American Bar Association Forum on the Construction Industry 2008 Fall Meeting “HEY, WHO’S IN CHARGE HERE?” The ConsensusDOCS Owner-Architect Agreement Penny Pittman Cobey McKenna Long & Aldridge, LLP Ricardo Aparicio, AIA General Electric Company Jerome V. Bales Lathrop & Gage, L.C.

CDOCS 240 AND AIA B101: KEY POINTS OF COMPARISON Role of the A/E During Construction Responsibility for Site Safety Indemnity and Waiver of CD’s Ownership of Documents, Copyright and Licenses Dispute Resolution

AGENCY ConsensusDOCS 240 Neither the A/E nor any of its consultants shall act on behalf of or in the name of the Owner unless authorized in writing. Paragraph 2.3

AGENCY AIA B101 Architect serves as the Owner’s Representative only to the extent provided in the Contract Documents. Section 3.6.1.2

AGENCY Comment The AIA maintains the Architect’s role as Owner’s Representative on the Project; ConsensusDOCS has significantly reduced the role of the A/E. Unfortunately, it is difficult to reduce the A/E’s role as Owner’s Rep without also lessening the A/E’s influence on the Project and ability to affect the quality of construction.

COMMUNICATIONS ConsensusDOCS 240 A/E and Contractor communicate through Owner; Contractor and Owner communicate directly. Subparagraph 3.1.4

COMMUNICATIONS AIA Documents Contractor and Owner “endeavor” to communicate through Architect. A201 Section 4.2.4

COMMUNICATIONS Comment Regional practices may vary, but most sophisticated owners rarely agree to communicate with their contractors only through the architect.

SUBMITTAL REVIEW ConsensusDOCS 240 Architect reviews submittals and must respond within 10 days, unless otherwise agreed by Owner, GC and Architect. Subparagraph 3.2.8.1

SUBMITTAL REVIEW AIA B101 Architect reviews all submittals, and contract adds exculpatory language designed to protect Architect from errors or omissions claims based on such review. Section 3.6.4.2

SUBMITTAL REVIEW Comment Note that ConsensusDOCS 200, at 3.14.1, states that the Contractor shall direct submittals to the Owner “and, if directed, to the Architect/Engineer.” Sophisticated owners will have staff to route and track submittals; A/E’s on other projects should advise Owners to modify 3.14.1.

RIGHT TO REJECT WORK ConsensusDOCs 240 A/E has no right to reject work.

RIGHT TO REJECT WORK AIA B101 The A/E has the right to reject Work that does not conform to the Contract Documents. Section 3.6.2.2

RIGHT TO REJECT WORK Comment The right to reject work is based on the Architect’s traditional role as agent of the Owner and guardian of the Owner’s interests. Many owners today insist on making the final decision as to whether the quality of the Contractor’s work is acceptable.

A/E AS INITIAL ARBITER OF DISPUTES ConsensusDOCS 240 ConsensusDOCS does not give the A/E this authority.

A/E AS INITIAL ARBITER OF DISPUTES AIA B101 Architect is Initial Decision Maker by default unless Owner- Contractor Agreement designates a different entity. Section 3.6.2.5

A/E AS INITIAL ARBITER OF DISPUTES Comment Despite the AIA position, the reality is that many architects are no longer interested in taking on this job, and owners are increasingly reluctant to give it to them.

RESPONSIBILITY FOR SITE SAFETY ConsensusDOCS 240 No duty to investigate, but if the A/E has actual knowledge of safety violations, the A/E must give prompt written notice to the Owner. Subparagraph 3.2.8.4

RESPONSIBILITY FOR SITE SAFETY AIA B101 The Architect is not responsible for site safety. Section 3.6.1.2

RESPONSIBILITY FOR SITE SAFETY Comment Depending on the state in which the Project is located, the new language of ConsensusDOCS 240 could make the A/E a site safety policeman—a role the AIA has long resisted.

