| AIA B141: Part 3 --
The Bad and the Dangerous
By David A. Ericksen, Esq., and Michael Strogoff, AIA
David A. Ericksen is a principal in the law firm of Severson
& Werson. He can be reached at Severson & Werson’s
San Francisco office at 415.677.5637 or on-line at dae@severson.com.
Michael Strogoff, AIA, is a full-time negotiation consultant
who specializes in training and assisting architects in negotiating
better fees and agreements with their clients. He can be reached
in Mill Valley, CA, at 415.383.7011 or on-line at aemanage@aol.com.
In 1997, the American Institute or Architects (AIA) completed
its overhaul of the two most widely used owner-architect agreements,
the A201 (General Conditions) and the B141 (Architect’s
Services). Among the AIA’s goals was to simplify language,
incorporate a proactive and positive tone, and allow greater
flexibility.
Although it succeeded, architects must evaluate the appropriateness
of the new documents for their practice, get legal advice
about specific terms and provisions, customize the agreements
as needed, and use the new A201 and B141 forms as a starting
point for more in-depth discussions about roles, responsibilities
and scope.
The changes to B141 create both new business opportunities
and affect how architects manage risk. We have grouped these
changes under the headings of "The Good," "The
Bad" and "The Dangerous." In Part I and Part
II of this article, we discussed some of the good changes.
Now, we look at some of the less-than-positive provisions
in the documents and offer some solutions.
The Bad
Construction Cost Control
While the architect’s role in pre-paring cost estimates
has not -significantly changed, the architect arguably assumes
more risk in B141-1997. The 1987 edition required owners and
architects to "explicitly agree" in writing to any
fixed limit of construction cost as a condition for architects’
assuming responsibility for meeting a construction budget.
B141-1997 no longer requires such an agreement. When the owner
establishes a construction budget in section 1.1.2.5, the
architect automatically assumes two obligations:
- The architect is obligated under section 2.1.7 to develop
a construction cost estimate (now termed Cost of Work) and
make recommendations for reconciling the project scope any
time throughout the project that the estimate exceeds the
owner’s budget. Unlike the 1987 edition, the architect
assumes this responsibility regardless of whether he agrees
with the initial budget.
- If the Cost of Work is exceeded by the lowest bona fide
bid, the owner can force the architect to redesign the project
to bring it within budget without additional compensation.
Architects can do several things to limit their exposure
for such budget overruns:
- Major inconsistencies between the owner’s budget
and objectives should be identified and resolved while discussing
the initial project information in section 1.1.2.
- Architects should discuss what and how project or market
conditions affect final construction costs and include adequate
contingencies in the cost estimate.
- On projects with severely limited budgets, or where the
final scope or complexity is difficult to foresee, an expanded
role in detailed cost estimating or value engineering might
be appropriate.
- A disheartening, related, deletion from the old B141
is the requirement that owners provide evidence that the
project is adequately financed. The AIA felt this provision
was not "owner friendly."
- Nevertheless, a prudent architect will still inquire into
an owner’s financial capacity to fund the project
and design fees, and respond to any subsequent litigation
or claims.
Consequential Damages
While the waiver of consequential damages between owners
and architects in B141-1997 generally favors architects, the
parallel provision in A201-1997 can work against those architects.
A201 now includes a waiver of consequential damages between
owners and contractors; however, the contractor’s waiver
against architects was deleted from the A201-1997 draft.
As part of B141, architects should require that owners either
insert this waiver for architects in A201, or strike the entire
waiver provision from A201. Otherwise, contractors sole source
to pursue consequential damage claims will be against the
architect since their remedies with owners have been limited.
Assignment to Lenders
Section 1.3.7.9 provides that the owner and architect may
not assign their interests in the agreement to any third party
without the written consent of the other, except that the
owner may assign its rights to an institutional lender. The
architect cannot do anything to block such an assignment.
In effect, the architectural firm can have a new project
partner imposed on it without any right to question that partner’s
qualifications to handle the project. Such a unilateral assignment
may have dramatic impacts on the architect’s delivery
of services, especially if the institutional lender is significantly
less sophisticated in construction matters than the original
owner.
This provision should be stricken or modified so that such
an assignment provides a basis for a change in the services
or compensation.
