The Architect’s Pivotal Role in the Resolution of Construction Claims and Disputes
Procedures Under A201-1997
Arthur O'Leary, FAIA, MRIAI
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Construction progress can easily become mired in controversy. The parties involved can rapidly lose incentive for cooperation when unresolved disputes interfere with friendly business relationships. Lingering claims and festering dissatisfactions worsen when they are not dealt with promptly and fairly. The sooner claims and disputes can be resolved, the sooner those wasted energies can be channeled back into more productive pursuits.
When claims are asserted by either party to the construction contract, owner or contractor, the architect should immediately commence the process of resolution. This is treated at length in the AIA General Conditions, Document A201-1997. Claims are dealt with in Paragraph 4.3 and dispute resolution in Paragraphs 4.4, 4.5, and 4.6.
Origination of a claim
Any claim or demand by the contractor against the owner or by the owner against the contractor should be reduced to writing. It should be directed to the other party with a copy to the architect. Certain time limits and other limitations are described in Paragraph 4.3, Claims and Disputes.
Contractor claims are often in the form of a request asking for adjustments in the contract price or time, or both, usually on account of changed or unexpected conditions or adverse weather. Many owner claims are an expression of dissatisfaction of some facet of the contractor’s performance.
Continuing Contract Performance. During the architect’s consideration of a claim, the contractor is required to continue diligently with the work of the contract and the owner is required to continue making payments according to the contract. (A201-1997, Subparagraph 4.3.3) This, of course, can be changed by mutual written agreement of the parties, if that is what they want.
Referral to the Architect for Design
The architect’s initial decision is necessary as a condition precedent to the next steps in the process. (4.4.1) The architect should treat this contractual duty as a high priority assignment. Should the architect delay this decision for 30 days, then the mediation and arbitration procedures will, by then, be set in train without the architect.
In making the decision, the architect must be fair and should obtain the complete views of both sides before making the decision. The decision must be based on the actual provisions of the contract documents, not what the architect wishes were in the documents. Sometimes the claim will be based on an alleged error or omission of the architect. This will be the litmus test of the fairness capacity of the architect.
All of the architect’s decision-making procedures should be in writing. In the event that either or both of the parties are dissatisfied with the decision, or the procedure, higher authorities (arbitrators) will undoubtedly review, and possibly overturn, the architect’s decision.
In the event the decision is considered fair and is acceptable to the parties, this resolves the claim and forestalls continuation of the procedure leading to mediation and arbitration.
The parties’ acceptance of the architect’s decision is usually the most economical way to end the controversy. Continuation through mediation and arbitration will undoubtedly entail considerable additional time and significant legal expense. The result, weeks or months later, might be the same as the architect’s initial decision.
The architect’s decision-making duties under A201-1997 do not extend to claims or controversies involving others than the owner and contractor.
Architect's Decision-Making Procedure
Architect’s Immediate Actions. Within ten days after receiving the claim, the architect should take one or more of the following actions:
(1) Ask the claimant to submit additional supporting data or ask the other party to submit a response with supporting data.
(2) Reject the claim in whole or in part.
(3) Suggest a compromise.
(4) Advise the parties that the architect is unable to resolve the claim. This would be the case if the architect feels there is insufficient information to evaluate the merits of the claim, or if the architect concludes that it would be inappropriate to decide the claim. This latter determination would be in the architect’s sole discretion. (4.4.2)
Architect’s Investigation. The architect should seek whatever relevant information is available from the parties, and should consult with experts if necessary. It may be necessary for the architect to seek the owner’s authorization for the expense of retaining such experts. (4.4.3)
Parties’ Response and Supporting Data. The parties should respond and submit additional supporting data within ten days after the architect’s request. After receipt of responses and supporting data, if any, from both sides, the architect should reject or approve the claim in whole or in part. (4.4.4) The decision should be issued within 30 days after all information from both sides is received by the architect. (4.4.1)
Architect’s Written Decision. The decision should be in writing and should state the reasons for the decision. The decision should inform the parties of any change in the contract sum or time, or both. The decision is final and binding on the parties but is subject to mediation and arbitration. (4.4.5)
Finality of Decision. The written decision should include language similar to the following:
(1) This decision is final but subject to mediation and arbitration.
