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the documents committee and the AIA contract documents per gram really does try to develop documents that are fair and balanced and a good starting point requires business of architecture episode of 230 civilization I mean exteriors and this is the podcast for architects for your discover tips strategies and secrets for running a profitable and impactful architecture practice if you haven't already get free instant access to the four-part architecture firm profit map video by going to free architect gift calm on that page you can enter in your best email address and you'll get instant access and if you aren't at a computer you can also text the phrase profit map that's two words to the phone number seven seven three seven seven zero four three seven seven today's podcast is sponsored by BQE core the award-winning platform that combines time and expense tracking billing project management accounting and business intelligence into one easy to use platform get a free trial at business of architecture comm forward slash demo contracts form a large part of what we do as architects because they form the basis for the services that we provide to our clients today we're honored to be joined by Ken Cobb Lee the managing director and counsel for the AIA contract documents program today we discussed recently released 2017 AIA contract documents a lot of thought and planning has gone into this latest revision and whether or not you use the AIA contract documents in your firm I think you'll find this conversation and be full of valuable insight about what to think about when you enter into an agreement with a client especially considering the risks involved so without further ado here's today's show ken welcome to the business of architecture I'd like to start off by asking you what are the major things architects should consider as they are entering into these legal agreements sure so the first choice is which contract and that starts with what delivery model do we want on a project do we want design-bid-build which is the traditional historic delivery model where the architect designs and once the design is completed the owner engages a contractor to build that design do they want design-build which is a little different model that's where the owner hires of design builder to do to do both the design and the construction of the project and then the design-builder might engage in architect for the design element that it's ultimately responsible for or a construction manager these are going to be a cm at risk so first you have to figure out which delivery model are you going to operate in once you decide that then you have to select the right size the appropriate owner architect agreement for use on that project and so let's let us take the the a201 family or the design-build family documents we have essentially five different owner architect agreements within that family and the right choice will depend on project complexity and project risk so the the b101 is sort of our flagship document there and that's for medium to large size projects where there's that are fairly complex and where there's a fair amount of risk involved in doing the design and overseeing parts of the construction you know contract administration if it's a very simple project not not complex at all I mean an example might be a garage or a small addition on the house then you might want to go with the be 105 which is our short form of contract agreement and it's very basic it's only about three pages and and but it's going to contain far fewer terms which leads more up for interpretation so again first need to know which delivery model you're going to be working in and then you need to select in the case of design-bid-build you need to select the appropriate size agreement for the project then and there are corollaries so where I mentioned the B 101 the a 101 would be a corollary agreement for that so depending on the size on the architects side there's a corollary owner contractor so can't tell me about the recent updates to the contract documents or it you can you give me a summary of the major changes sure well probably the most significant change that we made in 2007 which again relates to our design-bid-build family of documents the a201 family which is historically the you know the way design and construction first evolved the major change we made was to develop an insurance exhibit for use in the owner contractor agreements and we did that for a number of reasons other changes include the way we handle electronic information on a project we enhanced elements of both the owner architect agreement and the owner contractor agreements to deal with digital data and to deal with Building Information modelling we went to we developed an exhibit for use if they're in both the owner contractor side of the equation and the owner architect side of the equation if there's going to be significant elements of sustainable design and construction on the project and we made a number of other changes that we felt clarified things or helped enhance the project several of us have said over the course of past year since the since the release came out that the changes in 2017 were evolutionary but not necessarily revolutionary that is to say they reflected the evolution and change within the construction industry over the past 10 years and where things seem to be heading but nothing in them should be shocking or our our see changes in either contract law or our documents so two evolutions that you mentioned is some additional information about sustainability and then also you mentioned Building Information modeling tell me about the bid Building Information modeling what changes if it been implemented around that so we have over the over the course of the past eight or ten years we have been working on documents that specifically address digital data and Building Information modeling and the most recent iteration of those documents is our II 203 which is a digital data protocol and it addresses digital data in all forms including Building Information modeling and then some G forms that are used to really take a deep dive into protocols the G to a one deals with digital data generally how we're going to handle emails digital correspondence is there going to be a digital site information site for the project and then the G 202 deals specifically with how are we going to handle and allocate responsibility for Building Information modeling so in 2017 we built clauses into the documents that said that the parties were going to have an affirmative obligation to work on developing protocols for how to use managed data that's transmitted digitally and what uses could be made of it and specifically to develop protocols around the use of Building Information modeling and we called out that they were going to unless they agreed otherwise they're going to use our documents the e 2 O 3 and the G 2 o 1 and G 2 O 2 to establish protocols and we also said with respect to Building Information modeling