Contract Form and Conditions Site Development Planning Identify Proposer Criteria/Qualifications Detailed Site Utilization Studies Proposer List Off-Site Utility Studies Evaluations of Proposers Preparation of Draft Project Criteria Recommendation of Selected Proposers Documents Preparation of Final Project Criteria Documents Determination of Proposal Submission Requirements Revisions to Project Criteria Documents Preparation of Request for Proposals Narrative of Program Requirements/Objectives Reproduction and Distribution of Proposal Documents Narrative of Design Goals and Objectives Maintain Distribution/Deposit/Retrieval Log Project Concept Diagrams and Documents Respond to Questions Regarding Project Criteria Intent Preparation/Distribution of Addenda Evaluate Requests for Project Criteria - 6 -

8 Attend Proposers Conference Evaluation of Proposals Recommendation of Selected Proposal Recommendations for Payment Advise and Consult with the Owner 3 Attend and Participate at Project Meetings Respond to Questions Review Documents Prepared by Design- Builder Recommendations for Payment Advise and Consult with the Owner Attend and Participate at Project Meetings Attend Meetings Administer Remedial Work of Design- Builder Warranty Review Services Post-Contract Completion Evaluation Services Advise and Consult with the Owner Special Studies Tenant-Related Services Still Photography Audio-Video Services Computer Animation Services Other Services (Identify) Modifications Other Design-Build Procurement Services Respond to Questions Review Documents Prepared by Design- Builder Respond to Questions Review Documents Prepared by Design- Builder Site Visits for Selected Purposes Recommendations for Payment Substantial Completion and Final Completion Inspections Recommendation for Final Payment Advise and Consult with the Owner Project Promotion/Public Relations Leasing Brochures Special Furnishings Design Furniture, Fixtures and Equipment Services Special Disciplines Consultation Special Building Type Consultation Fine Arts and Crafts Consultation Graphic Design Services Renderings Model Construction Energy Studies Quantity Surveys For each of the above slope items, the B142 allows the parties to include additional information further defining that scope. Additionally, the B142 contains an explanation for most of the listed items as well as a number of other services options which allow for further customization. While not a party to the document, the Owner-Consultant arrangement can have far-reaching effects on the Design-Builder. Furthermore, many design-build firms (or design-build team members) may occasionally find themselves in the role of Consultant rather than Design-builder). It is important that the Design-Builder understand the Owner-Consultant relationship

9 B. AIA A141, Standard Form of Agreement Between Owner and Design- Builder The A141 Standard Form of Agreement Between Owner and Design-Builder replaces the former A191 (which was originally introduced in 1985 and subsequently updated in 1996) and is the core document in the new AIA design-build system. It is a deceptively simple 12-page document. Design-Builders will find that the document s greatest asset is its flexibility (numerous fill-in-the-blanks and checkthe-box opportunities, as well as extensive use of exhibits). The A141 forces parties to customize their contracts to the specific needs of the Project. While some may see this as burdensome, the parties need to focus on the contract terms and make selections on the front end should lead to a better understanding of the duties of each party and better results on the back end. The best contract is one where all parties clearly understand the terms to which they are agreeing. A thoroughly examined and negotiated contract will allow Design-Builders to benefit from a better understanding of their scope of work and Owners to benefit from less change order requests and misunderstandings regarding the contract documents. The A141 s core general conditions are contained in an exhibit, Exhibit A. This arrangement gives the parties the flexibility to either use the pre-printed existing general conditions (with or without modifications) in Exhibit A or to replace them with customized general conditions as a new Exhibit A. The A141 document also utilizes exhibits for insurance, bonding, and work cost details. 1. A141 One Part Agreement A major difference between the old A191 document and the new A141 document is the fact that the two-part arrangement has been scrapped in favor of one - 8 -

