by James B. Atkins,
FAIA, and Grant A. Simpson, FAIA
Recapping from last week
Mindful of the risks so prevalent in
our business, we do our best to negotiate a contract that will protect
us and allow us to serve our client appropriately while providing an
adequate fee for the time spent. However, there are times when we encounter
clients with requirements that go beyond our reasonable abilities and
Fine Mess: The Onerous Contract, Part I” explored some options available for risk management when we are faced
with unreasonable demands or if we have already agreed to a tough contract.
The options that follow expand on some of those ideas. The options
that we explore in this article may not be cure-alls, but taking positive
and responsive actions is far better than doing nothing at all.
Black’s Law Dictionary states, “Inspection … has broader
meaning than just looking (observation), and means to examine carefully
or critically, investigate, and test officially.” During negotiations,
it is advisable to review the AIA Contract Documents B141 and A201 site
observation duties with the client and explain the differences between
observation and inspection. If you elect to agree to “inspect,” then
you should propose a fee commensurate with the time involved with the
additional duties and increased risks.
If you have such a requirement in your contract, in the absence of specifically
defined requirements for your “inspections,” you can attempt
to establish the standard of care that you will meet by:
- Reporting your site observations on a form such as AIA document G711,
Architect’s Field Report, which references “observations” rather
- Including in your report the qualification: “Inspections performed
by the architect under this contract have been conducted under the
limited conditions as described by site observations in AIA document
A201, General Conditions of the Contract for Construction, as referenced
in the Owner-Architect Agreement.
- Arranging to discuss the subject of inspections versus observations
in a project meeting and include the description provided in AIA
document A201 in the meeting minutes. Do this even if the client or
contractor objects to your position during the discussion.
If you are working from an AIA form document such as B141 or A201, you
have a greater chance of establishing conformance to the “standard
of care” established in and by the AIA family of documents for
Certifying the contractor’s work
Although the architect certifies the contractor’s application for
payment, the standard of care for architectural design services
typically does not include certifying the contractor’s work. AIA
document A201 clearly states in paragraph 3.3.1 that the contractor is
solely responsible for their work and the work of the subcontractors,
The Contractor shall be solely responsible
for and have control over construction means, methods, techniques,
sequences, and procedures and for coordinating all portions of the
Work under the Contract.
Certification of the contractor’s work by the architect could
be interpreted to represent that the architect has confirmed that the
work is in strict accordance with the contract documents and is complete.
Such certification may cause the architect to be held responsible for
the contractor’s incomplete, incorrect, or defective work.
During contract negotiations it is beneficial to help the client understand
that although the architect will be responsible for its own acts and
omissions, it is not a guarantor of the work performed by others. AIA
document B141 states in paragraph 220.127.116.11:
The Architect shall be responsible for the Architect’s negligent
acts or omissions, but shall not have control over or charge of and
shall not be responsible for acts or omissions of the Contractor, Subcontractors,
or their agents or employees, or of any other persons or entities
performing portions of the Work.
If you fail in this endeavor or discover that your contract includes
an onerous certification, you can attempt to establish a reasonable standard
of care for your services after the
fact as follows:
- Your professional liability insurance agent will likely tell you
that you are not covered under your insurance policy when providing such
absolute certifications. If so, you should advise your client of this
fact and attempt to negotiate a compromise with them.
- Inform your client that your certification is for “substantial” conformance
to the contract documents as defined in AIA document A201-1997.
- If your client persists in demanding that you certify the contractor’s
work, ask your professional liability insurance agent to contact
the client and explain the potential owner liabilities of this action.
- Consider adding the following qualification to your Certificates
of Substantial Completion:
This certification is not a representation that the contractor’s
work is correct or complete, but it is consistent with the architect’s
responsibilities as stated in AIA document A201 as referenced in
the Owner-Architect Agreement.
100 percent complete design documents
Contract documents are conceptual as defined in the AIA documents and,
by definition, they cannot be 100 percent complete. This issue was
explored in a previous AIArchitect article
Loss Cause: An Architect’s Assessment of Errors and Omissions.” and
will be explored in greater detail in upcoming AIArchitect “Best
Practices in Risk Management” articles.
contracts appear to anticipate, and it is common in the industry for
many architects to refer to the status of their documents as a “percentage
of completion.” This industry habit is an effort to objectively
quantify what is an inherently subjective process. There is no industry
standard definition for what constitutes “completion” for
the design or construction document phases of architectural services.
That is one reason that phases of services were removed from the 1997
edition of B141.
Such objective measurements of subjective issues tend to go without
discussion during contract negotiations. Architects, when negotiating
an agreement, are often unwilling to engage in conflict on this issue
because everyone knows that sooner or later the documents will be considered “complete.” If
you should agree to a contract containing this requirement, try the following:
- Do not affix the notation, “100 Percent Complete Documents,” or
any other quantitative representation on your drawings. Instead, include
descriptive notations, such as, “Issued for Construction” or “Issued
for Schematic Design Review.”