if any party obtains a model before the protocols are memorialized in the document and they use that model for any purpose they use it at their own risk and without liability to any of the other parties including the party so you may have created the model so if the architect and its design team have created a model there might be a portion of the building you might be whole building whatever and I had developed that up to a certain point and the contractor asks for that model or the contractor somehow gets a hold of the press through the owner or whatever and uses it if they haven't established the protocols and that include reliance rights they haven't established that and memorialize that and the contractors use of that model is that its own risk and without liability to whoever gave it to him were whoever created it and the whole the purpose of that is to get the parties to sit down and talk about who's going to be responsible for developing the model at which phases and to what extent and then how can parties receiving it rely on it but until that's memorialized there's a whole bunch of extraneous data that could be contained in the model that the party created they may attend others to rely on or even look at and so those lines all have to be delineated and things need to be clarified before people run off and and use the model for whatever purpose they think they want these at work because they could be using data that was never intended for that purpose so we'll move yeah when we think about Building Information modelling or BIM what are some of the key issues that these parties are going to be negotiating and hashing out in this process they're the key that well the key thing is model content responsibility at each particular stage of the design and orchestra so depending on again depending on the project delivery model you're using those those elements are going to slide up and down the scale but in the design-bid-build scenario the expectation is going to be that the architect and its team has developed the model to a certain level for a whole host of model elements the foundation the structural steel the concrete electric the plumbing whatever certain data is going to be expected to be in that model when it gets and and if the parties agree that they're going to exchange the model then then there's going to be a level of reliance on the party receiving that model and information as they continue to enhance it and build on it as the contractors trade contractors get in there and use it and perhaps add data about where ductwork or piping is going to go so the parties first need to agree whether they're even going to exchange models some design teams would say we don't want to share our model because we don't want to drill down to the level of detail that's necessary to clearly share it we just want to use it internally but if they agree to share then at certain milestones in the project different parties are going to be responsible for ensuring that the data in the model is usable for certain purposes some would be estimating down the road it's going to actually be designed and ultimately the model may be turned over the owner for subsequent use in maintaining the facility and doing other things so they have to decide are we going are we going to even share the model and if so then at each phase along the way which which we can decide when the phases are for each line item and and if you look at our protocol its multiple pages of line items that we call the model elements who's responsible for the data in the model and what use can be made of that and all of that is why it's so important to establish these protocols upfront because once this project gets moving people are going to be responsible for turning over certain portions of the model at different phases and and the content has to be right and everybody has to have agreed I understand what I can rely on it for and I understand what I can't use it for so when we talk about use of the model give me an idea of what we're referring to are we talking about for instance pricing estimating construction with those be considered uses what are the use what is meant by use yes so um the I you're right some of it is estimating some of it is is detailing work like duct work or or detailing pipe runs and so on and so forth the best way to understand it is to look at our e 2 o 3 in the section that talks about the levels of development there's a whole section in there that refers to that and we have actually created language that is now being adopted by the industry at large for the levels of development for a model and so it's sort of becoming a standardized nomenclature we've licensed that language for use by the agencies BIM forum in the development of their BIM spec we've licensed it to the National Institute building standards for the creation of a national BIM spec we've license that the BIM Canada for the creation of documents in Canada but the goal being that we're all going to try and standardize our understanding of this important concept of the level of development because the definition that each level tells you well what you can expect in the model and also what sort of reliance you might make as a third-party user what reliance can be placed on that data so really the best thing to do is look at the e 203 in the level of development definitions and you see how it flushes down how how a level 100 element is pretty rudimentary pretty basic and you might be able to use it for some basic estimating whereas level 500 should show great detail about the actual as constructed on condition of the building let's let's jump back from a bird's eye view and just talk about the contract documents in a general sense maybe things that they have in common despite you know not depending on delivery model but if we were to look at that agreement that happens between the most basic between an owner and an architect what are some of the high points of the contract documents why they're so important to be used one of the one of the key features that that we have in all of our owner architect agreements that are intended for use on contracts of any real complexity or risk so the B 101 to be 103 we have a whole section on initial information and and we believe that initial information is really critical to the contract because it establishes the basic information upon which the architect is basing its price but also going to base its design and the way it will move forward in developing the design so the initial information is intended to pull from the owner those things that that are really important about the project items that are really important to the owner what the owners program might be is there going to be a sustainable design and construction element to this project are we seeking some sort of certification like lead or are there other health or sustainability elements that the owner finds important that needs to be a part of this design and so on and so forth and so we think initial information important um there are basic