Every 10 years or so, the American Institute of Architects (the AIA) revises its form construction documents. Those revisions are typically substantive and extensive, and the latest revisions, the 2007 form documents, are no exception. It is therefore of critical importance that all parties to construction projects, owners, developers, construction managers, contractors, and subcontractors, carefully analyze the new documents with their counsel and make appropriate modifications before signing them.

The matter is further complicated by the fact that a new, competing set of form documents has just been promulgated by an organization called ConsensusDOCS. The ConsensusDOCS form documents were produced by a collaboration of 19 construction association groups, including owners, contractors, subcontractors, and others.¹ Both the AIA and the ConsensusDOCS form documents are electronically available, but can only be obtained by subscribing to the respective organization's service.

This article covers the new general conditions form document promulgated by the AIA, the AIA Document A201-2007, first addressing some of the new rights and obligations of the parties, then the new disputes resolution provisions set forth therein, and finally comparing the A201-2007 disputes resolution provisions to those of the new ConsensusDOCS analog, the ConsensusDOCS 200.

The AIA Document A201

As was true for its 10-year-old predecessor (the A201-1997), the new A201-2007 form will serve as the general conditions for a multitude of AIA form construction agreements. These include the newly promulgated A101-2007, the new A102-2007 (previously, A111-1997), the new A103-2007 (previously, A114-2003), and the newly promulgated A401-2007. In addition, the new version of another frequently used AIA form document for small projects, the A107-2007, contains a number of general conditions provisions that mirror some of the new provisions of the A201-2007, although it does not explicitly cross-reference that form document.

New Rights and Obligations of the Parties

The new A201-2007 imposes new requirements on the construction manager (CM) and general contractor (GC). These new requirements tend to favor the owner/developer vis-à-vis the CM or GC.

Increased Rights Afforded the Owner:

• Owner's financing. Unlike the procedure previously in effect, under the new A201-2007, the CM or GC can no longer request information about the owner's ability to finance the project at any time.² Instead, while the CM or GC may so request prior to commencement of the project, it may do so thereafter only if (1) the owner fails to make a payment required under the Contract Documents, (2) a change in the Work materially changes the Contract Sum, or (3) the CM or GC "identifies in writing a reasonable concern regarding the Owner's ability to make payment . . . ."³ Although this revision appears to benefit the owner/developer, problems may well occur if payment issues arise, a not-infrequent occurrence on construction projects.

• Owner ability to issue joint checks to contact subcontractors directly. A new provision permits the owner to issue joint checks to the CM or GC and its subcontractor if the architect has withheld a payment certification due to a failure of the CM or GC to pay its subcontractor(s).⁴ In addition, the owner now has the right to request that the CM or GC provide written evidence of proper payment to its subcontractors and suppliers and, if the CM or GC fails to provide such evidence within seven days, the owner may contact them directly.⁵ These provisions will assist the owner/developer in keeping its project moving, even when its CM or GC is late in paying its subcontractors. It also permits the owner/developer a mechanism for avoiding later liens from subcontractors or suppliers with which the owner/developer is not in contractual privity.

New Duties of CMs and GCs:

• Review of contract documents and field conditions. Previously, the CM or GC could only be held liable to the owner for failure to notify the owner or architect of a nonconformance of the contract documents if the Contractor "knowingly failed to report [such nonconformance] to the Architect."⁶ Under the new A201, mere failure to report may give rise to liability.⁷ This new provision will assist the owner/developer in providing an additional cause of action should litigation arise. It also may prevent later CM or GC claims predicated on non-conforming or defective plans and specifications.

• Differing site conditions. A new provision requires the CM or GC to notify the architect if it recognizes "burial markers, archeological sites or wetlands not indicated on the Contract Documents."⁸ Given that even experts disagree as to whether certain ground conditions can be so characterized, this provision may prove burdensome to the CM or GC.

• Project superintendent. New provisions have been added requiring the CM and GC to promptly notify the owner of the name and qualifications of the proposed project superintendent and not change superintendents without the owner's consent.⁹ These provisions are important to the owner/developer because no matter how well-known the CM or GC is, each construction project is built by the individuals assigned to it and the owner/developer has a reasonable basis to want to know and have confidence in the people so assigned.

