FAQs: C196™-2008, Standard Form of Agreement Between Single Purpose Entity and Owner for Integrated Project Delivery

Why does the Owner Member enter into C196–2008 with the SPE?

C196–2008 provides the terms under which the owner agrees to fund the SPE. C196–2008 requires the owner to fund the SPE as necessary to develop a Target Cost proposal. Upon the execution of the Target Cost Amendment, the owner is required to fund the SPE as necessary to complete the project. In exchange for the owner’s funding obligation, the SPE agrees to deliver the project to the owner in accordance with the Target Cost Amendment.

 

Can the owner’s funding obligation exceed the Target Cost under C196–2008?

Yes, under C196–2008, the owner’s funding obligation can exceed the Target Cost. Once the Actual Cost exceeds the Target Cost, the owner is still required to fund the SPE for amounts the SPE incurs under its agreements with Non-Members. Additionally, the owner is required to fund amounts the SPE owes to the other members for earned Goal Achievement Compensation.

 

Is the owner’s funding obligation unlimited under C196–2008?

No, under C196–2008, the owner is not subject to an unlimited funding obligation. The SPE is required to develop a Target Cost. Once the Target Cost is reached, the owner is only required to fund the SPE for amounts it incurs under agreements with non-members to complete the project, plus any Goal Achievement Compensation earned by the other members.

 

What happens if the Actual Cost is less than the Target Cost under C196–2008?

Under C196–2008, the owner is required to make an additional funding obligation in excess of the Actual Cost to satisfy any amounts the SPE owes to the other members as Incentive Compensation. Incentive Compensation is a portion of any savings realized that the SPE pays to the other members at the conclusion of the project where the Actual Cost is less than the Target Cost.

 

Does the owner have any other obligations other than its funding obligation under C196–2008?

Yes, C196–2008 requires the owner to furnish certain information as well as any services required of it by the Target Cost Amendment. Additionally, the owner is required to identify a representative to serve on the Project Management Team on the owner’s behalf. The Project Management Team is established in Exhibit D (the Work plan) to C195–2008 and is responsible for monitoring and stimulating the progress of the project and for developing periodic cost projections, benchmarks, metrics, and standards for evaluating the performance of all members and non-members in the achievement of timely and cost-effective services and construction on the project.

 

What is the Work Plan?

The Work Plan is an exhibit to C195–2008, the SPE Agreement and is incorporated into C196–2008, the SPE-Owner agreement. The Work plan establishes the Project Management Team responsible for managing the planning, design and construction activities required to complete the project in the collaborative, integrated process intended under the Agreement. The Work Plan identifies who will serve as the Project Management Team, how the Project Management Team will function as well as how the Project Management Team will make decisions. The Work Plan also identifies and describes each phase of Integrated Project Delivery. The descriptions allow the members to identify the purpose and goal of each phase. Additionally, the Work plan describes how the members will utilize building information modeling (BIM).

 

Does C196–2008 require the owner to obtain insurance? 

C196–2008 requires the owner to purchase and maintain the owner’s usual liability insurance. The owner is also required to obtain property, boiler and machinery, and loss of use insurance. If the SPE institutes a Company-Controlled Insurance Program (CCIP), the owner is required to obtain any insurance the CCIP requires. To the extent the owner is required to furnish any services, C196–2008 requires the owner to require its consultants and contractors to maintain insurance as appropriate to the services rendered.

 

Does C196–2008 require the SPE to directly provide the services necessary to design and construct the project?

No, C196–2008 does not require the SPE to directly provide the services necessary to design and construct the project. In fact, C196–2008 explicitly states that the SPE will not directly provide any services on the project. Rather, it is stated that the SPE will furnish the services necessary through separate services agreements with the non-owner members and non-members. One reason for this explicit statement is that the SPE is a limited liability company and licensing laws in many states prevent a limited liability company from performing architectural services, unless all, or a majority of, its members are architects.

 

If the owner furnishes services through consultants or contractors, how does the SPE get to use their Instruments of Service?

The owner grants to the SPE a non-exclusive license to the use of its consultants’ and contractors’ Instruments of Service. The license permits the SPE to authorize the non-owner members and non-members, as well as their respective consultants, contractors, subcontractors, and material or equipment suppliers, to reproduce applicable portions of the Instruments of Service for use in performing services or construction for the project. The license terminates upon termination of C196–2008.

 

How does the owner get the right to use the non-owner members’ Instruments of Service after the dissolution of the SPE under C196–2008?

C196–2008 requires the SPE to grant to the owner a license to use the non-owner members’ Instruments of Service upon dissolution of the SPE. The owner may use the Instruments of Service for designing, administering, managing, constructing, using, maintaining, altering and adding to the project. If the owner uses the Instruments of Service, however, without retaining their author(s), the owner agrees to release the SPE and the authors from all claims and causes of action arising from its use. Additionally, the owner is required to indemnify and hold harmless the non-owner members from all costs and expenses related to third party claims.

 

May the owner bring a claim against the other members for claims arising from the other members’ services on the project?

Under C196–2008, the owner may not bring claims directly against the other members.  The owner assigns any right it may have against the other members to the SPE. The SPE is empowered to bring and resolve any claims the owner may have through the dispute resolution process established in C195–2008. The assignment of claims to the SPE, however, does not apply to claims arising from the non-owner members’ willful misconduct.

 

Under C196–2008 & C197–2008, what happens to the non-owner member’s claims once the SPE has dissolved?

Upon dissolution of the SPE, the owner and non-owner agree to resolve all claims and disputes they may have against the other members through the dispute resolution process set forth in C195–2008, the SPE Agreement.

 

May the owner terminate C196–2008 for its convenience?

C196–2008 allows the owner to terminate the agreement at any time for its convenience. Upon the owner’s termination of the agreement for its convenience, the SPE is required to dissolve and wind up its affairs. If the owner decides to terminate the agreement for its convenience, however, it is required to assume all of the SPE’s rights and responsibilities in its agreements with the non-owner member sand the non-members for services provided prior to the owner’s termination of C196–2008.

 

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