The most prevalent form contracts used in the construction industry are generated by the American Institute of Architects (AIA). In November 2007, AIA made several significant changes to the key AIA documents used by owners, contractors, subcontractors and design professionals. One of the most important changes was the introduction of the Initial Decision Maker, or IDM. Although the IDM was implemented in several of the AIA form contracts, this article will focus on the most widely used AIA document, A201-2007, General Conditions of the Contract for Construction.
Prior to the 2007 revisions, AIA A201 placed the onus of initial decision making on the architect. Contractors complained that the architect would favor the owner given that the architect is contractually bound to the owner. Furthermore, the architect would be disinclined to admit a design error and grant claims associated with design defects. In response, AIA created the IDM. Section 1.1.8 of A201 defines the Initial Decision Maker as “the person identified in the Agreement to render initial decisions on Claims in accordance with section 15.2 and certify termination of the Agreement under section 14.2.2.” Unlike previous versions of A201, the definition of the Initial Decision Maker allows the owner and contractor to select someone other than the architect to act as IDM.
The IDM’s primary responsibility under AIA A201 is to analyze claims and disputes submitted by either party and make an initial determination as to the validity of those claims. After the occurrence of the event giving rise to the claim, either party has up to 21 days to notify the IDM in writing of the dispute. Pending final resolution of the claim, section 15.1.3, AIA A201 requires that the contractor continue to perform work unless otherwise provided in the contract. After the claim is submitted, the IDM is required to make a decision within 30 days. Furthermore, submittal of the claim to the IDM is a condition precedent to submitting the claim to mediation and then to whichever dispute resolution method the parties have selected under the contract.
Within 10 days of the receipt of the claim, the IDM can (1) request additional supporting information from either the claimant or the respondent; (2) reject the claim in whole or in part; (3) approve the claim; (4) suggest a settlement; and/or (5) advise the parties that he or she was unable to make a decision. In addition, under section 14.2.2 of AIA A201, the IDM must certify that sufficient cause exists to terminate the contractor and certify the amount, if any, to be paid to the contractor upon termination.
Although AIA A201 provides a basic framework for the use of the IDM on construction projects, it fails to address several issues including the credentials needed for an IDM, who will pay the IDM, and the process and procedure for submitting supporting evidence including witness testimony to the IDM.
Contractors or owners entering into a new AIA 2007 contract should consider selecting an independent Initial Decision Maker, unless they are both comfortable with having the project architect act as IDM by default. Ideally, an IDM would be an impartial person that has no direct involvement in the project and has no personal or financial connection to the contractor or the owner. To ensure that the IDM is unbiased, the IDM should provide each party with full disclosure of any personal or financial connections to either party or the project. Once this information has been disclosed, both parties can knowingly enter into an agreement with the IDM to perform as needed. The Initial Decision Maker should provide both parties with an agreement that outlines the scope of the IDM’s services to the parties, the cost of those services and the means and methods by which claims will be submitted to the IDM, among other things.
Given that the AIA A201 document is silent regarding the location and credentials of the IDM, the IDM could presumably render decisions and provide its services electronically or by telephone. Depending on the issues, the IDM could render decisions in either a different county or even a different state than where the project is located. Both parties could submit their claims in writing to the IDM, and a decision could be rendered based on the submittals. If the parties request oral argument, the IDM could initiate a conference call or on-site meeting to discuss the claim.
When selecting an Initial Decision Maker, both the contractor and owner should choose an individual whose credentials would allow her or him to review the facts and issue an unbiased decision in a timely manner. The IDM could be anyone with construction experience sufficient to understand the disputes pertaining to the project, such as a construction attorney, design professional, contractor or construction consultant not affiliated with the project.
Paying the IDM, Submitting Claims
In prior versions of AIA A201, the Initial Decision Maker was the architect. Given that the architect works for the owner, the architect would bill the owner for any time associated with performing work as an Initial Decision Maker. The owner could then decide to either pay those charges or attempt to back charge the contractor for any time associated with the architect’s work depending on the nature of the claim. Under the current version, AIA A201 is silent regarding who pays for the Initial Decision Maker. Accordingly, the IDM agreement between the IDM, contractor and owner should delineate how the IDM is to be paid. Ideally, both parties would split the cost of the IDM, and the IDM would be used sparingly to make decisions that have a significant monetary value and/or negatively impact the critical path of the project.
Although the current version of AIA A201 provides for timelines regarding the review and processing of claims by the IDM, AIA A201 is largely silent with regard to how evidence will be submitted to the IDM. The IDM should provide each party with the opportunity to be heard and then to submit any reasonable evidence they deem pertinent to the claim. This evidence could include supporting documents, but may also include witness testimony. Therefore, the IDM could determine whether or not a decision could be made on the documents submitted by the parties or if a formal hearing needs to take place that allows both parties to present witnesses. Regardless of the IDM’s decision, both parties can proceed to mediation and then the dispute resolution method of their choice if either party was unsatisfied with the IDM’s ruling.
The AIA’s introduction of the Initial Decision Maker is beneficial to contractors and owners alike. The use of an independent IDM may help to reduce disputes on a project, avoid costly delays and possibly avoid the expense associated with litigating or arbitrating a dispute.
Author’s note: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation. Regulations and laws may vary depending on your location. Consult with a licensed attorney in your area if you wish to obtain legal advice and/or counsel for a particular legal issue.