INDEMNITY AND WAIVER OF CONSEQUENTIAL DAMAGES Indemnity: CDOCS 240 - Para. 7.1 Mutual Narrow Form Comparative Negligence-based A/E indemnifies Owner, GC, subs

INDEMNITY AND WAIVER OF CONSEQUENTIAL DAMAGES Indemnity - AIA B101 No indemnity

INDEMNITY AND WAIVER OF CONSEQUENTIAL DAMAGES Indemnity - Comment Although B101 contains no indemnity on the part of the Architect, B103 (for large and complex projects) includes one. Architect indemnifies only the Owner Indemnity limited to available insurance proceeds. – Section 8.1.3, B103

INDEMNITY AND WAIVER OF CONSEQUENTIAL DAMAGES Waiver of Consequential Damages - ConsensusDOCS 240 Mutual “Limited”—but in fact, broad Paragraph 5.4

INDEMNITY AND WAIVER OF CONSEQUENTIAL DAMAGES Waiver of Consequential Damages - AIA B101 Mutual Broad Section 8.1.3

INDEMNITY AND WAIVER OF CONSEQUENTIAL DAMAGES Waiver of CD’s - Comment On this issue, ConsensusDOCS and the AIA Documents form a united front against the Owner, who has much more to lose in waiving CD’s than the A/E (or the Contractor).

OWNERSHIP OF TANGIBLE DOCUMENTS ConsensusDOCS 240 Owner acquires property rights, but not copyrights, in the Documents, on condition of full payment. – Paragraph 10.1

OWNERSHIP OF TANGIBLE DOCUMENTS AIA B101 Architect retains all property rights in the Documents as well as copyright. – Section 7.2

OWNERSHIP OF TANGIBLE DOCUMENTS Comment Owners will still want to amend either provision to make sure that the Owner’s right to use the Documents to complete the Project is unconditional and cannot be enjoined, even though A/E may have enforceable right to payment.

EFFECT OF TERMINATION ConsensusDOCS 240 If for convenience: Owner retains the right to use the Documents to complete the Project, provided A/E is paid. – Subparagraph 10.1.2 If for cause: 240 is silent as to any Owner payment obligation. – Paragraph 8.1.

EFFECT OF TERMINATION AIA B101 – Section 7.3 – Section 11.9 Architect’s termination of agreement for cause results in automatic revoking of Owner’s license. – Section 7.3 Owner’s termination of agreement for convenience means that Owner must pay a licensing fee to Architect in order to complete the Project. – Section 11.9

EFFECT OF TERMINATION Comment Even though the AIA has modified its aggressive protection of the Architect’s IP rights over the years, those rights remain the Architect’s greatest source of leverage for ensuring payment.

DISPUTE RESOLUTION Direct discussions Step Process - ConsensusDOCS 240 “Dispute mitigation procedures” or mediation Arbitration or litigation – Article 9

DISPUTE RESOLUTION Step Process - AIA B101 Mediation Arbitration, litigation, or “other binding procedure” – Sections 8.2, 8.3

DISPUTE RESOLUTION Fees, Costs ConsensusDOCS 240 – prevailing party (as determined by adjudicator) recovers “costs.” – Paragraph 9.5 B101- no such provision

DISPUTE RESOLUTION Joinder and Consolidation ConsensusDOCS 240 - requires joinder of all parties necessary to resolve the claim. – Paragraph 9.6 B101- permits joinder and consolidation in some situations. – Section 8.3.4

DISPUTE RESOLUTION Continued Performance ConsensusDOCS 240 - requires continued performance during dispute resolution process. – Paragraph 9.1 B101- no such provision

DISPUTE RESOLUTION Choice of Law ConsensusDOCS 240 - law of the place of the Project. – Para. 10.4 B101 - law of the place of the project, except that the Federal Arbitration Act governs arbitration. – Section 10.1

DISPUTE RESOLUTION Statutes of Limitation/Repose ConsensusDOCS 240—no such provision. AIA B101—maximum 10-year statute of repose, depending on applicable law. – Section 8.1.1

DISPUTE RESOLUTION Comment Both ConsensusDOCs and the AIA documents allow the parties to choose between binding arbitration or litigation.  The menu of nonbinding resolution processes set forth in ConsensusDOCS 240 will be particularly appealing to owners of larger projects.

OTHER ISSUES Standard of Care Insurance Design Services