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In the A201-2007 standard contract form, The American Institute of Architects (AIA) has reacted to concerns expressed by clients, contractors, and the legal community by giving two options to stakeholders: 1) the replacement of the architect as the first step in resolving a dispute, and 2) the default to litigation rather than arbitration, unless the parties specifically determine that arbitration is preferred. Responding to concerns that arbitrations should be both final and conclusive, the AIA has also changed its long-standing but commercially untenable position against the consolidation of arbitration procedures and the joinder of other parties involved in the dispute.
Providing for a Truly Independent Initial Decision Maker
Traditionally under the AIA documents, an architect would attempt to settle disputes between the client and the contractor regarding interpretation of the plans and specifications, work delays, or the costs involved in making changes in the work.
To facilitate an arrangement in which both the project client and the client would rather have a truly neutral party involved in the dispute resolution process, the AIA documents now allow the parties to formally name a separate initial decision maker.
Engineering projects often employ an independent “standing neutral” or a dispute resolution board as the initial decision maker during a construction dispute. The new AIA documents default to having the architect remain as the initial decision maker if no other arrangements are negotiated. Project costs may increase if the parties have to enlist the services of an outside party each time a problem arises that an architect could have settled without the intervention of an outside party.
While the architect has routinely been asked to step between the client and the contractor and act as a mediator or arbitrator, in some situations, this role of the architect as a “neutral” is an awkward one. Even though the architect has agreed to act impartially, the client handles payment and has the right to terminate the architect’s services on seven days’ notice without cause. Though clients often expect a certain degree of loyalty in a dispute with the contractor, many know that it is often more likely that an architect and contractor will work together on multiple projects than that a client and architect will work together repeatedly.
Changing the Default from Arbitration
In recent years support for mandatory and binding arbitration of disputes has lessened. In some situations, arbitration does best serve the parties in a dispute. In others, litigation may make more sense. Recognition of this has led the AIA to provide a choice among binding dispute resolution methods. Now the forms will allow parties to select arbitration or another method of binding dispute resolution, with litigation as the default method.
If arbitration is selected, the new AIA documents require that the arbitration be conducted through the rules of the American Arbitration Association (AAA) unless other rules are specified by the parties. In the past, parties used the rules in effect at the time of the dispute even if they differed from those in effect at the time of negotiation. Acknowledging that the parties to the contract may have selected the use of AAA arbitration procedures because of their known attributes, arbitration will follow the rules fixed at the time of original agreement. This removes the possibility that one party may consider rule changes after the agreement to arbitration as being counter to its interests.
Until now, consolidation of separate arbitration proceedings such as a client-architect proceeding with a client-contractor proceeding was prohibited. The goal was to keep the standard of care for professional services—the measure by which arbitration between client and architect would be decided—from being confused with the standard applicable to a contractor. Consolidation is now no longer prohibited. With the approval of the arbitrator, any party to arbitration may include, by joinder, parties substantially involved in a common question of fact or law if their presence is deemed to be required and the party agrees to the joinder.
Although the removal of the consolidation and joinder prohibitions are reasonable to make arbitration an effective dispute resolution mechanism, many defense counsel argue that doing so will still lead to unfair awards. They suggest that if parties are to be joined in one proceeding, it should be in court, with all the evidentiary and procedural protections litigation offers.
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