- Discuss the issue openly in a project meeting, explaining that no
industry definition exists and that it is impossible for documents
to be 100 percent complete. Record your discussion in the meeting report.
- Meet with the client and explain the conceptual realities of design
documents. An upcoming AIArchitect article
entitled “Drawing the
Line” will address the conceptual nature of construction documents
in greater detail. Record your conversations in a meeting report.
- If you are still not getting through, ask your insurance agent to
contact the client and explain the conceptual realities and limitations
of design documents.
Guaranteeing budget conformance
Some clients may ask you to guarantee that your documents express a design
concept that can be constructed within a specific project budget. Supplementary
clauses such as, “redesigning the project to conform to budget
constraints” are sometimes imposed. It is not reasonable for
the architect to be made solely responsible for a project condition
over which they do not have authority or control.
Owners often mistakenly believe that the architect not only has ultimate
control of project costs, but that their pursuit of design excellence
is such that they will jeopardize the project budget with their efforts
to have their way. During contract negotiations you must candidly explain
to owners the relationship between time, cost, and quality. This issue
was addressed in the Architect’s Handbook of Professional Practice,
Update 2004, in an article entitled, “Maintaining Design Quality.” Essentially,
this concept states that an owner may expect to control two of the three
components—time, or cost, or quality—but not all three.
Owners have no doubt derived their mistaken beliefs about the architect’s
control over the budget because many of the requirements for the design
are expressed in the architect’s instruments of service. The reality
is that owners, contractors, and designers all affect the time, cost,
and quality on a project. Of the members of this team, the constructors
are better positioned to be knowledgeable about costs and to offer advice
as to when design changes should be implemented to meet budgets.
During negotiations, try to explain to the owner that you will not nickel
and dime them for minor revisions in assisting with managing the budget,
but you cannot be responsible for major changes when those changes are
not consistent with prior owner approvals.
For example, an owner desires an arching barrel vaulted roof on their
new villa. Estimates skyrocket, and the owner demands that you redesign
with a flat roof. That demand is not consistent with prior program requirements
and approvals, and it will require the architect to experience severe
fee penalties. If, on the other hand, the project exceeds the budget,
and the client asks you to change the specification from copper roofing
to painted metal, it would probably be a wise business decision to make
this minor change at your own expense.
As a rule, the design professional should never
agree to be responsible
for the cost of construction in excess of a budget. If the client resists
and represents this requirement to be a deal-breaker, you should walk
away from the commission, no matter how grand it may be.
In the event that you have onerous budget clauses in your contract,
try the following:
- Firmly establish the owner’s program requirements. Document
all program discussions thoroughly in letters, memoranda, or meeting
- Firmly establish the basis for the owner’s budget, including
the source, date, and quality of cost data.
- Notify the owner if you perceive a discrepancy between the program
requirements and the budget. If you believe the budget is deficient
for the desired program, give the owner definitive notification of
this belief. Provide the owner with reasonable solutions for resolving
the discrepancy, such as a reduction of program requirements or an
- Do not proceed with designs for which you have notified an owner
a discrepancy exists without a firm direction from the owner that
resolves the discrepancy. If you do proceed, you set the expectation
that the discrepancy has been resolved.
- Document all such resolutions in writing.
This subject could be reviewed in much greater detail, and it merits
a great deal of brainstorming and discussion with the owner and the contractor.
Review and approval of payment application backup
The architect is required in AIA owner-architect agreements to “determine
in general if the Work ... when fully completed, will be in accordance
with the Contract Documents.” This is not a requirement to check
each and every detail in the contractor’s application for payment.
Payment application backup on large projects can involve hundreds of
pages of documentation, and any detailed review and approval of this
information should probably be done through an audit by an accountant.
In errors and omissions claims, owners often allege that the architect
has inflicted damage upon them by approving payment to a contractor for
erroneous or incomplete work. This is often due to a lack of understanding
by the owner as to the architect’s responsibilities for reviewing
and certifying a contractor’s application for payment. To avoid
this misunderstanding, it can be beneficial to help the owner understand
the specific review requirements during contract negotiations.
Suggested negotiation points are:
- The architect does not make detailed inspections and is thus not
in a position to know the specific conditions of the work for which the
contractor has requested payment
- The architect does not guarantee the contractor’s performance
of the work
- The contractor is responsible for their own actions.
Nevertheless, if you should have the requirement to make a detailed
review of the contractor’s payment application backup in your contract,
you may try the following:
- If appropriate in the context of your contract
terms, remind your client in writing that you are only required to
general” if the work is in conformance with the contract documents.
This does not include a comprehensive review, approval, or audit of
the supporting data submitted by the contractor.
