AIA Document C197–2008 is a standard form of agreement between a single purpose entity (“the SPE”) and members of the SPE that do not own the project, called non-owner members. C197–2008 is intended for use on a project where the parties have formed the SPE utilizing AIA Document C195™–2008, Standard Form Single Purpose Entity Agreement for Integrated Project Delivery. C197–2008 is coordinated with C195–2008 in order to implement the principles of integrated project delivery, including the accomplishment of mutually-agreed goals. All members of the SPE, other than the project owner, will execute C197–2008.
AIA Document C197–2008 provides the terms under which the non-owner members provide services to the SPE to complete the design and construction of the project. The specific services the non-owner members are required to perform are set forth in the Integrated Scope of Services Matrix, which is part of the C195–2008 Target Cost Amendment and is incorporated into the executed C197–2008. In exchange for the non-owner members’ services, the non-owner members are paid the direct and indirect costs they incur in providing services. Additionally, C197 allows for the non-owner members to receive profit through incentive compensation and goal achievement compensation. For all document details and a record of changes, see the summary »
Date. The date represents the date the Agreement becomes effective. It may be the date that an oral agreement was reached, the date the Agreement was originally submitted to the other party, the date authorizing action was taken or the date of actual execution.
Parties. Parties to this Agreement should be identified using the full address and legal name under which the Agreement is to be executed, including a designation of the legal status of the parties (sole proprietorship, partnership, joint venture, unincorporated association, limited partnership or corporation [general, limited liability, close or professional], etc.). Where appropriate, a copy of the resolution authorizing the individual to act on behalf of the firm or entity should be attached. Other information may be added, such as telephone numbers and electronic addresses.
The Company. The limited liability company formed by C195–2008 should be identified by its legal name and the address of its principal place of business, exactly as that information is stated in C195–2008.
Project. The proposed Project should be described by name and location or address.
Article 2 – Member’s Responsibilities
§ 2.3 Exhibit D of C195–2008 establishes a Project Management Team responsible for managing the course of the Project and identifies a representative from each Member of the Company to serve on the Project Management Team. The Member, pursuant to this section of C197–2008, is required to provide the identified representative to serve on the Project Management Team. The Member’s representative on the Project Management Team shall have express authority to make decisions on behalf of the Member with respect to the Project.
§ 2.5 The Member agrees that it will not provide any services required under C197 through its own consultants or contractors without first receiving the Company’s approval. Additionally, Section 2.5 makes clear that C197–2008 is not a contract for construction, as the Company intends to contract directly with trade contractors using other agreements. Therefore, any Member wishing to provide labor and material to construct the Project must do so through a separate agreement with the Company.
§ 2.6 The Member, pursuant to this agreement, agrees to furnish to the Company the services described in the Agreement and in C195–2008, which is incorporated by reference. The Member is required to furnish the services necessary to develop a Target Cost proposal. If the Owner accepts the Target Cost proposal and the Company executes the Target Cost Amendment, the Member is required to furnish the services assigned to the Member in the Target Cost Amendment necessary to complete the Project.
§ 2.7 The Member is also required to obtain the insurance policies specifically enumerated in Section 2.7. If, however, the Company decides to institute a Company-Controlled Insurance Program (CCIP), the Member is required to participate in the CCIP and obtain the insurance required of it under the CCIP. The Member’s insurance obligations under the CCIP may be in addition to or instead of its obligations under Section 2.7.2.
Article 6 – Compensation
§ 6.1 The Company is required to compensate the Member for the direct costs it incurs to provide the services required under this Agreement. The direct costs for which the Member will be compensated consist only of those costs identified in Article 7, and do not include profit. If the Company and Member negotiate an hourly billing rate or rates for the direct costs, the parties shall insert either the agreed-upon rate or rates, or reference an exhibit setting forth the agreed-upon rate or rates. Refer to Article 8 for the calculation of payment for indirect costs.
If at any point, the Actual Costs for the Project exceed the Target Cost, the Company shall have no further obligation to compensate the Member for any direct costs incurred. The Member, however, is obligated to continue to perform the services required under this Agreement.
§ 6.2 In addition to being compensated for its direct costs, the Member can also receive compensation in the form of Incentive Compensation, which represents one element of potential profit. Incentive Compensation consists of an allocated portion of any savings realized if the Actual Costs are below the Target Cost. The parties shall insert the portion of any savings that will be paid to the Member as Incentive Compensation in Section 6.2.2. Incentive Compensation will be paid after the Company has had the opportunity to complete an audit of the final Actual Cost. If the Actual Costs equal or exceed the Target Cost, there will be no savings available for Incentive Compensation.
§ 6.3 The Member may also receive profit under C197–2008 in the form of Goal Achievement Compensation. In exhibit CC to the Target Cost Amendment, the Company establishes a series of goals for the Project and identifies a pool of money associated with each goal that can be paid to the Non-Owner Members if the goal is achieved. Exhibit CC to the Target Cost Amendment will also identify the portion of each pool of money that will be paid to each Non-Owner Member upon the achievement of the goal. If the goal is achieved, the Member may invoice the Company for its allocated portion of the pool of money for that goal. Additionally, Goal Achievement Compensation can be earned, and become payable, even after Actual Costs exceed Target Cost.
Article 8 – Indirect Costs
The Member may also be paid its indirect costs, which the agreement defines as general and administrative costs not directly attributable to the Project, including any cost not identified as a direct cost in Article 7. Indirect costs would include, for example, the Member’s administrative and supervisory personnel not working on the Project, and rent, utilities or other costs at the Member’s office location. The Member is permitted to be paid a portion of its indirect costs through an overhead rate that it negotiates with the Company. This article provides a fill point for inserting that negotiated overhead rate which would then be applied to the Member’s direct costs.
Executing the agreement.
The persons executing AIA Document C197–2008 should indicate the capacity in which they are acting (i.e., president, secretary, partner, etc.) and the authority under which they are executing the Agreement. Where appropriate, a copy of the resolution authorizing the individual to act on behalf of the firm or entity should be attached.
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