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For project owners and firms in design and construction, contractual options have increased significantly. Last November, shortly after the ConsensusDOCS program released its Standard Form of Tri-Party Agreement For Collaborative Project Delivery (ConsensusDOCS 300), The American Institute of Architects (AIA) distributed a report titled Integrated Project Delivery: A Guide. The AIA Board of Directors also required that new documents promoting integrated project delivery (IPD) be prepared for release at the AIA’s May convention. The institute’s contract documents program met that mandate on May 15 by releasing two standard contract forms that are at both extremes of integrated project delivery options.
As with the ConsensusDOCS 300, the new AIA contract forms are based on the use of building information modeling as a tool for design development, construction evaluation, and project communication. But the AIA standard forms bracket the ConsensusDOCS approach in developing unique forms of contractual arrangements.
Transitioning into an IPD Approach
The AIA used existing construction manager agreements as a model for a contractual arrangement that would enable the early collaboration of the architect, contractor, and owner. The contracts preserve separate relationships between the owner and architect and the owner and contractor. They allow the contractor to participate during the design phase of the project so that much of the “means and methods” development is incorporated into the design documents during the preconstruction process of design collaboration This contract family currently includes the following documents:
- A195-2008—Standard Form of Agreement between Owner and Contractor for an Integrated Project
- A195-2008—Exhibit A: Guaranteed Maximum Price Amendment
- A295-2008—General Conditions of the Agreement for Integrated Project Delivery
- B195-2008—Standard Form of Agreement between Owner and Architect for an Integrated Project
The institute considers this arrangement as transitional, although it is highly likely that the concept of fostering collaboration through separate design and construction contracts will be a common and enduring form of project delivery. The separate design and construction contracts share a common set of general conditions. The basic services and relationships among the parties are created through the general conditions document. This document defines six phases for each project: the conceptualization phase, the criteria design phase, the detailed design phase, the implementation documents phase, the construction phase, and a closeout phase.
Each phase assigns duties to the project owner, the architect, and the contractor/construction manager. The conceptualization phase, for instance, involves the architect in developing a schedule of design services once a common understanding of the project is reached by all three parties. The contractor then prepares an overall project schedule in collaboration with the architect.
While this approach to the integration of design and construction preserves separate contractual relationships, it could significantly alter the exposure of the contractor or construction manager. For instance, the Spearin Doctrine, a legal precedent that establishes an implied warranty of fitness of the design adequacy of the project, may longer exist. In the design-bid-build project delivery system, once the owner provides a contractor with the construction documents, the contractor has the right to rely on those documents. With integrated project delivery, that concept is no longer applicable. Because the contractor is involved throughout the design of the project and has a duty to determine the project’s constructability, the contractor can no longer claim reliance on the construction documentation.
While the architect retains ultimate design responsibility in accordance with state licensing laws, the contractor and specialty subcontractors participate extensively in the development of the design. This makes the unlicensed parties subject to design liability claims. Although the contractor is not licensed to provide design services, it is collaborating in making design decisions ranging from spatial requirements to the selection of systems and equipment, and therefore could be held liable.
Forming a New Legal Entity
The AIA also published a form for integrated project delivery that challenges accepted business procedures, legal precedents, and insurance products. The AIA created an innovative concept of a business arrangement in which the project owner, architect, and construction manager become members of a limited liability company and transact project-related business as one legal entity. C195-2008, the Standard Form Single Purpose Entity Agreement for Integrated Project Delivery, establishes a separate project-specific entity comprising the owner, architect, and construction manager in a relationship that allows a complete sharing of risk and reward. Under this contractual arrangement, the limited liability company, governed by the three parties, carries out a project while meeting mutually agreed-upon goals and target costs.
Under the contract, the company is funded by the project owner and, as an entity, contracts with the architect to design the project and the construction manager to coordinate construction. The construction manager only provides services; it is not envisioned as constructing the project. The parties that may own the limited liability company are not limited to the three above. Others, such as design consultants and specialty contractors, could be members. The single purpose entity subcontracts for services and construction to comply with licensing laws.
The most radical feature of this approach is the elimination of traditional concepts of compensation for services and profit. During the process, the architect and construction manager are compensated through payments of their actual costs. In lieu of traditional profit, these parties receive payment for the achievement of specified goals and from a contingency above a target cost if the contingency is unused.
Although the single project entity approach only is set out in the C195-2008 agreement, the AIA Contract Documents program will be publishing the subagreements in which the legal entity contracts with the architect, the construction manager, and other parties. Visit www.AIAContractDocuments.org/ipd for complete details on these new documents.
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