- Advise the client that you are not an accountant and that you
are not qualified to review and evaluate such accounting data.
- Use AIA document
G702, Application and Certificate for Payment,
which states the limitation that, “the Architect certifies to the
Owner that to the best of the Architect’s knowledge, information,
and belief ...”
- Request a change in services from the owner stating that the
services of a professional accountant are required to discharge the
responsibility for backup review under the terms of your contract.
Unreasonable deadlines for submittal and RFI review
The review of submittals by the designer can be time consuming if they
are complex or submitted untimely or in an unreasonable sequence. RFIs
often take time to review and resolve. Contractors use extended review
time to claim delay and subsequently ask for additional general conditions
costs. Nevertheless, the design professional has both the right and
the obligation to take the appropriate amount of time necessary to
review submittals or answer questions. A201 provides for a reasonable
review time in paragraph 3.10.2:
The Contractor shall prepare and keep current,
for the Architect’s
approval, a schedule of submittals which is coordinated with the Contractor’s
construction schedule and allows the Architect reasonable time to review
A201 gives the architect the significant authority to determine review
time in paragraph 4.2.7:
The Architect’s action will be taken with such reasonable promptness
as to cause no delay in the Work or in the activities of the Owner, Contractor,
or separate contractors, while allowing sufficient time in the Architect’s
professional judgment to permit adequate review.
If you must agree in your contract to specific review periods, or in
the event that your contract contains the requirement that submittals
and RFIs be reviewed and responded to in a short interval of time, consider
the following alternatives:
- Inform your client in writing that review times vary with the size
of the submittal and that you will endeavor to respond to these documents
within the average number of days required in the contract.
- If you are using MasterSpec specifications or other documents that
require a submittal schedule, request the submittal schedule from
the contractor to confirm that the contractor has scheduled reasonable
and adequate review time for each submittal. If necessary, demand in
writing that the contractor provide a submittal schedule for your approval.
Since you are allowed in MasterSpec and AIA contracts to agree to this
schedule, advise the contractor if the time allotted is inadequate
- Monitor the submittal schedule and determine if the contractor has
met their obligations for sequencing and timing to fit your review
availability. Advise during construction meetings if the contractor
is not meeting their schedule and document in writing if deviations
or nonconformance is evident.
- Advise the owner that AIA document B141, in Article 2.8.2, allows
for a Change in Services to increase the architect’s fee for, “Review
of a Contractor’s submittal out of sequence from the submittal
schedule agreed to by the Architect.” While you may not be able
to negotiate additional fees, you can use the clause as leverage in
negotiating reasonable review times. In addition, AIA document B511
provides language for the review of multiple submittals.
Indemnities and hold-harmless agreements
Indemnities and hold-harmless agreements in contracts must be approached
with caution. You should always consult with your attorney and your
insurance company before you accept any indemnity or hold-harmless
agreement. These clauses offer a guaranteed protection that may be
prohibited by the terms and conditions of your professional liability
insurance policy. However, mutual indemnities between the client and
architect for damages caused by their own actions are common.
Deletion of construction-phase services
Owners sometimes ask architects to delete construction-phase services
from their work. Since the architect typically contracts to issue a
Certificate of Substantial Completion at the end of the project, it
is difficult if not impossible for the architect to know if the project
has been constructed substantially in accordance with the drawings
and specifications if they have not visited the site and reviewed the
work during construction.
Many states mandate that construction administration must be performed
by a licensed architect because they recognize the need for professional
review to determine conformance. It is important that you retain this
important phase of services in your contract so that your ability to
determine conformance and completion will not be impaired.
If you have prepared construction documents and a separate architect
is retained to perform construction-phase services on your design, you
could be at a disadvantage in that you will not have the opportunity
to discover discrepancies before they are constructed. The primary responsibility
of the general contractor is to plan and coordinate the work in advance,
and the primary objective of the architect during construction should
be to resolve any conflicts or complications ahead of time. Design professionals
who provide construction-phase services on the work of others often have
less liability and thus may be less proactive in discovering problems.
If you are asked to delete this phase of work from your services, consider:
- Explaining the importance of the benefits of a single architect and
your vested interest in finding and resolving discrepancies.
- Visiting the site anyway to review conformance generally. If you
cannot visit the site and develop a comfort level with construction
conformance, under no circumstances should you issue a Certificate
of Substantial Completion or any other certification.
- Asking your insurance agent to contact the owner to explain the benefits
of including construction administration with basic services utilizing
the same architect.
We must take risks if we are to do business, but opportunities for improvement
will always exist. Stay on top of your negotiations and stay close
to your clients. And if you find yourself in another onerous contract,
take advantage of the opportunities and resources available for minimizing
your risks and improving your chances for success.
And while you’re at it, be careful out there.
Copyright 2005 The American Institute of Architects.
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