services that we all think about in terms of what we would expect from an architect and what architects would generally be expected expect of themselves to deliver call those basic services mmm but there are other extraneous services that architects might provide on a project and so we also prompt the parties to talk about whether or not they want some of these enhanced services which we call in the new nomenclature we call them supplemental services in the old Nam nomenclature they were one of two types of additional services but you know something over and above the basic elements that every architect would expect to do but you know but still within the architects realm so we deal with basic services supplemental services we deal with how did how to handle additional services if new things come along after the contracts executed that that the architect might be asked to provide dispute resolution is always a critical topic the party should decide if they're ultimately is a dispute on the project how is it going to be handled are we going to mediate or not well our documents then except for the very smallest one which has no real dispute resolution terms in it other than you going to court we always try to prompt the parties to mediate first and then they have to make a decision in the document up front if mediation fails are we going to litigate this are we going to arbitrate this these there's a big difference between going to court and litigating and and using arbitration as a dispute resolution mechanism are we going to try some other type of dispute resolution mechanisms so dispute resolution is a critical component of the contracts I think another big area is what what is the owners with particularly with respect to owner heart take news is the owners right with respect to the architects instruments of service and the instruments of service or the plans and specifications and other things that the architect repairs that define this project define this building and we have a we have a fairly extensive licensing formula that we use in our documents some owners in manuscript documents they want complete ownership of the architect's instruments of service but architects have always been reluctant to give up their intellectual property rights in their drawings and specifications for a multitude of reasons sometimes because their drawings are absolutely unique that design is unique and the owner is only paying for one project so they shouldn't really have the ownership rights in that to cookie-cutter this project multiple times sometimes the architect has fairly detailed specifications and they don't necessarily want to give up the intellectual property net because they use them repeatedly on projects and they don't want any sort of ownership challenge to that so we try and juggle and the owners desire to be able to use the drawings and specifications not only to build the project but to maintain the building later on to add to it if necessary down the road so they they want more than just the singular use of you can only use it to build the project that once the project's done you can't ever use it again you don't have a right we want we've expanded that while at the same time recognizing that the owner or that the architect retains the intellectual property in in in the instruments of service so that's a fairly complex licensing scheme but we think it balances everything out and really works well so I think those are those are the biggies of course a price you know the architects fee or in the case of the contractor the contractors fee those are that's another big big element but I think that covers the okay now as you guys have gone back to provide an updated version of this have there been any court cases or litigation that you've looked at in terms of the way things that have changed or new things you're seeing in the terms of these agreements and maybe when these things go wrong you know historically we have looked at stuff I can't say well there's there was some there was a clause added to the material on the owner contractor agreement that talked about the fact that there's no need for claim in order for an owner to retain liquidated damages that that sort of arose out of some court cases where there was some question about whether or not an owner needed the first file a claim before it withhold liquidated damages you also cleaned up some information about when when an initial decision was no longer necessary and in order to proceed in the claims process we we have a we have a rather unique claim situation where our claims are first submitted to initial decision maker who makes an initial decision about who's right and who's wrong subject then to the binding dispute resolution procedures but it keeps the project moving we clarified that once the once the corrected fair one you're correct the period after substantial completion was over there was no longer a need to get an initial decision the parties could go right the binding dispute resolution for multiple reasons and a couple Court decisions that were unclear about whether you needed an initial decision before you can take the next step so so we clarified some stuff there certainly in the past there have been some key Court decisions that are prompted certain clauses to be added probably one of the most famous well known and and for recent clauses is the Perini case it had to do with the construction of around of the casino in Atlantic City and ultimately that case is what resulted in an hour including a waiver of consequential damages in our documents and and also the other groups that published agreements all all went through a waiver consequential damages that was a case in which Carini was a construction manager on a renovation um I think Sands Hotel in Atlantic City and the project ended a few months late the substantial completion came a few months late and the owners went to arbitration and claimed lost damages on the lane opening of a hotel in Atlantic City and so I believe the arbitration award was 14 million dollars offset by paris' total fee for all construction management services of about six hundred thousand so the disparity in the award prompted everybody to say that's that's - nobody would have been anticipated taking it that large on a job where they only had paid six hundred thousand and so we came up with the waiver so we do that when there are big cases like that but I can't there's nothing quite that big that came into play in 2017 that's an example of when when the big case is hear something yeah for some of the smaller firms that are using these documents what what are the things that you want to tell them that they should be looking out for is they put these together sure so we know that the smaller firms are always concerned about the length of the agreement they feel like they're working with owners excuse me who perhaps don't want long agreements and so they're constantly looking for very short forms using short forms I would say to them look you have to analyze the complexity of this project