• Submittals. Under the procedures set forth in the new form, if the CM or GC fails to submit a submittal schedule, it will lose the right to claim any monetary increase or time extension required for review of submittals.¹⁰ In addition, the CM's or GC's submission of shop drawings and the like now constitutes a representation that the CM or GC has reviewed and approved them.¹¹ Both of these provisions are of benefit to the owner/developer in seeing that submittals are properly reviewed and that the project proceeds with fewer interruptions due to missing submittals and the like.

Reduced Obligations of the Architect:

• Architect's reporting duties. The architect's site visits are no longer "as a representative of the Owner" and he/she will no longer "keep the Owner informed" and "endeavor to guard the Owner against defects and deficiencies in the Work" as set forth in the prior version, the A201-1997.¹² Instead, the architect will merely visit the site "to determine in general if the Work observed . . . when fully complete . . . will be in accordance with the Contract Documents."¹³ In addition, the architect is only required to report "(1) known deviations from the Contract Documents and (2) defects and deficiencies observed in the Work."¹⁴ If the owner/developer seeks greater protection vis-à-vis the architect, that should be addressed in the separate agreement with the architect.

New Provision Regarding Electronic Communications:

• Electronic transmission of materials. In recognizing the prevalence of e-mail and electronic transmission of documents generally, the new A201 requires the parties to establish protocols for such transmissions.¹⁵

Dispute Resolution Process

The new A201's dispute resolution procedures are far more complex than the prior version, but also more flexible. First, the aggrieved party presents its claim to something new called the Initial Decision Maker (the IDM). In the past, the IDM was always the architect, but now the parties may designate someone else in the contract documents.

If one party is not satisfied with the IDM's decision, that party may then request mediation, but the procedure is a strange one: either party must make formal demand that the other file for mediation and if not done, then that other party waives its rights to mediate or arbitrate/litigate the "initial decision."¹⁶ The effect of this rather convoluted procedure, if not modified by the parties, may be to allow the winner to avoid mediation and even arbitration/litigation. Counsel would be therefore well advised to search the new A201 carefully so as to ameliorate the ramifications of such quirky provisions.

After mediation, the parties may then pursue either arbitration or litigation, depending on what they had agreed upon in the originally executed agreement.¹⁷ If arbitration was the method selected, the new form permits something very important that was not previously permitted - consolidation with other arbitrations provided three specific criteria are met.¹⁸

Possible Problems

• With the A201's "Independent Decision Maker"

In adding the IDM concept to the disputes resolution process, the AIA appears to be responding to criticism that having the architect as the decision maker in the first instance tended to favor the owner/developer, its client. In addition, the IDM concept appears to be part of an overall trend in the new AIA form documents generally to shield the architect from liability.

As noted above, in the prior A201-1997, the architect was in essence the IDM, although in the new framework the parties may still choose the architect for that role. Assuming the parties select someone else, the questions that will arise from that selection are many: To whom does the IDM report - the owner/developer or the CM or GC? Who pays for the IDM's services? Is the IDM required to interpret the drawings? Is the IDM qualified to do so, and doesn't that impinge on the architect's administration of the contract? What immunity will the IDM have from suit? What insurance will the IDM carry, if any insurance can be obtained? None of these questions is addressed in the A201-2007 form itself, so the parties must do so on executing their agreement.

Though by no means exhaustive, the extensiveness of these questions, and the fundamental nature of the issues raised, shows that one should not blindly sign any agreement that incorporates the A201 by reference. The parties and their counsel would be well-advised to revise the new A201 form before executing any agreement utilizing it.

ConsensusDOCS 200

Clearly designed to compete with the AIA A201-2007, the new ConsensusDOCS 200's general conditions provisions differ considerably from the A201's provisions. Regarding disputes resolution, the ConsensusDOCS 200 provides for a more collaborative process, in three distinct stages. Preliminarily, ConsensusDOCS 200 requires that during any dispute situation, the Contractor continue working and the Owner continue payments.¹⁹ The first stage of actual dispute resolution is direct discussions, first at the field level, but if that does not succeed within five days, at the senior executive level. If those discussions fail, the next stage is either "mitigation" or "mediation," depending on the choice agreed upon at the time of executing the agreement.²⁰ If no choice is made, the default procedure is mediation.²¹

