The AIA’s “new” B101-2017, the latest version of its flagship Owner-Architect Agreement, carries over concepts from its widely-used predecessor, B101-2007. Users of the 2007 form will find the 2017 revision familiar. But the new B101-2017 is different in important and subtle ways, and some of its changes may be controversial. Architect and Owner users of the B101 form may, therefore, wish to reconsider and refresh their contracting strategy for the next decade.
Biggest Change: Mandatory Digital Practice Document Use
The B101-2017 and other 2017 AIA B101 Contract Documents require use of the AIA’s 2013 Digital Practice Documents (unless that requirement is deleted from the forms). Yet, many Architects and Owners are unfamiliar with the three primary Digital Practice Documents. Two of the three apply even if Building Information Modeling (BIM) is not used on the project:
E203–2013, BIM / Digital Data Exhibit: This exhibit must be incorporated into the contracts of nearly all project participants, including the Owner-Architect Agreement.
G201–2013, Project Digital Data Protocol Form: This protocol form takes legal effect through the E203 and sets rules for Digital Data use, even on non-BIM projects.
G202–2013, Project BIM Protocol Form: This BIM-specific protocol is used with E203 and G201 on BIM projects. It requires considerable “buy in” from Architects.
This change has sweeping legal and business considerations for Owners who choose to not delete the requirement to use the Digital Practice Documents from their Architect and Contractor agreements.
The AIA’s owners architect agreement B101 and Digital Practice Documents impose substantial additional “default” obligations on Architects, Owners, and Contractors. However, if used correctly, the Digital Practice Documents can lend considerable value to projects. They provide the “rules of the road” for project use of Digital Data, and legal safe harbors for parties who comply with mutually-agreed protocols for its use. They fill in an important gap that developed in design and construction contracts when the “paper era” ended. But the documents are involved and complex, and should not be used lightly by Owners – or Architects and Contractors – who have not taken the time to understand what they require.
Appropriately Pricing Architectural Services
The “new” B101-2017 document family requires more of Architects than their now-obsolete 2007 predecessors. E204-2017, the Sustainable Projects Exhibit, which the new B101 requires on Sustainable Objective projects, imposes new obligations on Architect (and Owners and Contractors). Also, the B101-2017 introduces the new concept of “Supplemental Services” to the familiar “Basic Services” and “Additional Services” concepts – a change which affects an Architect’s entitlement to fees. The Digital Practice Documents also impose new tasks on Architects. Several other changes may also prompt Architects to reconsider how they price their services. These changes should also prompt Owners to reconsider what services they should pay Architects to perform.
Changes in the New B101-2017
Because the B101-2017 is closely modeled on its predecessor, B101-2007, users of the 2007 version of the Owner-Architect Agreement will find the new B101 familiar in both structure and content. Often, the changes discussed below involve the addition or deletion of a few words and could be easily overlooked by the casual observer. But these changes, while subtle, are important.
Architect’s License: The B101-2017 adds the following new sentence: “The Architect represents it is properly licensed in the jurisdiction where the Project is located to provide the services required by this Agreement or shall cause such services to be performed by appropriately licensed professionals.” The new B101 also calls for the Architect to include the Architect’s license number, if applicable, near the signature block. This new requirement may be of specific concern to parties other than Architects and engineers who use the B101 in traditionally unlicensed disciplines, including interior design.
Initial Information: The B101-2017 eliminates the 2007 version’s optional Exhibit A, Initial Information, and moves its content into the body of the new B101. This is a positive change. The optional Exhibit was often overlooked, and its important content omitted from the contract. The B101-2017 now requires that the Owner’s program and the project’s physical requirements be described. The Owner must also list its construction budget and intended procurement method and Owners and Architects must identify consultants they plan to hire. Also identified are representatives of both parties, including everyone who must review the Architect submittals. Further, the B101-2017 calls for design phase milestones. This represents a substantive change. The old B101 merely identified construction commencement and substantial completion dates. The new version requires the Owner to adjust its budget and anticipated design and construction milestones when there are any material changes to the Initial Information.
Owner’s Budget: The B101-2017 – unlike the 2007 version – affirmatively requires Owners to update their construction budgets throughout the duration of a project until final completion. In addition, Owners must pay Architects for redesign expenses, if market conditions the Architect could not have reasonably anticipated cause the lowest Contractor bid or proposal to exceed the Owner’s construction budget. Any redesign of the project to reduce the construction cost is now payable to the Architect as an Additional Service. The new B101 also allows Architects to recommend design alternatives and reasonable adjustments to the project’s program and scope to align with the Owner’s budget when the Architect is preparing cost estimates.
