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.
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 C197–2008 is intended for use where an owner, architect, construction manager, and perhaps other project participants, have formed a special purpose entity (“the Company”) to deliver a project utilizing Integrated Project Delivery and have executed AIA Document C195–2008, Standard Form Single Purpose Entity Agreement for Integrated Project Delivery (the SPE Agreement). C197–2008 is a standard form of agreement between the single purpose entity, which is a limited liability company, and a member of the Company that is not the project owner and, for that reason, is called a Non-Owner Member (“the Member”). The Member is likely to be the architect, construction manager, or other design professional. C197–2008 is not a contract for construction, but is a contract for services only.
Under C197–2008, the Member agrees to provide services to the Company as established in the SPE Agreement or identified in C197–2008. In return for the services provided, the Company will compensate the Member its direct and indirect costs. The Member may earn profits 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 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.
C197–2008 is intended for use in conjunction with C195–2008 and AIA Document C196™–2008, Standard Form of Agreement Between Single Purpose Entity and Owner for Integrated Project Delivery. Under C196–2008, the Project Owner provides the Company with the funds necessary to design and construct the Project.
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.