|+ click to enlarge|
At the end of a May 17 continuing education session on the new American Institute of Architects agreements for fully integrated project delivery, the AIA documents committee member presenting asked, “Any questions?” His answer was a chorus of laughter from the roomful of attendees at the AIA Convention 2008 in Boston. They had lots of questions, reflecting concerns about the legal, liability, insurance, payment, risk and reward-sharing aspects of the radical delivery system, which joins the owner, architect and construction manager in a limited liability corporation to collaborate on a project.
The questions included: How do you quantify intellectual property? Why would we want to have all these other companies benefit from our good ideas? Will traditional insurance cover this? Will we have to keep working without compensation if the cost goes above the target cost set in the contract? With risk-sharing, isn’t there a potential for a conflict of interest on the part of the architect if things aren’t going well? What do the lawyers say? Will we have to carry the job if we don’t get profit until the building’s completion? What about all the years working toward value-based compensation for architects?
“Some are eager for this; others and their attorneys will be cautious,” said Suzanne Harness, managing director and counsel for the Washington, D.C.-based AIA’s contract documents department.
That’s why AIA created two “flavors” of standard agreements, which it rolled out on May 15 at the convention that drew 23,950 registrants. One flavor is a family of transitional agreements for those unaccustomed to IPD. The other, C195-2008, creates a limited liability corporation with the owner, architect and contractor as primary members. The LLC, called a single-purpose entity (SPE), then contracts with the SPE member architect and other design consultants and the SPE-member CM and the subs. Consultants and subcontractors not members of the SPE can be contracted conventionally. Member agreements and building information modeling scope documents will be published in November. Information is available at www.aiacontractdocuments.org.
|+ click to enlarge|
“Transitional documents will be helpful,” said Harness. They get the owner, architect and CM “working together early in the project in a comfortable contracting arrangement,” she said.
Transitional agreements use familiar contracting models: B195-2008, an owner agreement; and A295-2008, an owner-contractor agreement with a guaranteed maximum price amendment, and A295-2008, a shared general-conditions document. The general-conditions document also includes the architect’s design services and contractor’s preconstruction services. The A295 form also details how parties will work together at each phase of the project.
Harness calls the SPE agreement, based on the AIA’s “Integrated Project Delivery: A Guide” released last fall, “quite revolutionary.” Full IPD is for the more adventurous, agree sources. Among other things, full IPD, AIA-style, blurs traditional lines between design and construction; waives the right of team members to make claims against others, except in cases of wilful misconduct, and engages both the architect and the CM in risk- and reward-sharing, creating a team sink-or-swim scenario. Costs are covered, but most of the profit is based on whether the project comes in under the team-set “target” cost. The agreement assumes a guaranteed-maximum-price contract with the owner, which funds the SPE.
Not every project is suitable for IPD, said committee member-architect Robert E. Middlebrooks, industry programs manager in the Waltham, Mass., office of software vendor Autodesk Inc. “IPD works when there are other incentives than lowest cost,” he said. “If you don’t trust the people you are working with, don’t do this,” he cautioned.
“I’m psyched,” said committee member Bradley R. Milton, partner in RDG Planning & Design, Omaha. So far, his firm has not dipped its toes into the waters of IPD. “I don’t expect this solution will be right for everyone, but for the sophisticated client with a complex project, [the agreements] provide a well-reasoned path to IPD,” he said.
The architect and the CM have two profit opportunities: There are shared savings, also with the owner, between the target and the actual cost if it is less than the target cost. The second way for compensation above cost is by goal achievement. Members of the SPE, through the governance board, establish goals based on unanimous decisions.
If the target cost is exceeded before construction completion, members agree to continue working without compensation, and there is no profit. “It’s all for one, one for all,” said Harness. “Interests are aligned.”
“We are not publishing a multiparty agreement,” which is a major distinction between the AIA forms and the ConsensusDOCS 300 forms published last year, said Harness. “Despite disclaimers, there is potential for a multiparty agreement to be seen as a joint-venture partnership,”in which there is joint and several liability, she said.
Both types of AIA IPD agreements require use of building information models as a collaborative tool. “In our life, I don’t think you will be able to present a BIM as the contract documents,” said Middlebrooks. “A 2D traditional set of documents backed up by BIM is the way to go,” he added.
Under an SPE, authorizations, approvals or other actions of the board of directors require unanimous affirmative vote of board members, who are representatives of the member firms, or by majority vote under specific circumstances set by the board. The owner also has the right to audit all SPE accounts.
The documents committee, which is made up of 25 architects, worked for a year on the IPD forms. The committee sought input from insurers and lawyers. “There are numerous and complex issues of professional liability risk and insurance presented by the approach,” said David J. Hatem of Boston-based Donovan Hatem LLP. “These pose challenges that are not insurmountable but need to be addressed from the public registration, contractual and insurance coverage perspectives.”
Many attendees to both the AIA IPD documents session, which drew nearly 250 people, and to a session on IPD, which drew about 335, expressed skepticism of IPD. One attendee, who declined to be named, said,“Trust, hope and wish are not management terms. IPD works until Kumbaya becomes kumbayuck.”