Summary of the AIA Design Build Agreement
The AIA Design Build Agreement, which is published by the American Institute of Architects (or AIA) in either unamended or amended form, is a document used in construction projects to facilitate a project delivery system known as design build. Simply put, design build is commonly described as a construction project delivery system in which the design and construction services are combined between the project’s owner and a single entity. For example, rather than separate entities that have a contract between the project’s owner and a design architect and a contract between the owner and a builder (GC or CM), design build typically has a single contract between the owner and one entity that will design and build the project. The AIA Design Build Agreement is the form that the owners and designers/builders can use to document the terms of this arrangement.
The main AIA Design Build Agreement is Document C112-2001, General Conditions of the Contract for Design Build Projects ("C112-2001"). It is accompanied by other AIA Forms C401-2007 Standard Form of Agreement Between Architect and Design Builder ("C401-2007") and B143-2007 Standard Form of Agreement Between Owner and Design Builder ("B143-2007").
This Agreement is used for many reasons. First, it allows the owner the ability to attempt to limit conflicts or disputes that may otherwise arise in the more traditional design, bid , build approach. One of the main benefits of design build is that it allows for quicker problem solving between design and construction issues prior to actual construction.
Several provisions of the Agreement and related forms bargain for risk allocation between the parties in a manner that is substantially different than other types of construction contracts. For example, a more common approach, and one that is more familiar to lawyers and construction professionals, is to place design responsibility on the design professional and construction responsibility on the contractor. Design responsibility is usually tied to a standard of care, i.e., a design professional is obligated to perform its professional services in a manner consistent with the standard of care in the industry. In contrast, the AIA Design Build Agreement does not strictly distinguish the parties’ roles in this manner. Rather, the Design Builder may be responsible for both the design and construction, and perhaps even both. (The structure of the contract, of course, will depend on whether a design firm is also the builder, or whether the design is performed by an unrelated entity.) Additionally, the Design Builder and the Owner may negotiate which of the two will be the owner of the design rights after the contract is signed. In construction parties with more experience under the traditional design, bid, build approach, these provisions may be difficult to accept or negotiate.
Nevertheless, the Design Build Agreement is an important tool in the construction contract arsenal and should be considered where design build is the most appropriate project delivery method.
Key Aspects of the AIA Design Build Agreement
The main components of the AIA Design Build Agreement include the following:
1. Modular Project Delivery – One Constructing Party and One Contract
The AIA Design Build Agreement is a binary contract, meaning there are only two parties: the Owner and the Design Build Contractor. AIA provides two forms for the AIA Design Build Agreement: (1) the Design Build Agreement where the Design Build Contractor provides s/he/its own design (Document A141-2014) and (2) the Design Build Agreement Between Designer and Design Build Contractor where the Designer is one of the Constructing Parties (Document A421-2014). Either form results in a single agreement with the Design Build Contractor that lays out the design and construction scope of work.
2. Architect’s Role During Construction
The Owner can look to the Architect as an additional set of eyes during the construction phase, without the Architect being an agent of the Owner. Indeed, the Architect may have the role of a Capital A or small a architect in this dual contract concept.
3. Early Designer Input
AIA designed the forms to promote earlier architect involvement, encouraging parties to have the Architect join before any plans are made as to the design or construction.
4. GSA AIA Design Build Contract
The AIA’s Design Build forms (Documents A141 and A421) were drafted for use by the General Services Administration (GSA), with edits and "fill in the blanks" for the Design Build Contractor. This means that if your project does not involve GSA, you may want to move away from the AIA’s suggested language.