10 integrated contract. This new arrangement reflects the reality that many parties simply did not utilize the A191 Part One agreement. Instead, many opted to solely use the A191 Part Two agreement for both the preliminary design and the final design and construction phases. While not the subject of this article, such usage of one part of a two-part agreement is a dangerous endeavor and can lead to inconsistent or inadequate provisions. Without a preliminary design agreement, the A141 commits the Owner at the outset (upon contract execution) to use the selected Design-Builder for the entire Project. The underlying assumption of the A141 is that the Owner will either already have a detailed preliminary design (created in-house or by the Owner s Consultant) or that the Owner and Design-Builder will enter into a reimbursable cost payment arrangement. As discussed below, the new A141 document allows the Design-Builder to use alternative compensation methods, a major benefit to the Design-Builder. 2. Compensation The previous AIA design-build contract, the A191 Part Two agreement, was designed for lump sum contracting. Under the A191 system the Owner and Design-Builder would first agree to the preliminary design created under the A191 Part One agreement and then later enter into the A191 Part Two lump sum agreement for final design and construction. Any alternative pricing method, such as cost-plus, or cost-plus with a guaranteed maximum price, could not be accomplished correctly without significant modifications to the document. The realities of the design-build industry have caused the AIA to revisit the compensation issue and make significant changes in their Design-Build - 9 -

11 documents. Projects are increasingly fast tracked and Owners want work to begin long before designs are 100% finalized. Prudent Design-Builders given insufficient design criteria either insist on reimbursable cost contract arrangements or put so much contingency in their lump sum prices (to cover the vast unknown ) that projects can become financially unfeasible for the Owner. Thus, the flexible compensation system of the A141 is a great improvement and favorable for the Design-Builder. I anticipate that the vast majority of Projects constructed under the new A141 contract documents will be cost-reimbursable (either with or without a guaranteed maximum price). Article 4.1 of the new A141 gives the Design-Builder three options to select regarding compensation methods: 4.1 The Owner shall pay the Design-Builder the Contract Sum in current funds for the Design-Builder s performance of the Design- Build Contract. The Contract Sum shall be one of the following: (Check the appropriate box.) [ ] Stipulated Sum in accordance with Section 4.2 below; [ ] Cost of the Work Plus Design-Builder s Fee in accordance with Section 4.3 below; [ ] Cost of the Work Plus Design-Builder s Fee with a Guaranteed Maximum Price in accordance with Section 4.4 below. (Based on the selection above, complete either Section 4.2, 4.3 or 4.4 below.) 4 As noted in the parenthetical at the bottom of the above excerpt, the selection of a compensation method (lump sum, cost-plus, or cost-plus with a guaranteed maximum price) determines which additional sections of the contract apply. Parties utilizing the AIA software program will find that the software takes into account your choice in Article 4.1 and then prompts for additional information relevant to your choice. For example, if you select the first choice (Stipulated Sum),

12 you will only be prompted to insert the additional information requested in Article 4.2 (the lump sum amount, allowances, and any unit prices). Similarly, if you select the second choice (Cost-Plus Fee) you will only be prompted to provide information for Article 4.3 related to your selection such as the amount (or percentage) of your fee, and you will not be prompted for guaranteed maximum price or lump sum information. The detailed items included in the Cost of the Work (essential if the parties are operating under a Cost-Plus or Cost-Plus with a Guaranteed Maximum Price basis) are attached to the A141 as Exhibit B. While an extensive description of items included or excluded from the Cost of Work are made available in that exhibit, the flexibility of the A141 also allows the Design-Builder to simply replace the standard Exhibit B form with their customized Cost of Work document

