Architect's Responsibility and Liabilities: The New B141


In this issue we continue our review of the 1997 changes to B141 beginning with a discussion of the changes to Architect's scope of services as they relate to the construction and post-construction phases of a project. We then turn to the new provisions of B141 as they relate to: responsibility for cost of construction; compensation; and the instruments of service.

Scope of Services--
Construction and Post-Construction Phases

Much has been said about the impact of the new B141 on the Architect's role during construction. While the earlier drafts of that form seemed to call for dramatic changes (i.e. "the Architect shall supervise construction..."), the final form does not substantially alter the Architect's role during the construction phase. Now the Architect is required to conduct "evaluations of the Work" rather than periodically observe the work. Those "evaluations" are to be provided at intervals appropriate to the stage of the "contractor's operations." It is not the intent of the AIA to alter the nature of the services to be provided by the Architect during these site visits. Consequently, there are strong arguments that the scope of the Architect's responsibility toward the contractor's work has not changed. However, there is always the danger that the court will consider the change to have been for the purpose of changing the scope of the Architects' obligations discussed by those terms. To date we have not seen any decisions from the court interpreting these terms as a change from the Architect's traditional construction administrative services. Of some help is the fact that the concept of "observation" remains within the provisions of the new B141 and that the traditional disclaimers regarding the Architect's responsibility for the work of the contractor not only remain in place but have been clarified and support our view that the Architect's duties in observing the construction have not been fundamentally changed.

Notwithstanding the foregoing, the new B141 has added some duties which you must keep in mind during the construction phase of the project. That is, Architects now not only have the duty to advise the Owner of known deviations from the Contract Documents, but, under the new form, they must advise the Owner of deviations from the most recent schedules submitted by the contractor. While nothing in the new B141 imposes a duty to review and comment on the adequacy of the schedule, the new insertion does impose a duty on you to advise the Owner when the schedule starts to slip.

Several revisions have a beneficial impact on the Architect. First, the execution of the Certificate for Payment is no longer a representation by the Architect to the Owner that the contractor is entitled to payment. Second, the Owner must now accompany the Architect on inspections for Substantial and Final completion. Third, the Architect now has the right to set forth the form to be used for all contractor Requests for Information; in our view, this form should be included as a part of the Project Manual.

One last addition to the "normal scope" of the Architect's services under the new B141 warrants some attention. Article 2.7 calls for the Architect to discuss the need for "Facility Operation Services"promptly after Substantial Completion and thereafter to conduct a meeting with the Owner within one year after Substantial Completion to "review the facility operations and performance and to make appropriate recommendations". Many view this as an additional opportunity to provide services to the Owner; what is clear is that it is an opportunity to increase the Architect's exposure. First, if this provision remains a part of your contract, you must ensure that you have followed through with the meeting and facility review, and the recommendations. Failure to do so could subject you to claims by the Owner that it lost certain benefits from your failure to provide these promised services. This is particularly true with regard to the one year visit. The Owner must offer a contractor the right to correct any defective work during the one year warranty, or lose the opportunity to seek recovery from the contractor under the warranty. Thus, your failure to make the required visit could support an argument that you bear some responsibility for any such lost opportunity. Moreover, the obligation to meet with the Owner to discuss facility operations could be interpreted to encompass a duty to notify the Owner of certain maintenance operations necessary to preserve the integrity of the building improvements, unless you make clear in your agreement that this is not one of your obligations. Certainly, if you agree to offer these services your fee should include an adequate amount for conducting both visits, particularly the one year visit.

Responsibility for Cost and Construction

As previously noted, the Architect's duties with regard to the project have been expanded by requiring the Architect to prepare a "preliminary estimate of the Cost of the Work", when Project requirements have been sufficiently defined, and then "update and refine" the estimate as design progresses. That estimate is to include contingencies and price escalation factors. If the estimate exceeds the budget, the Architect must recommend adjustment in size, quality or budget. The budget as set forth in the "Initial Information" is now always a fixed limit of Construction Cost. Consequently, if the lowest bona fide bid or negotiated proposal exceeds the budget for the Cost of Work, the Architect must modify the Instruments of Service without additional compensation. In the past, this duty arose only if the parties agreed to a fixed limit of construction costs in a writing and attached that writing to the agreement. However, providing free services to downsize the Project continues to be the limit of the Architect's liability. That is, if the Architect performs that duty, then the Architect is entitled to be paid the remainder of its fee (again no fee is due for revising the project to bring it in-budget).

