AIA contracts and Initial Deceision Maker/Dispute Resolution

[Sean Coppom]

Hi all,

Looking to get some feedback on who to use as an Initial Decision Maker (on an AIA contract) for dispute resolution for a construction project in Denver, CO.  For various reasons we don't want to use the architect.  This project consists of 4 townhomes on a single lot, but it would be valuable to hear of others experiences regardless of the type of project.  Specific recommendations or general advice are both appreciated!  Thanks for your time.

[Josh Cuthbertson]

Was the IDM identified in the AIA contract already?

[Sean Coppom]

Josh,

No, this is a new contract. 

[Josh Cuthbertson]

That's a tough one because I've never seen it not be the architect. It would be difficult to find someone that would be impartial to make conflict decisions between the owner / contractor. Maybe just a different architect? I don't know. The only other thing I could think of is a construction manager that isn't tied to the project perhaps?

[Nik Moushon]

There is a reason the IDM is the architect in those contracts. These AIA contracts are lobbied by almost every profession in construction. So they are not written in a way to give the architect extra leverage and control. It really is written very fairly and openly and that is why they are considered the industry standard. 

One of the biggest reasons the architect is written down as the IDM is because that is one of their main roles in the process...to be the middle person between the Owner and Contractor. They know what the design intent was. If you bring in some third party person to be only involved if a situation escalates then they will only know what is going on from what they have heard. They have very little background knowledge of the decisions that were made and why. What you are basically doing is creating a IDM position that skips the intent of the IDM position and goes straight to arbitration...yet having the option to go to a arbitrator or mediator afterwards...  You are creating a redundant loop. 

I highly suggest that you leave your architect as the IDM, there's a reason its the industry standard.

[Sean Coppom]

Nik,

Thanks for your comments.  I agree that if the majority of claims and/or disputes are related to the design of the structure than the architect is the most likely person to be able to settle those equitably.  in this case, the reason to use someone other than the architect is that we foresee that the majority of claims/disputes are going to be related to additional time and cost. I.e. weather related or material delays that affect cost and schedule, that ultimately have an effect on liquidated damages or bonuses.  I'm not sure that it's necessary to involve an architect in those types of decisions and I'm trying to explore our options.

I didn't want to post the sob story behind this whole mess necessarily, but it will provide some context for the discussion.  In mid-November we were less than a month from gaining CO on all four units, had them all under contract at or above asking price, and were looking to close by mid-December.  On a Saturday morning in late November we got a call that there had been a fire, presumably started by a few homeless people sheltering in a cove created by the garages and the rear units, and the garages along with the back units had been burned down.  We've been dealing with the aftermath ever since with insurance, remediation and new budgets for the rebuild.  We're carrying a $1M+ loan and the holding costs continue to add up, on top of the long, slow process to get these built in the first place.  So we've built these once already and the plans are solid at this point, but we need to really watch out and protect ourselves from claims and disputes regarding working days and delays in schedule.  If the contractor submits a claim for an additional two weeks due to weather, and we disagree with that length of time, we need someone to arbitrate that for us.  Not so worried about claims for additional cost as those will go through insurance.

Thanks for your time.

[Nik Moushon]

@Sean Coppom

Suites in the construction industry are mostly about time delays that lead to liquidated damages. Think like 70-80%. Its crazy how much time adds up to massive amounts of money. So this isnt something new. So architects deal with this kind of situations on pretty much EVERY project. The contractor always has a delay for something....always. Legitimate or not. 

If weather and material delays are concerning you that much then I would suggest reading over your specific AIA contract regarding time delays and liquidated damages. There are sections of the AIA contracts that talk about this. I will say its not uncommon for them to get removed as a lot of projects just to get to the size that they warrant them. A 4-plex usually is small enough that its not included, but this is different for everyone, so just ask your architect to include a section on this. Or go to your lawyer and have them write you up one that can be added. Clauses that set the number of weather delay days and liquidated damages per day are extremely common so this isnt something crazy to ask for. For an example, add a clause that gives the GC 10 weather related days and then LD cost of $100/day. The GC will record what days he has weather days on, if he uses them, and you can go back and check the weather days....well they should keep record. 

For material delays.....youre kind of SOL on this. Most contractors are not going to sign a materials delay clause in this kind of pandemic environment. Delays right now are all over the place. There was an almost 3 month lead time on appliances, 8 weeks for siding, 4-6 weeks on windows, etc. for one of my projects. They are just astronomical delays on materials right now. You might be able to get away with a clause that spells out that covid is causing abnormally long lead times and material delays so the contractor needs agrees they are aware of this and will order materials to account for extra lead times. But even with that you are getting into the Force Majeure gray area.....so its tricky for sure. I understand your hesitations. My duplex I'm building got delayed the entire length of the project. The month we poured foundations is the month we should've been finished...all thanks to covid. 

I really think that what will ease your mind the most is adding an additional clause or two to your contract. Start with asking your architect about it. They might have had something similar in another project that they can include in yours. If you are not satisfied with the wording you can always take it to your lawyer to look over and review. Architect are familiar with project delays though. What most people dont understand about the profession is that architecture is just not designing and putting CDs together. They also handle all the construction administration phase of the project. Very well versed in contracts and being the neutral third party to handle the first round disputes about the entire project. 

[Sean Coppom]

Nik,

I really appreciate the time you took to respond. It's very valuable info and I love opening up to new ways of looking and thinking about things. I'll put some of this to use right away. 

I'm supposed to be a limited partner in this deal but I have taken on a bigger role after the fire due to some of the things I believe were lacking regarding contracts and planning/preparation of the original project that led to delays and cost overruns. Things would have been alright if the fire didn't occur, but could quickly spiral out of control if we're not on top of it now. 

Cheers.

[Jim Adrian]

I will echo what @Nik Moushon has said.  

Architects don't walk way from projects once its designed and bid is awarded.  They also provide Contract Administration (construction observation and or inspection) for the owner.   Some of this comes down to what is the architects contract or scope of work with his client.   Architects can review pay apps, review schedules of complete, answer questions for the contractor, review shop drawings.  

Whatever clause you add the contract it must be measurable to be accountable. I am a big fan of liquidated damages and bonuses.  

[Sean Coppom]

Jim, 

Thanks very much for your comments.