13 3. Ownership And Use Of Documents Article A.1.6 of Exhibit A to the A141 addresses the issue of ownership and use of the Instruments of Service (documents and electronic data). A.1.6 specifically provides that the Design-Builder and its Architect will retain all common law, statutory and other reserved rights, including copyright, in the Instruments of Service. However, in Article A.1.6.2, the Design-Builder specifically grants to the Owner a non-exclusive license to reproduce and use all of the instruments of service for use in connection with the Project (including any further development of the Project). Design-Builders will likely find this provision Ownerfriendly, taking away a protection found in the previous version (A191) where the right to use the instruments of service is not conveyed until the Design-Builder is adjudged to be in default, and may be a ripe clause for negotiation. The above license is expressly conditioned on the Owner complying with all obligations under the contract, including prompt payment of all outstanding amounts due. 5 Article A further requires the Design-Builder to obtain a similar license from any of its Architects or other design professionals providing work on the Project. In the event that the contract is terminated for any reason other than the Owner s default, A requires the Design-Builder and all of its design professionals to convey to the Owner a non-exclusive license to use the Instruments of Service for the completion, use, and maintenance of the Project. This transfer is also expressly conditioned on the Owner s agreement to assume all of the Design- Builder s contractual duties and obligations to its design professionals, including

14 payment owed to those design professionals pursuant to their contracts with the Design-Builder

15 4. Dispute Resolution The new AIA design-build documents bring a sea change from the status quo with respect to dispute resolution. First, rather than having the Owner make initial determinations, Article 6.1 of the AIA A141 allow the Owner and Design-Builder to jointly choose a third-party project Neutral to make non-binding dispute determinations as the disputes first arise. If the parties do not select a Project Neutral in Article 6.1, then such disputes will be submitted to the Owner for an initial decision. In accordance with Article A.4.3., if the parties are unable to resolve their dispute amongst themselves, or with the help of the Project Neutral, then the claim is sent to non-binding mediation. Regardless of the path disputes take on their way to mediation, i.e. whether the parties utilize a Project Neutral or the Owner for initial decisions, mediation is a condition precedent to the parties right to either litigate or arbitrate their dispute. The AIA family of documents have for decades encouraged arbitration and incorporated it as the primary method for resolving disputes arising out of or related to Projects utilizing the AIA contract forms. Recent versions of the AIA documents, including the current A201 and A191 forms, require mediation followed by binding arbitration of all disputes. While keeping the mandatory mediation requirement, the new A141 does not require arbitration. Instead, consistent with the flexibility of all the new AIA design-build documents, Article 6.2 gives the parties a choice of dispute resolution options to follow a failed mediation attempt: 6.2 If the parties do not resolve their dispute through mediation pursuant to Section A.4.3 of Exhibit A, Terms and Conditions, the method of binding dispute resolution shall be the following:

16 (If the parties do not select a method of binding dispute resolution, then the method of binding dispute resolution shall be by litigation in a court of competent jurisdiction.) (Check one.) [ ] Arbitration pursuant to Section A.4.4 of Exhibit A, Terms and Conditions [ ] Litigation in a court of competent jurisdiction [ ] Other (Specify) 7 Essentially, the parties either choose arbitration, litigation, or other. The other option allows parties to design their own dispute resolution system (such as dispute review boards, mini-trials, med-arb, etc.). The default, if no box is checked, is litigation, not arbitration. 8 This is important to underscore because many practitioners assume that disputes arising out of unmodified AIA documents are always resolved via AAA arbitration. Design-Builders should benefit from their ability to choose their dispute resolution mechanism at the outset of the Project. If the parties do choose arbitration, then the A141 throws in another twist. While most AIA documents disallow joinder of related arbitrations, AIA A141, Exhibit A, Article A specifically allows joinder of any other arbitration involving common issues of law or fact between the Owner or Design-Builder and any person or entity with whom the Owner or Design-Builder has a contractual obligation to arbitrate. Because all the new AIA design build documents contain similar dispute resolution paragraphs 9, if all parties are using the family of documents, then joinder of related parties (Architect, Contractor, and Design-Builder) will be an option for a more efficient dispute resolution process-enjoyed. For example, this joinder provision will allow the Contractor to add the Architect (with whom the