Benefits of the AIA Design Build Agreement
The advantages of using the AIA Design Build Agreement are many for both the contractors and clients. These contracts put all the responsibilities for the project in the hands of one entity working directly with their client. The result of that arrangement is an increased efficiency that reduces cost and minimizes the number of project adminstration hours the client must commit to the project. But efficiencies are are not the only benefit of the AIA Design Build Agreement. Using one also allows clients to get lower prices, quicker project completion and improved quality. It also allows them to mend the relationship between design and construction, and replace it with a single process where their contractor develops the plans, oversees the build and controls the budget. The AIA Design Build Agreement also uses a fast-track approach to project completion that uses phased design and construction documents. Design work commences while the contractor is on the job, and the plan can be adjusted as construction progresses. Phased documents also encourage the developer to put forth something that is workable, so they do not waste hours and money adjusting the design in an older traditional way. Such risks in traditional fixed-price contracts increase the chances that they will come up with creative ideas and develop innovative solutions on a budget and on time.
Disadvantages and Concerns
One potential drawback of this Agreement is that it may not offer the most competitive pricing at the outset. If a contractor is incentivized to offer a one-time fixed contract, he or she might sacrifice quality in the hope of securing a substantial profit for "coming in under budget" should costs be lower than anticipated. Agreed-upon allowances for materials and finishes can also lead to budget issues. With many items needing to be ordered at the same time or close to each other, allowances may result in many change orders and additional markups. Historically, the contractor has had a built-in incentive to cut corners on design fees since that price was often negotiated at the end of the project after fees were fully incurred. Before you sign on the dotted line, look closely at the contract price as a whole and challenge yourself to identify all the risks you bear. Then, research contractors to find one who shares your values and will communicate with you about the process, the anticipated costs, and the risks ahead. The quality of the plans created by the architect is certainly a critical piece of risk. The architect’s fee for the design also shifts under this Agreement, so (s)he has little incentive to provide high-quality drawings. Although the risk of an Architect’s error being realized by the Contractor is shifted to the Owner, the design should still be as flawless as is possible. Agreeing to a reasonable timeline before the contract is signed, and maintaining that timeline through the process, should help to mitigate design issues.
How to Use the AIA Design Build Agreement
The first step in the implementation of the AIA Document A142 – 2008 is the selection and hiring of an architect at the onset of design of the project. "Hiring" an architect is slightly misleading; in fact, the owner under this form of agreement selects an architect, and the constructor selects a design architect to work alongside the owner’s architect to create the design for the project. Because the constructor selects the design architect to work with the owner’s architect, it is important to take both personalities and professional experiences into consideration. Comparison of philosophies is important here, and a complete understanding of the other’s role is paramount to the success of the project. This process alone could help avoid many pitfalls that occur later in the project. Therefore, the relationship between the architects should be factored in the pre-design stage, and the parties should be open to the design professionals’ opinions, whether they are right or wrong. At the end of this process, the team must agree on the design and the means and methods to construct it. The team must work together to overcome challenges without placing blame or holding anything back. In other words, the team must communicate. It is vital that the architects discuss the merits of all methods at their disposal to construct the project as efficiently and expeditiously as possible. Working together will more than likely cut substantial time out of the project schedule.
Once the architects hash through the merits and problems of the methods to construct as discussed above, it is time to begin discussing the actual building materials. It is essential to remember that the constructor and the architect are on the same side, working toward achieving the same budget and schedule. If the cost of a material exceeds expectations, or if the product is not available when promised and change orders jeopardize the project schedule, then the realities of the situation should be accepted. The designers will assume their share of the risk, and the constructor will not hold them responsible for delays and costs incurred as a result of the selected design. When the architects agree that the design , building system, and materials selected are the best options given the time constraints and budget restrictions, the process of the design and construction is now seamless.
Next, the parties must agree upon the fee for the constructors services in preparing the drawings and specifications to be used to price the project and establish a guaranteed maximum price (GMP). The fee can be billed at an hourly rate or a lump sum amount, and the architects’ Time-Dependent Direct Cost Multipliers (TDCRS) and Labor-Dependent Direct Cost Multipliers (LDDRS) can be used if hourly rate fees are used. The use of the TDCRS and LDDRS provide for the inclusion of burden and overhead. The risk of the constructors, and the owner’s designers, is to make a mistake in calculating the overhead or the burden. As previously mentioned, a mistake is not the fault of the team member, and each party must bear its allocated burden and overhead when the assigned budget does not allow for everything expected for the correct performance of the contract.
