New Versions of the AIA and ConsensusDOCS Documents: What You Need to Know to Avoid Risk
by Jonathan McGaha | October 25, 2010 12:00 am
The American Institute of Architects, Washington, D.C., documentation has been a cornerstone for contractual agreements among architects, owners and contractors for more than 100 years. These AIA documents are commonplace in any agreement before construction begins.
Every 10 years, AIA has the option to revise its documentation to accommodate changes in both the industry and the relationships of the parties involved in the construction process. Recent changes, however, significantly affect the way architects, owners and contractors deal with disputes that may arise during construction, as well as each party’s rights in choosing the method in which disputes are resolved.
In addition, several industry organizations- including the Arlington, Va.-based Associated General Contractors of America and Atlanta-based Construction Owners Association of America-released new uniform contract documents called ConsensusDOCS in September 2007.
The AIA Family of Documents
AIA offers several documents that can be used as templates when creating agreements among the parties involved in a construction project. Following are explanations of the two most relevant and highly utilized documents:
A201 (General Conditions of the Contract for Construction)
Considered the primary AIA document, A201 states, among other things, that “Claims, disputes or other matters in controversy arising out of or related to the Contract … shall be subject to mediation as a condition precedent to binding dispute resolution.” This document also indicates that unless parties agree otherwise, mediation and arbitration claims “shall be administered by the American Arbitration Association (AAA) in accordance with the Construction Industry Mediation Procedures and Arbitration Rules on the date of agreement.”
A101 (Standard Form of Agreement Between Owner and Contractor)
This form is one of the secondary documents related to the primary document, A201. Together, they, along with any other secondary documents selected, form the total agreement among the parties. This document, like other secondary documents in the family, contains a dispute resolution provision.
While the A201 document names AAA for arbitration, secondary documents such as A101 give parties the option to select AAA arbitration, litigation or another binding dispute resolution method or provider if their dispute is not resolved first through AAA mediation. A binding dispute resolution option is selected by marking the appropriate box. If parties do not check one of the three boxes to indicate their choice-or agree in writing to some binding dispute resolution other than litigation-the default resolution method is litigation.
ConsensusDOCS
Recently, 20 leading construction associations, including the AGC, COAA and Alexandria, Va.-based American Subcontractors Association, joined together to provide an alternative to the AIA’s standard contract documents. As part of this effort, the AGC and COAA combined their existing documents into the new industrywide ConsensusDOCS, which became available Sept. 28, 2007.
Parties utilizing these documents must begin the dispute resolution process through informal negotiations. If these negotiations are unsuccessful, parties then proceed to either dispute mitigation or mediation, depending on which they’ve selected as the preferred option.
When selected, mediation is administered under the AAA’s Mediation Procedures, unless the parties agree to another set of rules. If mitigation or mediation is unsuccessful, parties proceed to binding dispute resolution through litigation or arbitration under the AAA Construction Rules. Again, the choice between litigation and arbitration must be clearly marked on this document.
Problems and Potential Risks
You need to fully understand the difference between litigation and arbitration to avoid putting you or your company at risk. The following points outline the key differences between these two choices.
Time Involved
Litigation: If you do not actively choose arbitration, you or your clients could be at risk. If you find yourself in litigation by choice or default, chances are the process is going to be time-consuming. In the five-year period between 2001 and 2006, there was a 10 percent increase in the cases filed in the U. S. District Courts. During the same period, there was a 10 percent increase in cases per judge, and, in 2006, each judge averaged 495 cases. For a civil case, the median time-frame from filing to trial was 23.2 months, which equates to two years of waiting to get to trial. In 2006, 11 percent of the civil cases awaiting trial were more than three years old.
Arbitration: AAA arbitration cases of any size could be completed before you get to trial. In 2006, the median timeframe to resolve a construction case was about 10 months from filing to award.
Expertise
Litigation: Cases that go to litigation are rarely heard by industry experts. In court, you risk getting a judge that knows nothing about the construction industry. When you have a claim with large sums of money at stake that involves a lot of technical data, a judge and jury who do not understand the specifics of your industry may not be the best forum to resolve your dispute.
Arbitration: With the AAA construction panel of neutrals, your case is always heard by an expert in the industry. Of the 25 percent of AAA panelists coded for construction, 62 percent are attorneys; 24 percent are engineers; 16 percent are general contractors; and 7 percent are architects. Additionally, the AAA has refined the selection process for our arbitrators to conform to new construction dispute issues so that they have the best possible understanding of complex construction issues. AAA also offers several options-such as expedited arbitration and limited discovery-designed to make the entire process quicker and less costly to the parties involved. An arbitrator’s ruling is both binding and confidential.
Read Carefully
Parties are urged to read the new AIA and ConsensusDOCS documents carefully. The proposed changes may significantly affect how your disputes are resolved.
Robert Meade is senior vice president of the New York City-based American Arbitration Association.
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