The Dangerous
Characterizing one of the new or revised provisions as "dangerous"
does not mean that the provision is either good or bad from
the perspective of risk or project management. Rather, it
means that the provision has the potential to achieve tremendous
positive results or to be disastrous, depending on how it
is handled. Therefore, it is dangerous.
Expanded Services
The opportunities for expanding an architect’s project
role places this category under both The Good and The Dangerous.
Within the potential for expanded services lies the risk that
architects may take on responsibilities they are not qualified
for or equipped to handle.
Although it seems obvious, it must be emphasized that no
architectural firm should take on work for which it is not
qualified or equipped to handle from either a technical or
capacity perspective. To agree to perform such services is
almost de facto malpractice.
Also, a word of caution about the list of possible services
in section 2.8.3: Unless this checklist is reviewed for completeness,
owners may assume that the omission of a specific service
means that the architect is responsible for providing it.
Firms should augment this list, particularly for complex or
unconventional projects.
To assist in this, the instructions that accompany B141-1997
include a matrix with a more extensive list of services. While
the matrix does not correspond to all of the tasks listed
in the actual agreement and can be confusing, it is a useful
starting point. As an additional resource, firms should review
the scope of services they provided on similar projects.
Scope vis-à-vis Fees
B141-1997 may broaden the architect’s initial scope
of services, and owners will soon view this as the new standard.
Therefore, architects must clearly state which tasks are beyond
those previously deemed "basic services" or included
within their former set of standard services. One strong reason:
the same fees used with the 1987 version will not cover the
services in the 1997 version.
Examples of services in Part II that are beyond those previously
defined as basic services include:
- An obligation to specify performance and design criteria
for required submittals
- Requirements to maintain records of changes in construction,
submittals and contractor’s application of payments.
- A post-construction review of facility operations and
performance.
A similar hazard arises from the potential to assume an expanded
set of services without adjusting fees. In the quest for an
expanded role, architects must carefully negotiate a corresponding
increase in compensation.
Number of Site Visits
Although specifying the number of site visits included within
the architect’s fee provides financial protection, it
also poses risks. The danger is in agreeing to an inadequate
number of site visits. If architects are then hesitant to
provide additional site visits because owners will not authorize
additional compensation or are concerned that providing these
visits might be interpreted as indicating design deficiencies,
valuable opportunities to solve construction problems are
lost.
Prospective Bidders
Section 2.5.2 states that architects shall assist the owner
in establishing a list of prospective bidders or contractors.
However, the nature of this assistance is not clearly defined.
The danger is that an architect who fulfills this role may
be seen as having endorsed or guaranteed the contractor’s
qualifications. This may be a problem if the contractor fails
to perform.
Any assistance in identifying potential contractors should
contain appropriate disclaimers. More importantly, a provision
should be added that states that the ultimate selection of
a contractor is solely the owner’s decision.
Design Delegation
The B141-1997 adds a new section to allow for and address
situations in which design services or certifications are
to be furnished by the contractor. In these situations, section
2.6.4.3 requires the architect to "specify appropriate
performance and design criteria that such services must satisfy."
The architect is then entitled to rely on the adequacy, accuracy
and completeness of the design services provided by the design
professional retained by the general contractor.
While this clarifies some responsibilities pertaining to
performance criteria, there is an inconsistency with section
3.12.10 of A201-1997 that states that, as a condition of the
contractor’s assumption of certain design responsibilities,
the owner and architect are required to "specify all
design and performance criteria that such services must satisfy."
The ambiguity between B141’s appropriate performance
and design criteria" and A201’s "all performance
and design criteria" could lead to confusion by contractors.
Owners might be left holding the bag, responsible for providing
criteria that fall between the architect’s definition
of "appropriate" and the contractor’s expectation
of "all."
Arbitration
As with the 1987 B141, the new form refers all disputes to
binding arbitration. While arbitration is often a cost-effective
and appropriate means to resolve disputes, it is not right
for all situations. Each project should be considered separately
to determine if arbitration is right for that project. Relevant
considerations include the size, complexity and locale of
the project, the resources, sophistication, and personalities
of the parties, and whether all potentially necessary parties
are committed to arbitration.
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