and the risk against the length of the form you use because when things go bad on a project you want as much spelled out in the terms as possible don't want the parties arguing over whether it's whether the contract or the obligation should go this way or this way and the only way you get to clarity is through through words through terms and so you really need the juxtapose the desire to have a short concise little contract against the need to make sure you covered the the critical things and if if dispute resolution is important to you then you want to understand what it is you want an agreed-upon upfront your or otherwise you're going to just go to court whether you like that or not if you want to make it clear that that you as an architect still own your instruments of service then you want those terms spelled out in this contract and what the owner can use it for and what they can't use it for if you're going to use building information modeling then you want something that requires the parties to get the details down first before you start sharing your model and all of a sudden won't wind up saying no no no I didn't intend you to use it for this or whatever so I would say 2 to 2 small practical firm practitioners you need to decide what's what's important and how much you don't want to argue about things later and how much you don't want left open to some third party to decide and then you bet then you decide what what form of contract is right for you and and I would say that we have some members of our documents committee who are all AIA architects some of them do custom residential work and then use the B 101 which is a fairly hefty agreement and they use it because they feel that at the end of the day they can explain to a known or even a custom residential job it's important that we have this understanding and it's important that both of our rights be clearly spelled out so that there's less room to argue about the which hopefully never happens but sometimes does so you know what one thing that I know a lot of the smaller firms they feel like the document because it is so complex that it's a little overwhelming to an owner and sometimes they're worried that all the legalese will scare away an owner or put them on the back foot what would you say to a smaller firm practitioner who is you know dealing with that dilemma of wanting of course to reduce his or her own liability and the liability of their firm but at the same time they don't want to have a document that scares away potential clients or freaks them out so to speak right well again I would harken back to what what some of our documents committee members have said and and and sort of say to them if you can explain to the owner what the key sections are and what the key clauses are and you can explain to them that the contract protects everyone not just the architect what everyone's rights and that there really is the the contract if they look at the contract as a good tool to provide a roadmap of exactly what is going should be expected of the architect at various times and also a clear roadmap of what the architect is going to expect from them then then I think that many owners will will accept that and understand that you know it is a tool for parties to understand what's going on not you know obviously not all owners feel that way but again in a in the case of a very simple low-risk project you can probably get away with a lot less words if you have an existing relationship with the client you can probably get away with less horizontal on a low-risk simple project but once you get into a realm where the potential for monetary loss to you as the architect or to the owner become significant more than more than you would like to take a hit on either more than it more than you could take a hit on and absorb it in your business without significant injury or more than you've got insurance for then you then you really want to use something that clearly delineates the firm's and that's a hard sometimes a hard pill to swallow but if you develop sort of a presentation that you use over and over again I think you can you can soften up the owners and get them to accept that are you seeing any general trends where more sophisticated clientele companies are is basically saying look we don't want to use that contract we don't want to use your contract this is how we do it and basically twisting the arm of the design team to take or leave their terms and conditions sure we know that happens in the industry all the time some of us refer to that as the golden rule there's all rules you know and and because the owner has the as the goal the client and is the one paying they often times try to exercise that right but we also know that there are a fair number of owners and a fair number of lawyers that that advise owners that say look you're better served by a contract that represents a fair starting point and it's fair to the parties because we all know that an onerous contract can result in higher fees because the party that perceives that in disproportionate amount of risk is being pushed their way it's going to increase their fees to to reflect the risk that they're taking on we also know that in some circumstances firms will walk away from a job if the contract is to out sided because they don't want to take on that red and they may not need the Commission they may say The Commitments Commission's not worth the risk that we're going to take on this project we know that using fair and balanced agreements will get the job started faster because people are not going to have to fight over terms and we also know that at times owners add terms the contracts that are uninsurable and so it raises the question of whether or not the architect is going to be covered by liability insurance which of course is bad at first blush for the architect if they don't get there they don't have coverage for the risk but also it's bad for the owner because the whole purpose of half carrying insurance is to help cover the monetary loss that might result from from the risk and and examples of that our owners will sometime right right horrendous clauses about the standard to which the architect will perform well they may think they're doing themselves a favor or their attorneys may think they're doing their clients a favor by writing these horrendous terms in but the truth of the matter is professional liability policies policies will only respond to damages that arise out of a breach of the common law standard with care that is to say what a reasonably prudent architect would have done under the same or similar circumstances so when the architects contract says that it will perform without flaw to the highest degree possible it automatically sets up a question in a fight over whether insurance is going to continue to play because professional liability says I don't have to I don't have to respond for damages at that higher standard we need to respond to damages that better breach of the common law standard another area where owners really think they're