This process is meant to arrive at a GMP. The GMP must be a lump sum or an open-book, cost-plus contract. The GMP must be expertly calculated by the constructor and the owner’s designers. The GMP is not meant to be used to cover errors and omissions in design; if the need arises for these costs to be passed on to the Constructor, the risk must be shared in accordance of the liability at the time of contract formation for the design that created the error. Mistakes of this type must be covered by the firm or professional that created the error. However, if the error is due to a difference between the top of the design and the bottom of the construction, the extra cost must be born by the underestimating party. Therefore, in the event of a failure to perform the contract, the liability for the extra cost will remain open to negotiation should the need arise to adjust the GMP. The reality of this situation must be taken into account when setting the GMP. That is: who assumes the risk of some latent element of the design and construction being forgotten, or overlooked, and how the cost related to this happening is handled?
Differentiating the AIA Design Build Agreement from Other Agreements
In the spectrum of construction contracts, the AIA Design Build Agreement stands out as a unique form of agreement that can be further distinguished from other construction related agreements. The market for standard construction contracts shows a clear distinction between design-bid-build and design-build. Design-bid-build contracts are usually associated with pure construction contract documents like the AIA A101 – Standard Form of Agreement Between Contractor and Owner where the work is typically completed in a sequential order. In contrast, design-build contracts adopt a more integrative approach to project delivery. Both the design and the construction components are under one agreement. There are several variations of design-build contracts, which can be based on traditional trade contracts such as A101 or on other form contracts like the ConsensusDocs or AGC contracts. The key difference among these contracts is that the design-build contractor is involved in the design and construction process together.
Another construction contract comparison of interest is the design-assist contract. Under the design-assist contract, the contractor assumes a more integrated role in the design process by providing feedback and suggestions during the design phase on behalf of the contractor. AIA Document E202-2013 – Design Assistant Document, Standard Form of Agreement between Owner and Design-Assist Consultant; and AIA Document A201-2017, General Conditions of the Contract for Construction, allow for a collaborative relationship between the owner, architect, and contractor, in which the contractor has design input during the preconstruction services component of the contract.
The overall benefit of the AIA Design Build Agreement is that it provides one contract and one contract price for both the design and construction of the project. This surety of costs increases efficiencies and promotes better decision making.
Conclusion, tips
In conclusion, the AIA Design Build Agreement provides a robust framework for design-build projects that can foster collaboration and communication between the design-builder (in most cases, a contractor) and the owner. It allows the parties to clearly define the scope of work, project schedule, and contract price, while also establishing specific responsibilities for both the design-builder serving as architect and the architect serving as the engineer of record.
However, while the AIA form documents provide a great foundation, it’s always crucial to consider how the standard terms and conditions can be adjusted to better meet the specific needs of the project and parties involved. Understanding the details of the Agreement, as well as the Owner/Builder Agreement, the General Conditions, and any Supplemental General Conditions, will help to ensure that all parties are on the same page and minimize potential disputes down the line .
The AIA Design Build Agreement is an increasingly popular choice for owners looking to quickly develop a property without the complication of dealing with two separate contracts with an architect and a contractor. Having a single-source vendor makes sense for these types of projects, as does the stated intent of the form Design Build Agreement to save time and money.
While the AIA Design Build Agreement is certainly well written, it is important for both owners and design-builders alike to understand what their respective rights and obligations are under the Agreement. It is also necessary to understand that the AIA Design Build Agreement consists of no less than three interrelated contracts; all of which should be carefully considered before entering into the deal.
If you are considering utilizing the AIA Design Build Agreement, I’d suggest doing the following: Remember that, although the AIA Design Builder Agreement contains a lot of great protections for both parties, you still need to think about whether those protections are appropriate in your case – and you need to add them if they aren’t.