October 2018
by Brian Perlberg, ConsensusDocs
Success on a construction project can rise or fall on the contract you choose. Remember, financial solvency often depends on it. If just one contract out of 10 goes bad, this might lead to a general contractor shutting its doors. I’m often asked why should I choose ConsensusDocs over American Institute of Architects standard construction contract documents? While many express dissatisfaction with AIA contracts to me, they often say it’s the devil they know (and make extensive changes). This article points out the fundamental differences between ConsensusDocs versus AIA contracts and how making a few word changes might not address the fundamental differences.
Mission
The American Institute of Architect’s mission includes “to organize and unite” and “promote” the architectural profession. The AIA’s contracts show a bias toward architects. AIA contracts give architects a disproportionate share of decision-making authority without the same level of responsibility. ConsensusDocs’ goal, on the other hand, is to write fair contacts that advance better project results. Fairness stems from neutralizing bias by giving all the stakeholders to the A/E/C industry an equal voice to the drafting table.
Communications
Historically, AIA contract documents funnel all communications through the architect. The AIA A201 General Conditions is for a contract between an owner and contractor, and yet the most prevalent word is architect. When coupled with an AIA agreement, the word architect appears 400 times. Historically, the owner and contractor were NOT supposed to communicate directly with one another, but ONLY through the architect. Thankfully this obstacle has finally been removed in 2017, but the basic structure remains.
ConsensusDocs emphasizes positive and direct party communications. Parties are encouraged to speak directly to one another, early and often in the project to facilitate a positive relationship. Electronic communications are recognized as an effective means of communication in notice provisions as well as for use in project administration though documents such as the ConsensusDocs Electronic Communications Protocol.
Role of the Owner, Passive Check-Payer or Decider
AIA documents demote the owner into a passive project role. An owner’s main function is to do one thing—write checks. Beyond that, the message in the AIA B101 Owner/Architect agreement and AIA A201 General Conditions Document is the architect knows best—and owners need protection from the contractor, who should be kept at arms-length.
ConsensusDocs gives owners an active role. After all, an owner has the most to gain or lose in the success of the construction project, which ultimately is the owner’s capital asset. An owner may delegate its authority to an outside architect, such as approving change orders, but decision-making authority defaults to the owner. All decision making doesn’t default to the architect. Keep in mind that an owner might have an internal construction manager or hire a construction manager externally, which would certainly change the equation.
Project Financial Information and Sharing Information
ConsensusDocs allows a builder to request and receive project financial information before and during construction. ConsensusDocs provides the industry’s only standard questionnaire and guidelines to help ask reasonable questions about project financing.
AIA restricts access to receive financial information once the project commences. Under AIA, the default for commencement of the project is the date of contract signing, which is before dirt is even moved. Thereafter, a contractor must show a reason (as determined by the architect) to receive financial information. The consequences for not receiving reasonably requested information is not clear because new AIA language in this section is vague.
Writing Style
The ConsensusDocs are written from the perspective that good legal writing is simply good writing. Contract language with a clear and concise language helps the parties understand, administer, and interpret the contract. A distinguishing feature in ConsensusDocs is the integration of the general terms and conditions and the agreement into one document. This avoids the two documents from conflicting and avoids confusion. Provisions are written so that the responsibilities and obligations, such as indemnification, are reciprocal on both parties in a consistent fashion. What is good for the goose should be good for the gander.
Over ConsensusDocs’ 10-year history a great deal of effort has been made to refine the language and make sure it is consistent in style and even placement throughout the family of 100-plus contract documents. ConsensusDocs comprehensively revises its documents once every five years but also has the flexibility for discrete revisions typically based on changes to case law or the insurance market. Timely updates keep users from being out of date and exposed.
AIA contract documents are updated once every 10 years. Given their long history, AIA’s substance and language style is slower to change. The substantive terms are not always consistent when comparing an architect’s responsibilities and a contractor’s. An architect’s services are at times aspirational or silent in regard to clear consequences for not performing completely or in a timely fashion. Conversely, obligations falling on the contractor come with hard deadlines and broad consequences, especially when such obligations coordinate with an architect’s responsibility. One example is a contractor’s obligations to provide a submittal schedule, and unclear consequences for not processing submittals in a timely fashion.