Insurance: The B101-2017 has extensive new insurance language. While the new terms are not inappropriate, they create risks for Architects who do not scrupulously ensure they carry the coverages required for each new contract and project. The new B101 describes the insurance coverages and policies Architects must carry in more detail. New provisions require the Architect to name the Owner as an additional insured on the Architect’s general liability (not professional liability) policy for claims caused in whole or in part by the Architect’s negligence. That additional insured coverage must be “primary and non-contributory” – a concept fraught with legal difficulty and inconsistent treatment by many states – to the Owner’s insurance policies. The new B101 affirmatively obligates Architects to provide insurance certificates to Owners. All Architects who use the B101-2017 should discuss the new form with their insurance brokers. Conventional wisdom advises Architects to always show all of their professional services contracts to their brokers before signing them. With the new insurance language in the B101-2017, this practice is more important than ever.
Performance Criteria: The new B101 requires Construction Documents to set forth in detail the “performance criteria” of materials and systems and other requirements to construct the Work. Adding these words can have significant practical and legal impacts. For example, rather than permitting the designer to specify “an Acme Model 150 18-ton chiller,” the B101-2017 may require the designer to add “capable of maintaining an interior temperature of 76° Fahrenheit when the outside temperature is 100° Fahrenheit.” This more detailed language may help with proposed substitutions. Performance criteria was required, historically, only when professional design services are required by the Contractor, typically in the shop drawing phase (see B101-2007, §126.96.36.199; A201-2007, §3.12). The legal implications of these changes will become clearer as disputes are litigated. The language might affect certain warranties, for example. Under the Spearin Doctrine, Owners warrant the adequacy of plans and specifications to contractors – but some courts distinguish between general “design specifications” and detailed “performance specifications,” and decline to extend that Owner’s warranty if the latter kind of specifications are used on the project.
Supplemental Services: Much of what the B101-2007 termed “Additional Services” is now recast as “Supplemental Services.” Additional Services under the new B101 are more contingent and unknown at the time of contracting (e.g., revision of codes, law, or regulations; reviewing out-of-sequence submittals). Supplemental Services, by contrast, tend to be anticipated required services (e.g., as-built drawings, fast track services). The new B101 provides flexibility by inviting different modes of Architect compensation for Basic Services (perhaps a fixed fee) and for Supplemental Services or Additional Services (perhaps an hourly rate). The old B101 contained a fill-in-the-blank table of “Additional Services” that were either “Not Provided” or the responsibility of either “Architect” or “Owner.” The new B101 recasts the services in this table as Supplemental Services.
Procurement Phase: The B101-2017 replaces the old “Bidding or Negotiation Phase” with the new “Procurement Phase,” and slightly changes the Architect’s services. The new B101 requires the Architect to perform additional Basic Services when Owners hire contractors through negotiations. Specifically, B101-2017 requires Architects to prepare responses to Contractor questions, and provide interpretations and clarifications to the contractors in the form of addenda. Considering a proposed substitution, however, is payable to the Architect as an Additional Service – provided the Owner authorizes it to consider the substitution. Compared to the new B101, the B101-2007 gave Architects a greater role in any competitive bidding, including the responsibility to distribute and collect bid documents, to consider substitution requests, and to prepare and distribute addenda to prospective bidders.
Evaluations of the Work: By adding three words, the B101-2017 made two subtle changes to the Architect’s construction phase obligations. It increased the speed with which Architects must report to Owners: in the new B101, Architects must “promptly” report known deviations from the Contract Documents to the Owner. Because the new form emphasizes the Architect’s responsibility to keep an eye on the schedule, Architects must now promptly report “known deviations” from the most recent construction schedule submitted by the Contractor. The latter change is more syntax than substance, but the B101-2017 highlights the Architect’s obligation to report schedule slippage to the Owner with the new sentence structure.
Certificates for Payment: The B101-2007 required Architects to issue final Certificates for Payment, but the new B101 adds these certificates must be “based upon a final inspection indicating that, to the best of the Architect’s knowledge, information and belief, the Work complies with the requirements of the Contract Documents.” And by issuing certificates for payment, Architects now more clearly represent, to the best of their knowledge, information and belief, “that the Contractor is entitled to payment in the amount certified.”
