Design Professional-Created Design-Build Forms

"Why does it take so much time to draft and negotiate this agreement?" and, "Can't we just use the standard AIA or AGC forms and be done with it?" are two of the most frustrating questions an attorney can hear during the negotiation of a design-build contract. As this column and the one following will address, each of the "standard" forms have their own quirks, advantages, and disadvantages which makes their blind use risky.

Standard forms are inherently limited because they reflect the interests of the organizations that create them. On the other hand, they are economical to use, subject to certainty as courts interpret their provisions over time, have been conscientiously reviewed for consistency, and are known in the industry.

The most commonly used standard form design-build documents are those published by:

• American Institute of Architects (AIA);
• Engineers Joint Contract Documents Committee(EJCDC) of the National Society of Professional Engineers/Professional Engineers in Private Practice, the American Consulting Engineers Council, and the American Society of Civil Engineers;
• Design-Build Institute of America (DBIA); and
• Associated General Contractors of America (AGC).

This column will discuss the AIA, EJCDC, and DBIA documents. A more extensive discussion of the new and unique AGC documents will follow in a subsequent column.

Each set of forms is meant to have broad application so that they all can be used by different kinds of business entities — partnerships, corporations, joint ventures, etc. In addition, they are similar to each other in a number of substantive respects, including definitions; a requirement that the owner turn over whatever site information it has to the design-builder; and the way they treat payments, differing site conditions, changes, claims, termination for the owner's convenience, and the use of mediation as an alternative approach to dispute resolution. The primary differences between forms arise from the needs of the organizations that produce them to advance the interests of their constituents, as well as the more subtle areas of risk, indemnity, and dispute resolution.

The AIA document collection is widely used, primarily because of the carryover from the use of its design/bid and negotiate/build documents. The AIA set utilizes the lynchpin of all AIA documents — A201 (1997) General Conditions of the Contract for Construction — which is very controversial, especially for owners. Along with the A201, the collection includes A191 (1996), Standard Form of Agreements Between Owner and Design/Builder, A491 (1996), Standard Form of Agreements Between Design/Builder and Contractor, and B901 (1996), Standard Form of Agreements Between Design/Builder and Architect.

The lead document — A191 — contains two separate, sequential agreements. The Part 1 Agreement covers services for preliminary design and budgeting, and the Part 2 Agreement covers services for the final design and construction.

The EJCDC document group is the oldest of the commonly used forms, having been issued in 1995. These documents, meant to be used when the engineer is the lead design professional, are most commonly employed on public works projects such as sewage treatment plants, roads, and bridges. Reflecting the special biases of its member associations, the EJCDC documents emphasize narrowing the engineer's liability for the approval of shop drawings, inspection of the work, and approval of payment applications. These documents are not two-step forms; they apparently assume that the design-builder has performed sufficient investigations to enter the final document upon adoption of the conceptual documents and studies prepared by the owner.

The EJCDC documents contain the most comprehensive submittal procedures of the forms discussed here. The procedures cover everything from schedules, to shop drawings, to payment issues. Interestingly, these documents are less concerned about change-order protocol. EJCDC forms allow the owner to change the work by written addendum, change order, or construction change directive. With very specific pre-arbitration claims procedures and a separate dispute resolution agreement, the EJCDC forms are far more structured than any other forms.

The DBIA as an organization courts owners, and is supported by design professionals and large design-builders. As a result, DBIA documents attempt to be more "middle of the road" with respect to design-build issues — setting out to provide the "optimum" documentation for the reasonable benefit of all parties. Whether they achieve that goal is subject to dispute.

The DBIA documents are organized into a preliminary agreement, a final agreement (two versions — lump sum and guaranteed maximum price), and general conditions. They are set up to encourage early involvement with the owner to develop the program requirements. With this in mind, the design-builder's proposal must expressly state deviations from the owner's program.

The DBIA documents are biased toward amicable resolution of disputes before moving into an adversarial mode. They contain a specific "meet and confer" process that is to be undertaken within seven days of the time a dispute arises. In a provision that was unique when it was first advanced, the owner is required to pay 50% of the actual direct reasonable costs of any disputed change before negotiations or dispute resolution procedures are finalized.

The owner is given a limited license to use the design-builder's documents, even in the case of termination. The design-builder, and those working on its behalf, however, are indemnified from problems that may arise from that use. Along with this is a provision for payment of a surcharge for such use (assuming the design-builder is not in default).

The ways in which the AGC documents provide an alternative approach to establishing the relationships on a design-build project is the subject of the next column in this series.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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