doing themselves a favor is is these very intense contractual indemnification --zz where they where they require that the architect then the fine hold them harmless defend indemnify hold harmless for any damages that in any way remotely relate to the architects work or or at all some of that runs afoul of anti indemnity statutes that some states have but more importantly again professional liability policies will only respond for damages that are colored by comic essentially common law negligence standards mmm and so if if the architect wouldn't be obligated under the common law to indemnify you know these enhanced indemnity provisions aren't going to be covered by the insurance and so folks have to be careful about that but that's just a couple of examples of the common sort of onerous clauses the ownership of the instruments of service that I mentioned before also fairly common those are the kinds of owners clauses and and and we find that because we do a fair amount of education programming and I do a fair amount of speaking when I talk about these topics particularly two groups of lawyers afterwards they will come up to me and say we never realized that that was uninsurable we thought we were doing our clients a favor but now we realize we need to rethink that so so sometimes the lawyers who are drafting the contracts as well as the owners themselves don't realize that they could be creating this trap for the unwary as you're traveling speaking and teaching are there any other common questions that come up that you can address for us to give some value to our listeners today well I think one of the one of the questions that comes up is why is the AIA have a ten year revision cycle and a lot of people think well you know that the industry evolves sometimes much more rapid the answer is that the AIA a contract documents program has been in existence for 130 years and over that time they have considered all sorts of questions like that and what is the appropriate revision cycle and after experimenting with shorter cycles and longer they've come to the conclusion that 10 years is about the sweet spot because it affords the industry an opportunity to begin using the documents and then determining whether or not there are any shortcomings in the documents mmm if there are legal shortcomings it gives and we hope that there are but occasionally we need cases to one your way through to see where courts are going to come out and then we need time to start the next revision so on a tenure revision cycle we actually begin looking at the documents 7 years 7 8 years into the cycle to give us a two to three years to revise the major ones so for all of those reasons we have found that 10 years is the right is the right time we also know that I apologize we also know that parties don't like the study changes regularly part of the value in using AIAS contract documents is that the terms that are in there have have developed over time and parties that grow accustomed to using our documents understand what's in them 10 years is about the cycle where people are willing to go okay I'll now take the time to look at what the AIA has revised and come up to speed on that so now familiar with these new provisions and new nuances they don't want to do that ever two three years and and and so so the AIAS contract documents would lose value because because much of our value proposition is is based on the fact that once you know once you take the time to learn our documents you only have to study the changes on essentially ten year cycles and and so it's easier as a professional to stay up on what's in them and to understand the evolving nature the industry and the risk without having to spend design time or construction time we studying things every couple of years instead and and finally we do recognize that there are some times when the industry evolves faster than our documents and when that happens then we're prepared to issue new documents that address those risks that can be incorporated into our existing documents examples of course would be include Building Information the Building Information modelling documents and elements where we address that rapidly evolving element of the construction industry without having to rewrite our documents the same is true if you look at the evolution of the way we prepared documents to address sustainable design and construction as that was rapidly evolving so we're prepared to do it in segments like that but we believe that the tenure process is tried and true for the reasons I gave you the right fit so I think that that's probably one of the biggest ones ok is there any other information that you feel is just essential that you would like our audience to hear about the contract documents before we wrap it up I think it's really important for everyone to understand that the document that the documents committee and the AIA contract documents program really does try to develop documents that are fair and balanced and a good starting point for the parties there's some misconception in the industry that says that we are architects centric because we are prepared by the American Institute of Architects and therefore it must be architect protective and there are some architects who would say they probably should be but the truth of the matter is the industry is best served by documents that that represent a good balance and a fair starting point a good document that the part all of the parties can look at and say yes we can use this and it fairly lays out the roles and responsibilities and allocates the risk so I think that that is is very important and to understand that we spend a tremendous amount of time trying to garner industry feedback and working on those documents to hit that cool fantastic thank you Ken for joining us today thank you my pleasure and that is a wrap as a podcast listener get access to my free four-part architecture firm profit map by going to free architect gift com you can also get it by texting the phrase profit map that's two words to the phone number seven seven three seven seven zero four three seven seven today's podcast is sponsored by AIA advantaged partner BQE software the makers of BQE core BQE core is office management software for architects Peter Drucker famously said what's measured improves BQE core lets you easily measure your key financial performance indicators and it's dead simple get insights on the profitability of your firm with a beautiful and easy to customize graphical dashboard core gives you the power you need to grow your firm and keep your hard-earned profit and they have pricing structures that work for the smallest of sole practitioners to the largest of firms learn more and get a free trial at business of architecture comm forge slash demo the views expressed on this show by my guests do not represent those of the host and I make no representation promise guarantee pledge warranty contract bond or commitment except to help you conquer the world carpe diem
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