Case Law and Litigation
AIA has published contract documents since 1888. AIA documents, old and new revisions, generate a great deal of case law and decisions interpreting the language in the documents. There are entire case law books devoted to the cases generated by litigated projects using the AIA contract documents. AIA touts the breadth of case law associated with AIA contract documents.
ConsensusDocs has been around for over 10 years. Billions of dollars have been put in place using the documents. Not one reported case has been generated using ConsensusDocs. ConsensusDocs touts the infrequency of projects that fall into litigation using their documents.
Dispute Mitigation Vs. Dispute Escalation
AIA’s first line of disputes is through an initial decision maker, which defaults to the architect. Architects are not trained to serve in a quasi-judicial role, but the AIA contracts thrust an architect in the role of judge, jury, and executioner, even if they are not interested in many small decisions monitoring contract administration. According to the AIA, the architect serves as the IDM on almost all projects. And even if the architect isn’t the IDM, architects retain authority to make certain decisions regarding design intent. Moreover, the IDM process is complex with technical timing requirements to finalize IDM decisions that have important consequences that might get easily overlooked by some parties.
ConsensusDocs utilizes an innovative tier approach that requires the parties to talk with each other at the project and senior project level to mitigate claims before they are escalated to a formal claim. ConsensusDocs also employs innovative dispute mitigation techniques in calling out options for a project neutral or a dispute review board which have proven to be effective on projects that can afford to carry the cost. ConsensusDocs even publishes two standard DRB agreements to implement DRBs.
Design Documents
The AIA B101 Owner/Architect Agreement strongly protects architects’ interests in their intellectual property in design documents. If there are any disputes or potential disputes between the architect and the owner, the architect can stop the project in its tracks from advancing, unless and until full payment for services are rendered and a blanket waiver favoring the architect is given. Protecting an architect’s IP rights takes precedence over advancing a project forward. AIA forbids an owner from using design documents on a future project, even renovations, unless the architect is involved.
An architect is “entitled to rely on, and not be responsible for the accuracy, completeness, and timeliness of services and information furnished by Owner.” The owner may not rely upon the design professionals provided information in a reciprocal manner. An owner’s protection rests upon the architect’s standard of care, which is a different and lower standard. Commenters have cautioned owners from basing their Owner/Architect agreement on an AIA document because AIA’s mission is to protect and promote the architectural professional. The view that AIA documents are owner-friendly is considered a myth.
ConsensusDocs 240 Owner/Design Professional Agreement takes a balanced approach regarding a design professional’s IP rights and an owner’s need to build or renovate a project. An owner is allowed to continue a project if there is a dispute between the owner and architect provided payment for services performed has been paid. An architect retains their claim rights. Additionally, there is an option (although it is not the default) for an owner and architect to mutually agree for an owner to use the design documents for future projects along with a waiver of claims to the architect, if the architect is not involved in that future work.
The ConsensusDocs architect agreements provide the owner with construction phase design documents that are sufficient “to bid and build the work.” Reciprocally, the design professional may rely upon the design services provided by others. Unbuildable design documents are the equivalent of pretty pictures. ConsensusDocs provides owners a balanced architectural agreement that isn’t written by an architectural association.
Conclusion
Now with a 10-year track record, ConsensusDocs provides an industry-wide developed and endorsed choice for standard design and construction contracts. ConsensusDocs takes a plain English and fair to all parties’ approach. ConsensusDocs encourages direct party communications to build positive collaboration. Owners gain more control and an active say in their projects. Constructors are viewed as problem-solvers rather than problem-makers. AIA provides a more traditional approach that gives architects more control. Architects make most decisions and protect owners from potential contractors’ abuses. AIA contracts’ long history and usage is well known with a history of litigation and case law. As successful projects trend toward collaboration, your contracts should reflect the business relationships you want to build so you can build better.
Brian Perlberg is the executive director and senior counsel for ConsensusDocs.
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