Compensation

The terminology associated with compensation has been altered; the concepts of Basic Services, Basic Compensation, Additional Services and Additional Compensation are no longer used. The Architect now provides a defined scope of services for the Architect's Compensation. In the event that there is a "Change in Services" the Architect is entitled to an "Adjustment in Compensation". The new B141 defines "Change in Services" (the functional equivalent of Additional Services) in several different ways. First, B141 provides for an "appropriate adjustment in the Architect's scheduling compensation" for circumstances that "affect" the Architect's services. These include: revisions to code or "official interpretations" of codes which require revisions to previously prepared Instruments of Service; changes in the Owner's instructions or approvals; and significant changes in scope.

The Architect also is entitled to such appropriate adjustments if the agreed upon "quantity" of services is altered. For example, the new B141 now permits the Architect to set forth limits on the number of visits to the site, the number of reviews of contractor submittals, and the number of inspections for substantial or final completion. If these quantities are exceeded, there may be an "appropriate adjustment". In our view there should be an equivalent provision in the Owner/Contractor agreement that specifically permits the Owner to back-charge the Contractor if these limits are exceeded.

Finally, the new B141 provides a listing (which can be expanded by the Architect) of services which are not included for the agreed-upon-compensation. They include out-of-sequence submittals, the evaluation of an extensive number of contractor claims, and Contract Administration Services performed more than 60 days after substantial claims. One of these services deserves special attention here. Article 2.8.2.2 allows for a "Change in Services" where the Architect must prepare "responses to Contractor's [RFI's] where such information is available to the Contractor from a careful study and comparison of the Contract Documents, the field conditions, other Owner-provided information, Contractor-prepared coordination drawings, or prior Project correspondence or documentation." This provision helps to address an on-going problem of needless RFI's generated as the result of the contractor's failure to properly review existing documents, or of any motivation other than that of obtaining necessary information. In order to make this provision effective, there must be some mechanism in the Owner/Contractor agreement by which the Owner can back-charge the contractor for these payments.

In each case when the Architect seeks an adjustment in compensation for a "Change in Services," the Architect's entitlement to an appropriate adjustment is conditioned on: (1) showing that the services were required "by circumstances beyond the Architect's control"; and (2) showing that it gave notice to the Owner before rendering the services. The failure to satisfy either of these conditions creates the substantial likelihood that the Architect will be denied payment for changes in service.

Instruments of Service

The new B141 has restructured the agreement's approach to the ownership of documents. Documents are now referred to only as "Instruments of Service". The Architect continues to retain all rights of ownership in the Instruments of Service, including all copyrights. However, Paragraph 1.3.2 of the Agreement grants the Owner a non-exclusive license to reproduce documents for constructing, using and maintaining the Project. Yet, this license is void if the Owner fails to comply with the obligations of the agreement, including the obligations to make payments when due.

If the Architect is terminated, not for default, the Owner's license is terminated and the Owner must return all documents. However, if the Architect is adjudged to be in default, a new license is created replacing the first which permits "similarly credentialed" professionals to reproduce and, "where permitted by law", to make changes, corrections or additions to the Instruments of Service for the Project. The new license also applies to the use of the consultant's Instruments of Service. However, the Instruments of Service must be used without modification; they cannot be changed, corrected, or added to without the permission of the consultant. This provision is similar to that found in the 1987 edition of B141 in that it grants the Owner certain rights if the Architect is adjudged to be in default. However, as a practical matter, an adjudication that the Architect was in default can take many years, particularly in Pennsylvania (and especially if the arbitration provision is deleted from the agreement thereby requiring litigation in court). Consequently, as a practical matter, it is unlikely that an Owner ever will be entitled to exercise this right.

The new B141 also directly addresses the use of electronic documents. Specifically, the Agreement provides that, while these are Instruments of Service to which the Architect retains all rights of ownership, the use and dissemination of electronic files is to be governed by a separate agreement. All design firms should pay special attention to their use of documents in machine readable format and how they control their subsequent use and dissemination of those files. In that regard, you should note that under Paragraph 8.6 of AIA Document C141 (the Architect/Consultant Agreement), the consultant must make its calculations available to the Architect.