17 Contractor is not in privity) to an arbitration between itself and the Design-Builder. While the B142 also has a "check the box" dispute resolution provision, if arbitration is selected the contract specifically rejects joinder without specific written assessment of the Owner and the Consultant Certification Of Compliance With Project Criteria The new A141 document also takes away some of the gray areas found in the old A191 document system. Under the A141, the Design-Builder is specifically entitled to rely on the accuracy of the Project Criteria provided to it by the Owner. Under the A141, if there are problems with the Project Criteria requiring modifications, then the Design-Builder is entitled to a change order in accordance with Article A.7. In return for the ability to rely on the Project Criteria, however, the Design-Builder must certify that the performance of its design and construction services is consistent with the Project Criteria and that its Work complies with all applicable laws and professional standards: A The Design-Builder shall obtain from each of the Design- Builder's professionals and furnish to the Owner certifications with respect to the documents and services provided by such professionals (a) that, to the best of their knowledge, information and belief, the documents or services to which such certifications relate (i) are consistent with the Project Criteria set forth in the Design-Build Documents, except to the extent specifically identified in such certificate, (ii) comply with applicable professional practice standards, and (iii) comply with applicable laws, ordinances, codes, rules and regulations governing the design of the Project; and (b) that the Owner and its Consultants shall be entitled to rely upon the accuracy of the representations and statements contained in such certifications. 11 Design-Builders and their Architects should be aware that, because of this contractual certification, they will not be able to claim that Work which is inconsistent with the

18 Project Criteria should be accepted just because it is adequate under the applicable professional standard of care. 6. Termination And Suspension Provisions While the old A191 Part One agreement allowed termination for convenience during the preliminary design stage, once the parties entered into the A191 Part Two agreement they were bound to each other until Project completion or default. The new A141 form changes this dynamic. Now, in accordance with Article A.14.4, the Owner may terminate the contract at any time for her convenience. 12 If, however, the Owner elects to terminate for convenience, then she is responsible to pay the Design-Builder for all Work performed to date, all termination costs, reasonable overhead and profit on Work not completed. 13 In the case of a termination for the Owner s convenience after commencement of construction, the Design-Builder is entitled to receive payment for all Work executed, all costs incurred by reason of the termination, and reasonable overhead and profit on Work not executed: A.14.4 TERMINATION BY THE OWNER FOR CONVENIENCE A The Owner may, at any time, terminate the Design-Build Contract for the Owner s convenience and without cause. A Upon receipt of written notice from the Owner of such termination for the Owner s convenience, the Design-Builder shall:.1 cease operations as directed by the Owner in the notice;.2 take actions necessary, or that the Owner may direct, for the protection and preservation of the Work; and.3 except for Work directed to be performed prior to the effective date of termination stated in the notice, terminate all existing contracts and purchase orders and enter into no further contracts and purchase orders

19 convenience: A In the event of termination for the Owner s convenience prior to commencement of construction, the Design-Builder shall be entitled to receive payment for design services performed, costs incurred by reason of such termination and reasonable overhead and profit on design services not completed. In case of termination for the Owner s convenience after commencement of construction, the Design-Builder shall be entitled to receive payment for Work executed and costs incurred by reason of such termination, along with reasonable overhead and profit on the Work not executed. 14 Similarly, the A141 allows the Owner to suspend Work at any time for its A.14.3 SUSPENSION BY THE OWNER FOR CONVENIENCE A The Owner may, without cause, order the Design-Builder in writing to suspend, delay or interrupt the Work in whole or in part for such period of time as the Owner may determine. A The Contract Sum and Contract Time shall be adjusted for increases in the cost and time caused by suspension, delay or interruption as described in Section A Adjustment of the Contract Sum shall include profit. No adjustment shall be made to the extent:.1 that performance is, was or would have been so suspended, delayed or interrupted by another cause for which the Design-Builder is responsible; or.2 that an equitable adjustment is made or denied under another provision of the Design-Build Contract. 15 C. AIA B143, Standard Form of Agreement Between Design-Builder and Architect The AIA B143, Standard Form of Agreement Between Design-Builder and Architect, replaces the old B901 as the standard form contract between the Design- Builder and its architect or other Consultant. Design-build entities with their own inhouse design professionals which self-perform all design work will not have reason to utilize this document. The B143 is meant to be used for any architect or other design professional with whom the Design-Builder subcontracts some or all of its design

