Saturday, July 22, 2017

Dispute Avoidance for Green Projects (Redux)

Taiwan's World Games Stadium,
By now you likely have heard that the American Institute of Architects (AIA) released its revised construction contract documents. See Press Release dated Apr. 27, 2017 ("2017 AIA Contract Documents Now Available").  In this update, the AIA considered and analyzed industry  developments and then incorporated edits throughout its key contract documents used by owners, contractors, architects, and subcontractors.  Pertinent to sustainable or "green" building, the AIA released the brand new E-204-2017 called the "Sustainable Projects Exhibit." 

Recall that back in May 2016 this blog touched upon this intersection of green building and dispute avoidance.  In that post, we noted that for this specialized context, the AIA offered D503-2013 as a guidance document, which collected the various Sustainable Project (SP) agreements (variations of the A101, A201, etc.), illustrated how the contract language is modified from the base agreement.  The provisions in these SP versions were intended to avoid the unique issues that can arise on these green projects. 

Now in 2017, the AIA, owning to the fact that green building has become significantly more prevalent in the construction industry over the last decade, the AIA has simplified its approach. Rather than requiring parties to use separate SP versions of each  contract document, the AIA now offers a one-stop exhibit that parties can simply attach to any AIA contract document if the project includes a green objective, rating, or certification (e.g.  LEED® -- Leadership in Energy and Environmental Design).  Below is a look at the new and improved ways that E-204-2017 anticipates and avoids disputes on green projects.

(1) Defines Responsibilities.

Likely the most important pre-project-commencement step is that the parties are on the same page with what the project is seeking to achieve in terms of sustainability, how to measure that achievement, and who is responsible for each step. Accordingly, first and foremost, Article 1 of E-204-2017 requires the parties have a meeting of the minds to outline each element of their sustainability objectives include substance and deadlines.  In the follow-on sections, Articles 2, 3, and 4, the responsibilities of each project member are defined -- architect, contractor, and owner.  For example, at section 2.3, it is the architect's responsibility to convene a Sustainability Workshop and prepare the Sustainability Plan before the conclusion of the design phase in order to establish the green certifications, schedule, and budget. Other examples include that the contractor is unambiguously required to arrange for proper waste disposal (including a establishing a process for salvage and recycling) whereas the owner is unambiguously required to arrange for the final commissioning of the project. See section 4.5.  Communications about criteria and responsibilities in the first instance is a clear way to avoid ambiguities and therefore avoid disputes in the future.

(2) Defines Consequences.

The AIA E-204-2017 forestalls various disputes by limiting the consequences.  For example, the contract document addresses use of copyright materials, the architect's plans, and clearly states how exactly the owner may use them for reaching the sustainability objectives, see section 2.8.  Another example, is green materials.  Green building criteria frequently includes selecting certain sustainable materials for construction, which materials may not perform as intended (or be available) given they may not have been tested or verified previously.  The AIA E-204-2017 anticipates this potential dispute and at sections 2.5.2 and 3.5  requires the owner to sign off on the use of the green materials after the architect and contractor advise about the same.  The architect and contractor are thereby insulated from liability in the event the materials do not perform as intended.  Similarly, although the architect is responsible for marshaling the green certification process and the contractor is to build the green project as defined, neither the architect nor contractor is offering any warranty or guarantee to the Owner that the sustainable objective will, in fact, be achieved. See section 2.7 and 3.9.2.  This is a reasonable disclaimer given that "achieving the Sustainable Objective is dependent on many factors beyond the Contractor's and Architect's control."  See section 6.1.  Likewise, consequential damages are waived. See Article 5.

(3) Substantial and Final Completion.

Along the lines of not requiring the architect and contractor to guarantee the achievement of the green objective, substantial completion is not tied to the green achievement either.  Which the architect and contractor must fulfill their responsibilities toward achieving the green objective, actually achieving the green objective "shall not be a condition precedent to issuance of the final certificate of payment." 3.9.2.

In sum, the AIA E-204-2017 provides a concise (6 page) way to incorporate a green objective into a project without wholly reinventing the wheel of the familiar construction contract.  It flags the issues that can crop up in a green project and addresses them in the first instance a manner that seeks to avoid ambiguity.  At the same time, the AIA still provides flexibility for the parties to divine their own particular terms and conditions. See Article 7.

The author, Katharine Kohm, is a committee member for The Dispute Resolver. Katharine practices construction law and commercial litigation in Rhode Island and Massachusetts.  She is an associate at Pierce Atwood, LLP in Providence, Rhode Island.  She may be contacted at 401-490-3407 or

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