The "mitigation" process set forth in ConsensusDOCS 200 requires designation of an independent Neutral or Dispute Review Board (DRB), selected and paid for by the parties equally.²² That DRB is to hear the dispute and render nonbinding findings within five days of hearing. The ConsensusDOCS 200 states that the DRB's nonbinding findings may be admitted into evidence in a subsequent binding adjudication,²³ so the parties should seek to modify this provision if that is not their intention. In addition, distinct from dispute resolution functions, if the parties so request, the DRB may also visit the project periodically throughout the course of the project.²⁴ Such a function would only make sense on relatively large projects, but would certainly facilitate dispute resolution, likely even preventing disputes from occurring, another indicator that the ConsensusDOCS 200 seeks to have the parties act collaboratively.

Mediation, the default procedure for the second disputes resolution stage, is designated to be performed by the American Arbitration Association, unless the parties choose another organization to do so, and there are several other highly reputable mediation organizations from which to choose. In order to prevent the mediation from unduly delaying a binding decision, there are specific deadlines about completing the mediation: it shall commence within 30 days and conclude within 45 days of the issue having been raised.²⁵ In addition, at least under the American Arbitration Association's rules for mediation, the party requesting mediation may commence arbitration simultaneously with the mediation so as to facilitate the former, just in case it proves to be necessary.²⁶

The third stage, if neither mediation nor mitigation has succeeded, is binding litigation or arbitration, depending on the parties' choice at the time of executing the contract.²⁷ Although not specified in the ConsensusDOCS 200, litigation would be the default procedure, because parties may not arbitrate without a written agreement to do so. Additional provisions worth noting: (1) joinder of all necessary parties is required, roughly analogous to, but more expansive than, the A201 consolidation procedure, and (2) the "non-prevailing Party" must pay the costs of the adjudication, as determined by the adjudicator.²⁸ With regard to the latter, the term "costs" is not defined, so whether or not it includes legal fees, and the amount thereof, should also be presented to the adjudicator for determination.

As noted, the ConsensusDOCS 200 form appears to foster a more collaborative relationship between owner and GC/CM than does the new AIA A201, although both forms will require a fair amount of modification by counsel.

Conclusion

Given the complexities and changes set forth in the new AIA Document A201-2007, and the advent of the new, ConsensusDOCS 200, all parties to construction agreements - owners, developers, construction managers and contractors, as well as architects - would be well-advised to have their attorneys carefully review the terms of the form chosen.

Brian G. Lustbader, counsel to Mazur, Carp & Rubin, specializes in construction contract negotiation and litigation. E-mail: blustbader@mcrlawfirm.com.

Endnotes:

1. The acronym "DOCS" in the name "ConsensusDOCS" stands for Designers, Owners, Contractors and Subcontractors, although I am not aware of any association of designers or architects that has participated in this collaboration. Presumably, the architects and designers work within the AIA.

2. AIA Document A201-1997, §2.2.1.

3. AIA Document A201-2007, §2.2.1.

4. Id., §9.5.3.

5. Id., §9.6.4.

6. AIA Document A201-1997, §3.2.3, emphasis added.

7. AIA Document A201-2007, §3.2.4.

8. Id., §3.7.5.

9. Id., §§3.9.3, 3.9.4.

10. Id., §3.10.2.

11. Id., §3.12.6.

12. AIA Document A201-1997, §4.2.2.

13. AIA Document A201-2007, §4.2.2, emphasis added.

14. Id., §4.2.3, emphasis added.

15. Id., §1.6.1.

16. Id., §15.2.6.1.

17. Id., §15.4.1.

18. Id., §15.4.4. Those criteria are (1) the other arbitration agreement(s) permit consolidation, (2) the arbitrations involve common questions of law or fact, and (3) the arbitrations employ materially similar procedures.

19. ConsensusDOCS 200, §12.1

20. Id., §12.2.

21. Id., §12.4.

22. Id., §12.3.

23. Id., §12.3.

24. Id., §12.3.1.

25. Id., §12.4.

26. See R-9 of the American Arbitration Association's Construction Industry Arbitration Rules and Mediation Procedures.

27. Id., §12.5.

28. Id., §§12.5.1 and 12.6.