AIA & the Initial Decision Maker
by Danielle Maya, Cotney Construction Law
(Editor’s Note: Danielle Maya is a partner at Cotney Construction Law and has over 20 years of experience as an attorney. Cotney Construction Law is an advocate for the roofing industry and General Counsel of Western States Roofing Contractors Association. Maya can be reached at (866) 303-5868.)
American Institute of Architects (AIA) documents make the architect an Initial Decision Maker (IDM), but is that in the best interest of project parties or projects in general? It is important to consider carefully whom to select as the IDM, and the dispute resolution process following an IDM’s decision. If the parties do not wish for the architect to serve as the IDM, the contractor and owner should select an unbiased individual with construction experience, such as a construction attorney, design professional, or unaffiliated consultant.
Common construction form contracts include ConsensusDocs®, created by the Associated General Contractors of America and Engineers Joint Contract Documents drafted by the American Society of Civil Engineers (ASCE). However, the most prevalent form contracts are those from the AIA. Each authority drafts its contracts to benefit the professionals it represents. ConsensusDocs favor contractors, ASCE documents favor engineers, and AIA contracts favor architects and owners. Because owners typically have the most leverage, an AIA contract will often be the starting point in negotiations.
Two AIA documents are typically used in conjunction with each other. Those are the A201: General Conditions and B101: Architect-Owner Agreement. These documents make the architect the IDM by default. Historically, the architect was always the IDM, but contractors contested that this created a conflict of interest. In response, the 2007 and 2017 AIA revisions allow owners and contractors to designate another party to serve as the IDM. To further quell concerns, the IDM, be it the architect or alternative party, must exercise good faith and impartiality in decision making.
For most contractor or owner claims, an IDM’s decision is a condition precedent to mediation, arbitration, or litigation of that claim. The AIA definition of claim is broad and includes disputes arising out of or relating to the contract. This promotes the IDM policy’s intent of preventing claims from impeding the project. However, there are some disputes that are off limits for the IDM. The IDM cannot decide claims where the condition giving rise to the claim was discovered after the warranty period. Additionally, hazardous materials, safety emergencies, insurance, and contractual liquidated damages claims are also outside of the IDM’s jurisdictional scope. Furthermore, unless the IDM and affected parties agree, the IDM may not decide disputes between the contractor and non-owner parties.
If a claim is within the IDM’s scope, the claimant must give notice of the claim before the later of either 21 days after the event giving rise to the claim or 21 days after the claimant recognizes the issue. The IDM then has ten days to take action and may either approve the claim, reject the claim in whole or part, suggest a compromise, advise the parties it is unable to resolve the claim, and/or request information from either party. The IDM may consult experts and request that expenses resulting from those consultations be borne by the owner.
The IDM’s decision is final and binding on the parties, subject to mediation and binding dispute resolution. However, if the IDM has made its decision in good faith, the parties should anticipate the IDM’s decision will be upheld. The IDM’s decision must state in writing the reasons for its conclusion and notify the parties of any changes its decision will have on contract price or time. Should the IDM not give its decision within 30 days after notice, the claimant may demand binding dispute resolution without the IDM’s ruling.
Parties may deviate from the AIA and autonomously contract for what procedures will apply following an IDM’s initial decision. However, the AIA procedures provide that within 30 days after an initial decision either party may demand the other to file for mediation. If neither party does, the IDM’s decision is binding and final. Additionally, if a timely demand to file for mediation is made, but the opposing party does not file within 30 days of receiving demand, the IDM’s decision is final, subject to binding dispute resolution. If mediation is unsuccessful, either party may demand the other to file for binding dispute resolution within 30 days of the mediation’s conclusion or 60 days after a demand to mediate was not honored. In either event, if the party receiving the demand to file for binding resolution fails to do so within 60 days after demand receipt, then the IDM’s initial decision is binding.
Because refusal to submit to mediation and binding dispute resolution will result in the IDM’s decision being binding, it is critical that parties carefully consider whom to select as IDM. Additionally, if the parties cannot accept the risk of the IDM’s decision being final, they should contract for a different dispute resolution procedure. Because the IDM process can be complex, you should consult an attorney before selecting an IDM, agreeing to act as one, or finalizing a dispute resolution procedure.