Texas Construction Law Blog

Coordination between the Owner-Architect Agreement and the Owner-Contractor Agreement is crucial for any successful project. In particular, the parties may overlook the provisions related to an Initial Decision Maker (“IDM”). When the fight breaks out, there are usually conflicting claims whether the quality of the design or the quality of the construction is to blame. Perhaps it is some of both. In Texas, the contractor does not sue the design team for bad drawings, and the design team does not sue the contractor for faulty construction. The owner is caught in the middle and must make important strategic decisions early. Should the owner fight with the contractor, the architect, or both?

Dispute Resolution Requires Coordination

One of the most critical areas requiring coordination is dispute resolution. Will both agreements require arbitration, or will litigation be the chosen method? If arbitration is the preferred route, does the agreement allow for the joinder of necessary parties? Problems arise when, for example, one agreement mandates arbitration while the other omits or explicitly deletes this requirement. Such inconsistencies are unfortunately common in the industry and can lead to complicated and prolonged disputes.

In an American Institute of Architects (AIA) form contract between the owner and contractor, for example, using the A101 Agreement and the A201 General Conditions, there are provisions for an IDM for initial handing of a claim between the owner and the contractor. Often, the owner and contractor agree on having the architect serve as the IDM.  Sometimes this occurs without a conscious choice, as this is the default provision in those documents.  However, the owner-contractor documents are typically signed long after the owner-architect agreement is signed. An owner might not select a contractor until long after the architect has been working on plans and specs. 

Implications for the Architect

Did the architect agree to be the IDM in the owner-architect agreement? What if that agreement is silent on this subject, or the printed form had it, but it was deleted? Can the architect refuse to be the IDM if it was not spelled out in the owner-architect agreement, but it does call for it in the owner-contractor agreement? What are the implications for that in whatever is the current dispute? If a design mistake is part of the problem, does the architect as IDM have a conflict of interest? Architects usually do not want that role, but if they take it, they may consider it an extra service. But in a B101 owner-architect agreement, being an IDM is included in the architect’s basic service. Who will pay that fee if the architect demands to be paid an extra for taking on this work (and risk)?

Potential Solutions

One solution is to delete the IDM standard language and require the opposing parties to go directly to mediation before filing litigation or arbitration. Perhaps an even better solution, if the project budget merits it, is to pick an independent, well-qualified person up front to be the IDM. Pay them to do it with split fees, like an informal one-person, non-binding dispute review board. 

Conclusion

Ultimately, when preparing the owner-contractor agreement, it is best to first review what was agreed in the owner-architect agreement and ensure that both documents are aligned. Coordination between these agreements can prevent significant headaches down the road.