Termination for Convenience: Under the 2007 version of the B101, Architects terminated for the Owner’s convenience were paid “an amount for the Architect’s anticipated profit on the value of the services performed by the Architect.” The B101-2017 deletes that language. Like its predecessor, the new B101 requires payment for the Architect’s services performed before the Architect is terminated, for reimbursable expenses incurred, and for costs because of termination. To recover lost profit, Architects must now affirmatively include it as part of the “Termination Fee,” a new concept in the B101-2017. The new B101 also contains a blank for the parties to insert the “Licensing Fee” payable to the Architect if the Owner intends to continue to use the Architect’s Instruments of Services. This concept is not new, but the 2017 version of the B101 deletes language that limits the Owner’s use of the Instruments of Service “solely for the purposes of completing, using and maintaining the Project….”
Agreement Term: The new B101 provides that “this Agreement shall terminate one year from the date of Substantial Completion,” unless as otherwise provided. This is a new concept. Various provisions of the new B101 are revised to state explicitly that they survive the Agreement’s automatic termination. Parties may want to modify the B101-2017 further to exempt other provisions from automatic termination, including, for example, a statement that waivers of subrogation survive its termination. The termination date, one year after Substantial Completion, marks the end of the obligation to maintain certain insurance coverages under the new B101.
The B101-2017 also differs from the B101-2007 in the following subtle ways:
- Architects might be less likely to be deemed to have approved construction “means and methods” because certain submittal review language from the 2007 version – which contemplated the possibility that an Architect may approve means and methods indicated by a submittal – is deleted from the 2017 form.
- Owners must now include the Architect in all communications with the Contractor that relate to the Architect’s services of professional responsibilities or promptly notify the Architect of the substance of any such communications.
- When Architects review submittals bearing the professional seal and signature of a design professional hired by contractors, the new B101 clarifies this review is “for the limited purpose of checking for conformance with the information given and the design concepts expressed in the contract documents.” It also clarifies that Architects “shall not be responsible for” the adequacy and accuracy of services, certifications, and approvals of the Contractor’s design professionals.
- Architects are entitled to rely on the accuracy and completeness of Owner-furnished services and information, as usual. But the new B101 adds that Architects “shall not be responsible for” Owner-provided services or information, or the “timeliness” of when the Owner supplies that information.
- The B101-2017 clarifies that absent their written approval, Architects are not responsible for the Owner’s acceptance of non-conforming work.
- The new B101 adds provisions for the handling of “confidential” and “business proprietary” information, but it is somewhat more permissive about disclosure by explaining when disclosure is permitted.
WHAT REMAINS THE SAME AS THE B101-2007?
Some of the most important concepts and provisions of the B101-2007 survive intact.
Reliance on AIA Document A201
The new B101 continues to incorporate by reference AIA Document A201, the General Conditions of the Contract for Construction. The A201 might be the most widely used Contract Document in the U.S., but it is little understood. If the Owner separately hires the Architect and Contractor – the tripartite contract structure, which continues to be the most popular project delivery method – the A201 governs the relationship between all three parties.
The A201 is therefore important for both Owners and Architects. The A201 provides a major advantage to Owners who only occasionally build and lack the in-house capability to manage the project or desire to hire a construction manager. The A201 requires the Architect to police the Contractor, for the Owner’s benefit, in numerous important ways. Architects benefit from the A201 as well. Although the A201 is technically part of the Owner-Contractor Agreement, it still obligates the Architect to perform a variety of Construction Administration Services. Many Architects do not understand these services or factor them into their fee structure. The word “Architect” appears in the 2007 version of the A201 a whopping 290 times! The new version, AIA Document A201-2017, continues the Architect’s central role in the administration of the Construction Contract.
The Standard of Care
The B101-2017’s statement of the standard of care is identical to that of its predecessor. This time and dispute-tested formulation of the yardstick against which to judge the adequacy of the Architect’s services is perhaps the most important term in the B101:
- 2.2 The Architect shall perform its services consistent with the professional skill and care ordinarily provided by Architects practicing in the same or similar locality under the same or similar circumstances. The Architect shall perform its services as expeditiously as is consistent with such professional skill and care and the orderly progress of the Project.