20 duties under the A141. The B143 Document follows the trend of the new AIA design-build forms in that it is comprised of a simple customizable agreement with interchangeable exhibits. Exhibit A to the B143, Initial Information, provides the parameters under which the Architect is to perform. Here the Design-Builder identifies for the architect the Project Criteria (that were provided to the Design-Builder by the Owner and likely developed by the Owner s Consultant) as well as any physical, legal, and financial parameters. For the actual scope of the Architect s work, however, the B143, similar to the B142, uses an additional exhibit. The scope of services checklist is located in B142 s Exhibit B, Standard Form of Architect s Services. The following is a list of potential scope items in Exhibit B which are provided in a check-the-box format: POTENTIAL B143 ARCHITECT S SCOPE OF SERVICES ITEMS General Administration: Multi-Discipline Coordination Design Services Scheduling Materials, Systems and Equipment Evaluation Project Design Presentations Design-Builder and Owner Submissions Governmental Authorities Submissions Project Criteria, Schedule and Budget Site Evaluation Selection of Construction Contracting Method Estimates of the Cost of the Work for the Architect s Portion of the Project Design Documents Construction Documents Specification of Performance or Design Criteria Bidding/Proposal Information Selection of Bidders/Proposers Bidding/Proposal Document Reproduction Bidding/Proposal Document Distribution Substitutions 16 Pre-Bid/Proposal Conference Addenda Opening of Bids/Proposals Bid/Proposal Evaluation Bid/Proposal Negotiations General Administration Requests for Information Evaluations of the Architect s Portion of the Project Rejection of Work Recommendations for Payments to Contractor Submittals Changes in the Work Review and Prepare Proposed Change Orders and Construction Change Directives Minor Changes Substantial Completion Inspection Final Payment Project Completion Documents Warranty Review Services Project Anniversary Review

21 Exhibit B to the B143 also includes a description and further explanation for each of the above scope items, as well as the ability for parties to include additional information to further define that scope. 17 The flexibility inherent in this Exhibit B allows the Design-Builder to hire multiple design professionals (each contracting with the Design-Builder under a separate customized B143 document) to perform small portions of the scope. As noted in the earlier discussion of the A141, the new AIA design-build documents treat the Ownership and use of the Instruments of Service differently than its predecessor documents. Under the A143, if the Owner/Design-Builder agreement is terminated (for any reason other than Owner default, including Owner convenience), then the Owner receives a nonexclusive license to use the Instruments of Service created by the Architect to complete the Project: If the agreement between the Owner and Design-Builder is terminated for any reason other than the default of the Owner, the Architect shall convey and shall require its Consultants to convey to the Owner a nonexclusive license to use the Architect s Instruments of Service for the completion, use and maintenance of the Project, conditioned upon (1) payment to the Architect of all amounts due to the Architect and the Architect s Consultants, and (2) the Architect's receipt of the Owner s written notice to the Architect of the Owner s assumption of the Design-Builder s duties and obligations under this Agreement; or if the Owner fails to provide such written notice, (1) payment to the Architect of all amounts due to the Architect and the Architect s Consultants, and (2) the Architect s receipt of the Owner s written agreement to indemnify and hold harmless the Architect and the Architect s Consultants from all claims, as well as any expense, including legal fees, which the Architect and its Consultants may thereafter incur by reason of the Owner s use of such Instruments of Service. The Architect shall incorporate the requirements of this Section in all agreements with its Consultants. 18 This nonexclusive license is contingent on the Owner paying all amounts due to the Architect and assuming all of the Design-Builder s contractual duties with respect to

