Dispute Resolution—Mediation and Arbitration
AIA Document C195–2008 is a standard form single purpose entity (SPE) agreement through which the owner, architect, construction manager, and perhaps other key project participants, each become members of a limited liability company. The sole purpose of the company is to design and construct a project utilizing the principles of integrated project delivery (IPD) established in Integrated Project Delivery: A Guide. AIA Document C195–2008 provides the framework for a collaborative environment in which the company operates in furtherance of cost and performance goals that the members jointly establish. To obtain project funding, the company enters into a separate agreement with the owner. To design and construct the project, the company enters into separate agreements with the architect, construction manager, other non-owner members, and with non-member consultants and contractors. The compensation model in the non-owner member agreements is goal-oriented and provides incentives for collaboration in design and construction of the project, and for the quick and effective resolution of problems as they arise. This highly collaborative process has the potential to result in a high-quality project for the owner, and substantial monetary and intangible rewards for the other members. For use and execution of a document, see its instructions »
Integrated Project Delivery is a project delivery approach that integrates people, systems, business structures, and practices into a process that collaboratively harnesses the talents and insights of all participants to reduce waste and optimize efficiency through all phases of design, fabrication, and construction. AIA Document C195–2008 is a standard form agreement for the creation of a single purpose entity to facilitate Integrated Project Delivery.
Through use of C195–2008 the Owner, Architect, Construction Manager, and perhaps other key Project participants, each become Members of a Limited Liability Company (“the Company”). To design and construct the Project, the Company enters into separate agreements with the Architect, Construction Manager, and any other Non-Owner Members to provide design and construction services for the Project. The Company also enters directly into contracts with Non-Member design consultants, specialty trade contractors, vendors and material suppliers for services, labor, and materials. To obtain Project funding, the Company enters into a separate agreement with the Owner. C195–2008 provides the framework for a collaborative environment in which the Company will operate in furtherance of its goals.
The approach to compensation and profit inherent in the traditional models of project delivery is eliminated in the C195–2008 model. The Architect, Construction Manager and other Non-Owner Members of the Company are reimbursed only for their direct and indirect costs incurred in the design and construction of the Project. Profits can be earned in two ways: achievement of goals during the course of the Project (“Goal Achievement Compensation”), and shared cost savings realized at the end of the Project (“Incentive Compensation”). The Company pays pre-established Goal Achievement Compensation amounts to all Non-Owner Members if and only if the goals are met. Failure to achieve a goal, regardless of fault, results in forfeiture by all Non-Owner Members of the Goal Achievement Compensation pre-established for that Project Goal. Similarly, failure to design and construct the Project for a total cost less than the pre-established “Target Cost,” regardless of fault, results in forfeiture of any Incentive Compensation payment by all Non-Owner Members.
This goal-oriented compensation structure, in conjunction with other key provisions in C195–2008, provides incentive for the Members to work collaboratively to design and construct the project, and to quickly and efficiently resolve problems as they arise. This highly collaborative process has the potential to result in a high-quality Project for the Owner, and substantial monetary and intangible rewards for the other Member participants.
C195–2008 is intended for use in conjunction with AIA Document C196™–2008, Standard Form Agreement Between Single Purpose Entity and Owner for Integrated Project Delivery, and AIA Document C197™–2008, Standard Form Agreement Between Single Purpose Entity and Non-Owner Member for Integrated Project Delivery. The text of C195–2008 was modified slightly in October 2009.
Dispute Resolution—Mediation and Arbitration.
This document contains provisions for mediation and arbitration of claims and disputes. Mediation is a non-binding process but is mandatory under the terms of this agreement. Arbitration may be mandatory under the terms of this agreement. Arbitration is binding in most states and under the Federal Arbitration Act. In a minority of states, arbitration provisions relating to future disputes are not enforceable but the parties may agree to arbitrate after the dispute arises. Even in those states, under certain circumstances (for example, in a transaction involving interstate commerce), arbitration provisions may be enforceable under the Federal Arbitration Act.
The AIA does not administer dispute resolution processes. To submit disputes to mediation or arbitration or to obtain copies of the applicable mediation or arbitration rules, contact the American Arbitration Association at (800) 778-7879 or visit the website at adr.org.