(2) A demand for arbitration of this claim must be made within 30 days after the date on which the party making the demand receives the final written decision. The failure to demand arbitration within said 30 days’ period shall result in this decision becoming final and binding upon the owner and contractor. (4.4.6)
Late Decision. If the architect renders the decision after an arbitration has been initiated, the decision has no effect, but may be entered in the arbitration as evidence. However, if the parties wish to accept the architect’s late decision, then the arbitration can be dropped and the decision accepted. (4.4.6)
Mechanic’s Lien. Mechanic’s lien claims may proceed under the time limits set by law irrespective of the determination of the claim being considered by the architect, by mediation, or arbitration. (4.4.8)
Notification of the Surety
Upon receipt of any claim against the contractor, neither the architect nor the owner has any obligation to notify the surety of the nature or amount of the claim. In some cases, particularly when the contractor may be in danger of default, it would be wise to enlist the assistance of the surety in resolving the situation. However, this is not required of the architect or owner. (4.4.7)
Aesthetic Effect Claims
Architect’s decisions based on aesthetic effect are final and binding on the parties and are not subject to review by mediators or arbitrators. (4.2.13, 4.5.1, and 4.6.1) However, this is not an unqualified power possessed by the architect. Aesthetic effect decisions are final only if consistent with the intent expressed in the contract documents. The disingenuous or artful classification of decisions as having aesthetic effect will not necessarily place them out of reach of mediators and arbitrators.
If the parties cannot mutually accept the architect’s decision, then the claim is referred to mediation under the Construction Industry Mediation Rules of the American Arbitration Association (AAA). (4.5.2) This must be done before the claim can be submitted to arbitration. (4.5.1)
Mediation is a procedure in which a mutually acceptable disinterested, impartial intermediary meets and talks with both sides, together and separately, and assists them in their negotiations. The mediator does not impose any decisions on the parties but instead helps them to arrive at their own voluntary resolution.
Mediation can be by-passed if both parties agree to do so. However, many disputes are resolved in mediation, and if this can be done, much time, effort, and expense can be saved. A mediated settlement, being somewhat informal, will often leave the parties in a friendlier state so they can continue doing business with each other.
The parties will share the AAA fees and mediator’s fees equally. (4.5.3)
If the dispute cannot be settled by the architect’s decision or by mediation, then it will be subject to arbitration. (4.6.1)
Arbitration procedures will be in accordance with the Construction Industry Arbitration Rules of the AAA. (4.6.2)
Arbitration is a system whereby a disinterested neutral person or panel of three hears the evidence and arguments of both sides in a dispute and then makes a decision. The decision is final and binding on the parties, with appeals limited to matters involving corruption of the arbitrators or other unfairness of the procedure. (4.6.6)
The arbitration is initiated by the claimant sending a demand to the other party, with a copy to the AAA. The demand must be made within the 30-day period after the architect’s initial decision. (4.4.6 and 4.6.3)
At the time of making an arbitration demand, the claimant must include all known claims against the other party. (4.6.5)
The arbitrators, in their award, will determine who pays the costs of the arbitration.
Limitations on Consolidation or Joinder
According to A201-1997, any arbitration of a dispute arising out of the construction contract will be between the owner and contractor only and cannot include the architect, architect’s employees, or the architect’s consultants, unless they agree in writing. (4.6.4)
All time limits specified in the claims and resolution procedures are subject to change by mutual agreement of the owner and contractor. Thus, if the parties wish to expedite the procedures, they may agree to lessen some or all of the time periods.
Lawyers in Mediation and Arbitration
In mediation and arbitration procedures, the parties may be represented by legal counsel, but it is not required. Any party may self-represent, but should do so only if they feel they know their position adequately and can present it effectively.
A free copy of the pamphlet, Construction Industry Dispute Resolution Procedures (Including Mediation and Arbitration Rules) is available from the American Arbitration Association, from any one of its offices located in major cities throughout the United States. For additional information on the AAA, see their World Wide Web site at http://www.adr.org.
Architects or other contract administrators, who are faced with decision-making on claims submitted by owner or contractor on a construction contract that includes A201-1997, should read the applicable sections referred to above. For purposes of the article, the actual text has been paraphrased and simplified.
For additional information on dispute resolution under A201-1997, see Chapter 22, Resolution of Construction Disputes, in A Guide to Successful Construction - Effective Contract Administration, by Arthur F. O’Leary,
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