22 the Architect. 19 Even if, upon the Design-Builder s termination, the Owner refuses to assume the duties of the Design-Builder under its B143 contract with the Architect, provides that the Owner can still receive a license to use the Architect s drawings if it pays the architect all amounts due and provides an indemnity for any damages that may arise out of its use of the Architect s drawings. If the Design-Builder terminates the Architect for cause, then the Architect provides the Design-Builder a nonexclusive license to use the Instruments of Service to complete the Project: In the event the Design-Builder terminates the Architect for cause pursuant to Section 3.7.4, the foregoing license shall be deemed terminated and replaced by a second, nonexclusive license permitting the Design-Builder to authorize other similarly credentialed design professionals to reproduce and, where permitted by law, to make changes, corrections or additions to the Instruments of Service solely for purposes of completing, using and maintaining the Project. 20 Similar to the Design-Builder s certification requirements under the A141, the B143 also requires the Architect and its Consultants to certify that the documents and services provided pursuant to the B143 are consistent with the Project Criteria and comply with applicable professional practice standards and laws governing the design of the Project. 21 The dispute resolution provisions of the B143, Article 3.41, provides the same check-the-box options as the A141 document. The parties may choose between arbitration, litigation, or other. Regardless of the selection, mediation remains a contractual condition precedent to any other type of dispute resolution. The ability for the Design-Builder to join its Architect in a dispute with the Owner may save the Design-Builder from having to fight two battles in different forums

23 D. AIA A142, Standard Form of Agreement Between Design-Builder and Contractor The A142, Standard Form of Agreement Between Design-Builder and Contractor, replaces the A document. It consists of a primary agreement and five (5) exhibits. The A142 is flexible and drafted such that it may either be utilized by the Design-Builder as an agreement between the Design-Builder and one prime general contractor or as an agreement between the Design-Builder and any number of multiple prime contractors. If the Design-Builder is acting as its own general contractor, then the A142 may be used as the primary subcontract agreement between the Design-Builder and its subcontractors. If the Design-Builder selfperforms all construction Work, then the A142 would not be utilized. If the A142 is used as a subcontract, however, the Design-Builder should carefully review to ensure that its usual subcontract protections are inserted. Unlike many standard form subcontracts, the A142 does not include any incorporation by reference clause incorporating the terms of the Owner-Design-Builder contract. To the extent that the Design-Builder wants certain terms passed down to the Contractor, under the A142, the Design-Builder needs to insert those terms and/or documents consistent with the Design-Builder s contract with the Owner. Like all the new AIA design-build documents, the A142 is exhibit driven. Exhibit A contains all the terms and conditions (the general conditions ). Exhibit A is a substantial set of general conditions, similar to the A201 but modified to (1) meet the specific needs of design-build construction; and (2) properly coordinate with the other new AIA design-build documents. Note that under the new AIA design-build

24 documents, the A201 is never referenced, and is not made a part of any of the agreements. Exhibit B is the preconstruction services document. It contains a blank wherein the Design-Builder may specify the scope of any preconstruction services that the Design-Builder wants the Contractor to provide. If the Contractor is not providing any preconstruction services, then Exhibit B is simply not used. Exhibit C is utilized to insert the Contractor s scope of work. Interestingly, Exhibits B (preconstruction services) and C (scope of work) are essentially blank pages rather than the extensive check-the-box scopes of services found for the Owner s Consultant under the B142 and the Design-Builder's Architect under the B143. Exhibit D is the Cost of Work document. Exhibit D is where the Design-Builder and Contractor specify and determine what is, and what is not, included in the Cost of Work. This information is especially important for Design-Builders contracting with Contractors on a cost-plus basis. Finally, A142 s fifth exhibit, Exhibit E, contains the insurance and bonding requirements for the Project. Similar to the A141, the A142 allows the Design-Builder and the Contractor to agree to payment arrangements other than the traditional lump sum agreement. 22 Through a check-the-box approach, the parties choose between a stipulated sum, reimbursable cost plus a fee, or reimbursable cost plus a fee with a guaranteed maximum price payment arrangement. 23 The dispute resolution scheme for the A142 follows that discussed above for the A141. The A142 allows the parties to select a Neutral to be responsible for initial determinations regarding disputes prior to submittal to mediation. 24 If the parties do not select a Neutral, however, the A142 provides that initial determinations would