This classic formulation of the standard of care recognizes a few important truths. A Contractor stands between each Architect and a completed project. Therefore, it is nonsensical to expect Architects to guarantee end results. Professional services, by their very nature, require the application of judgment to facts and circumstances and are incapable of precise calculation. Thus, the appropriate measure by which to judge professional services is whether they were appropriately performed, not based on the outcome. Just like no doctor will guarantee the surgery will succeed and no lawyer will guarantee a win at trial, Owners should not expect Architects and engineers to make guarantees or warranties regarding the outcome of a project.
Owners often outsmart themselves by modifying the contractual standard of care to impose more stringent requirements on design professionals. Professional liability insurance insures them only against professional negligence, i.e., violations of the standard of care. This insurance is usually the only asset available to protect the Owner from design malpractice. Unlike contractors, who tend to be well-capitalized, design professionals typically have few assets. An Owner who prevails at trial against an Architect with no insurance typically gets nothing of value (other than, perhaps, used computer equipment and the rights to an office lease the Owner may not want).
One of the best ways for Owners to unwittingly exclude design professionals from their insurance coverage is to tinker with the contractual formulation of the standard of care. If the Owner imposes arduous terms, like requiring Architects and engineers to provide end-results warranties, that can void professional liability coverage. If an Owner brings a claim against an Architect, the best thing for the Owner is to see the professional liability insurer step up and pay the claim. Even minor contractual changes to the standard of care can create insurance coverage questions, possibly reducing an insurer’s motivation to quickly settle an Owner’s claim.
No Indemnity Clause
Like the B101-2007, the new B101 contains no general indemnity clause in which one party agrees, or the parties mutually agree, to indemnify others. This omission may be intentional and may be based on the difficulty in crafting appropriate and enforceable indemnity clauses. The law of what constitutes an enforceable agreement to indemnify varies tremendously by jurisdiction. For example, many states prohibit one party from being indemnified from the consequences of its own negligence. Other states permit that indemnity under limited circumstances. Some states take an even more permissive approach, largely enforcing contracts as they are written. There is no “one-size-fits-all” indemnity clause ideally suited for each jurisdiction.
Owners and architects often craft custom indemnity clauses for the B101, which is appropriate. The mischief is that parties often unwittingly agree to indemnity terms that courts will not enforce. Another similar peril is including overbroad terms that the Architect’s professional insurer will not insure. There is great nuance here. Contract and insurance policy language can vary wildly. However, an Architect’s agreement to “defend” the Owner from claims that arise from the Architect’s negligence is typically not insurable. Confusingly, with an appropriately drafted contract clause, Architects can sometimes insure over an obligation very similar to the prohibited “defense” obligation: a requirement to indemnify the Owner for attorneys’ fees it incurs responding to claims arising from the Architect’s negligence.
The takeaway is that Owners and Architect must exercise care when adding custom indemnity clauses. In general, the broader a contractual obligation to indemnify, the less likely that obligation is enforceable. As with the B101-2007, Owners and Architects are best served by including an indemnity clause that is both insurable and enforceable in the jurisdiction where the project is located.
Just a Starting Point…
Like all form contracts, the standard B101-2017 text can be edited to suit individual needs. No two projects are alike – there is no “one-size-fits-all” contract form. But Architects and Owners may wish to consider revisions and additions to the B101-2017 about issues including:
The AIA Contract Documents’ B101-2017 differs from its 2007 predecessor. Of particular significance is the B101-2017’s mandatory use of the Digital Practice Documents. They create a new paradigm of opportunity and risk for Architects. In 2018, the AIA’s familiar 2007 Contract Documents were phased out. The industry was forced to start using the 2017 forms. Understanding how they differ is key.
On our website, you will find a complete downloadable article comparing the new B101-2017, Agreement Between Owner and Architect, and its predecessor, the B101-2007: It concludes that the new B101, while different, is an improvement in many ways. Owner and Architect B101 users may therefore wish to reconsider and refresh their contracting strategy for the next decade.
This publication is prepared for the general information of friends of Baker Law Group LLC in Illinois. It is not legal advice for you, or legal advice regarding any specific matter. Jeremy S. Baker is licensed to practice law only in Illinois. Under rules applicable to the professional conduct of attorneys in various jurisdictions, it may be considered attorney advertising material. Prior results do not guarantee a similar outcome.