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Initial Decision Maker (IDM)
A New Term – A New Concept in Contract Administration

Arthur O'Leary, FAIA, MRIAI
 


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Owner-Contractor Agreements
Every ten years the American Institute of Architects reviews and reissues the whole suite of integrated standard documents for construction and architecture. This is for the dual purposes of remaining current with construction industry practices and the state of the law. Many of the documents remain unchanged, or slightly changed, while others undergo drastic changes. The reviewers represent all facets of the construction industry as well as the legal and design professions. 

In the latest review, the 2007 Editions, a new concept has been introduced, accompanied by a new defined term: Initial Decision Maker. This has been included in the three main construction contract forms:

   AIA Document Number A101-2007 
   (Old Number A101-1997)
         Agreement Between Owner and 
         Contractor where the basis of payment 
          is a Stipulated Sum.
   AIA Document Number A102-2007 
   (Old Number A111-1997) 
          Agreement Between Owner and 
          Contractor where the basis of payment 
          is the Cost of the Work Plus a Fee 
          with a Guaranteed Maximum Price. 
   AIA Document Number A201-2007 
   (Old Number A201-1997)

General Conditions of the Contract for Construction. 
The IDM concept is also found in AIA’s less used standard construction contracts. (See End Note)

Traditionally, in the past, all AIA standard construction contract forms provided that the architect administering the contract would make decisions in all matters of dispute between the Owner and the Contractor. Such decisions would be final and binding on the parties, but subject to mediation and arbitration. There is nothing intrinsically wrong with this system, provided that the architect is willing to fulfill this role and that the owner and contractor both trust the architect’s competence, integrity and impartiality. 

Objections to the Old System. 
Some contractors feel that decisions made by architects will in many cases favor the owner, leaving the contractor at a distinct disadvantage. There is no question that some architects have been known to make most or all of their decisions in favor of their client. The fact that architects’ fees are paid by the owner is often seen by contractors as a disincentive for complete impartiality. 

Some owners feel that the architect should, as a matter of loyalty, be partial to the owner’s interests. Some owners expect that all architect decisions should be in the owner’s favor considering that the owner is paying the architect’s fees. Some owners, after an adverse ruling, would feel that the architect has favored the contractor as a fellow member of the construction industry. 

Some architects do not relish the idea of having to make decisions that might go against the client. Architects know that the decision would have to be impartial, but would find it distasteful to have to rule in favor of the contractor and against the client. In many cases the architect has had a long-standing close friendly relationship with the client and to make an adverse decision would be a personal embarrassment. Often claims made by owners and contractors against each other are very large and complex thereby causing serious dilemmas for some architects. 

When the contractor’s claim is based on erroneous or defective contract documents prepared by the architect, the architect must rule in favor of the contractor and against the client. This is sometimes difficult for architects to do. 

Initial Decision Maker.
Many owners and contractors are satisfied with the competence and integrity of the owner’s chosen architect and feel safe and secure with the traditional position of the architect during the construction period. In this case, the architect fulfills the role of Initial Decision Maker (IDM) with the full confidence and support of the owner and contractor. 

If the owner and contractor prefer to have an independent IDM, then they can appoint a mutually agreeable person to serve this purpose. The name of this person should be entered in the construction agreement:

A101-2007, Paragraph 6.1
A102-2007, Paragraph 13.1

If the IDM is not appointed in the construction agreement, the architect will serve this function in the traditional manner. 

Independent IDM.
The independent IDM can be anyone who is not otherwise a party to the construction agreement, and who is acceptable to the owner and the contractor. The IDM does not have to have any particular qualifications. It could be a lawyer, accountant, contractor, architect, engineer, carpenter, plumber, a travel agent, or a ski instructor. 

The only necessary qualifications are acceptability to the owner and contractor and the IDM’s willingness to fulfill the role. Approval by the architect is not a requirement. 

Obviously, the IDM should be a person who has a reasonable understanding of construction, construction materials, and construction contracts. 

Common sense dictates that the IDM’s engagement be in the form of a written contract signed by owner, contractor, and the IDM. So far, the AIA has not proposed a standard form of IDM agreement. The agreement should cover remuneration, duties, time limits, communication, and the means of dismissing the IDM. Some IDMs would require a stand-by fee for being available all through the construction period even though not called upon to render any services. 

Compensation of the Independent IDM.
Being an entirely new concept, there is not yet a commonly acceptable standard method for compensating the independent IDM. Presumably the contractor and owner would share the expense, possibly on a 50/50 basis. So far, it is not known what the rate of compensation is likely to be. 

Considering that architects who serve as IDM normally include the service in the overall architectural fee, the architect’s fee might be reduced, as the architect’s IDM services will not be required. However, some architects might argue that the presence of an additional party involved in the construction administration process would increase the architect’s administrative duties. 

Architect’s services assisting the IDM and providing background information is an extra service, subject to extra compensation, according to Owner-Architect Agreement B201-2007, paragraph 3.3.1.11. 

The IDM’s Initial Decision.
According to A201-2007, Paragraph 15.2.5, “The Initial Decision Maker will render an initial decision approving or rejecting the Claim, or indicating that the Initial Decision Maker is unable to resolve the Claim. This initial decision shall (1) be in writing; (2) state their reasons therefor; and (3) notify the parties and the Architect, if the Architect is not serving as the Initial Decision Maker, of any change in the Contract Sum or Contract Time or both. The initial decision shall be final and binding on the parties but subject to mediation and, if the parties fail to resolve their dispute through mediation, to binding dispute resolution.”

How Will It Work in Practice? 
A number of practicing architects, engineers, and contractors were consulted in preparation for this article. One architect had already served as an Independent IDM. Most were very skeptical about the practicality of the new system. 

Fortunately, the Independent IDM is not compulsory. In any contract where the owner, contractor, and architect prefer the present system, then they will stick with it. Those who want to try something new can go with the Independent IDM. 

 

 End Note

The Initial Decision Maker concept is also included in:
AIA Document Number A105-2007 
(Old Number A105/205-1993)
     Standard Form of Agreement     
     Between Owner and Contractor for a
     Residential or Small Commercial            
     Project
AIA Document Number A107-2007 
(Old Number A107-1997)
     Standard Form of Agreement 
     Between Owner and Contractor for a      
     Project of Limited Scope
AIA Document Number A103-2007 
(Old Number A114-2001)
     Standard Form of Agreement                
     Between Owner and Contractor           
     where the basis of payment is 
     Cost of the Work Plus a Fee without      
     a Guaranteed Maximum Price



“A Guide to Successful Construction: Effective Contract Administration” by Arthur F. O’Leary, FAIA, MRIAI or “Construction Nightmare Jobs From Hell & How To Avoid Them” by Arthur F. O’Leary and James Acret are available from bookworkz.com or call DCD at 800-533-5680.


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