25 then be made either by the Architect or the Design-Builder, depending on whether the Design-Builder has given the Architect that responsibility in the B143 agreement. 25 Consistent with all the new AIA design-build documents, mediation is a condition precedent to any other formal dispute resolution procedure. 26 If mediation is not successful, then the parties look to their selection in A142 s Article 6.2 where they would have selected from the check-the-box menu either arbitration, litigation or other. If arbitration is selected, the A142 s arbitration provisions once again provide that joinder of similarly-situated arbitration proceedings is specifically allowed. In the event that no dispute resolution method is chosen, the default is litigation. 27 E. AIA G704DB, Acknowledgement of Substantial Completion of a Design- Build Project Due to the nature of design-build construction, the Owner assumes many of the Project administration duties that would traditionally be performed by architects on design-bid-build projects. Because the typical design-build project does not have a project architect, except for the Architect hired by the Design-Builder, to review the Design-Builder s Work and certify substantial completion, the substantial completion/ determination role falls to the Owner. The AIA has created the new G704DB to outline the Owner s role in performing this acknowledgement. Most Owners who utilize a Consultant (pursuant to B142) will likely pass this task on to that Consultant to perform. The G704/DB requires the signature of both the Owner and the Design- Builder. 28 Its use, though not required, is good practice because it contractually establishes an agreed date of Substantial Completion

26 II. CONCLUSION Unlike the changes or updates that the mega software companies make for their operating systems and programs (i.e. version 2.x ), the new AIA design-build documents are more than just a minor update to the 1996 version, they are a completely revamped set of contract documents. Design-Builders should note the differences (the two part approach has been replaced with an integrated agreement and a new party, the Owner s Consultant, has entered the dance) and allow the requisite time needed to properly review and become familiar with the documents prior to signing the Contracts. The new AIA design-build documents are some of the most flexible standard form documents in the marketplace (numerous blanks, checkthe-box menus, and Exhibits allow for ultimate contract customization) and an experienced Design-Builder can either use this to its advantage in customizing the agreement or sit back and let the Owner dictate all the contractual terms. The time that a Design-Builder spends at the front end of a Project customizing these new Design-Build documents and negotiating agreeable terms will result in better Projects and less claims

27 ENDNOTES 1 See, generally, Howard G. Goldberg, "The New Design-Build Documents Designed With The Owner In Mind", Under Construction in The Construction Industry, March, 2005; G. William Quantum, "The AIA's New (and Improved) Design-Build Contracts", The Construction Lawyer, Vol. 25, No. 2, Spring 2005; Howard G. Goldberg, "The New AIA Design-Build Family of Documents", Victor O. Schinnerer & Company, Inc.'s 44th Annual Meeting of Invited Attorneys (2005); Matthew A. Gillies, Howard G. Goldberg, Joseph H. Jones, Jr., and John E. Kofron, "Building Your Practice Around the AIA's New Design/Build Family of Documents", The ABA Forum on the Construction Industry and the ABA Center for Continuing Legal Education Live Telecast and Audio Webcast, November 8, AIA B , AIA B , Exhibit B. 4 AIA A , AIA A , Exhibit A, Id. 7 AIA A , Id. 9 See AIA , Exhibit A, A.4.4.3; AIA B , 3.41; AIA , AIA B , AIA A , Exhibit A, A AIA A , Exhibit A, A Id AIA A , Exhibit A, 14.4 AIA A , Exhibit A, AIA B , Exhibit B 17 Id

28 18 AIA B Id. 20 AIA B AIA B , AIA A , Id. 24 AIA A , Id. 26 AIA A , 6.2; See also, AIA A , Exhibit A, AIA A , AIA G704/DB