AGC-AIA Dispute Represents Deeper AEC/O Rifts

24 Oct, 2007

Rejection of the A201 document stems from an imbalance in roles and responsibilities that can -- and should -- be addressed using collaborative technologies.

A mid-October press release from the Associated General Contractors (AGC), the leading trade association representing U.S. construction contractors, carried an ominous headline: "AGC Members Unanimously Vote Against A201 Endorsement -- General Terms and Conditions Document Fails to Provide Balance." The A201 document at the heart of this dispute is part of the standard form of agreement between owners and contractors recommended to the AEC/O industry by the American Institute of Architects (AIA), the leading trade association representing U.S. architects.

In my opinion, this is more than a fraternal squabble between trade associations; the dispute is symptomatic of broader and deeper problems in AEC/O (architecture, engineering, construction, and operations).

All businesses today face profound strategic change due to the disruptive technology of the Internet and related information innovations. AEC/O business is no exception, although AEC/O has succeeded in postponing the inevitable, technology-driven changes longer than most other industries. (AEC/O has generally lagged all other industries -- except agriculture and mining -- in terms of both technology investment and technology innovation.)

Blown to Bits, published in 2000 by business authors Philip Evans and Thomas S. Wurster, explains " the new economics of information transforms strategy." Although the book does not directly address AEC/O, the implications are clear that information technology in general, and emerging approaches such as building information modeling (BIM) in particular, are driving changes in roles, risks, rights, and responsibilities across the entire building project delivery value chain and lifecycle. Of course, it is these factors -- roles, risks, rights, and responsibilities -- that are at the heart of any contract and contract-related document.

Thus, even if disputes over the wording and intent of standard form documents do not explicitly address topics such as file transfers or project data ownership, such disputes serve as proxies for the underlying tug of war over roles, risks, and so forth. On one hand, AIA in recent years has aggressively promoted what it calls "integrated practice," linked to BIM and other project technologies, as a way for architects to expand their roles and rights in the overall process. On the other hand, I've observed that AIA continues to seek -- as it has since its founding 150 years ago -- to minimize architects' risks and responsibilities. One of the explicit motivations of AIA's founders was to counter the influence of "package dealers," the design-builders of their day. In other words, promoting favorable interpretations of architects' roles, risks, and so on can be seen as a crucial element of AIA's existence as a trade association -- as it should be for any trade association.

When I served on the AIA national board of directors a few years ago, the AIA Contract Documents business brought in nearly $10 million per year, roughly one-quarter of AIA's budget. Consensus building with other AEC/O players, such as AGC, is an important element of the contract documents business, so AIA's crafting of a document that AGC says it cannot accept -- the first such break in 50 years of collaboration, according to AGC -- indicates the depth and extent of tension over these issues. AGC's press release speaks for itself in making pointed reference to "risk," as well as to "command-and-control" versus "the more collaborative and innovative direction of our rapidly changing industry." My prediction is that we will see more disputes of this type before AEC/O settles into that wished-for "collaborative and innovative direction." For example, the Construction Users' Round Table (CURT), an owners group, often appears to be seeking "better" (and presumably BIM-derived) deliverables from architects and engineers (A/Es), while various constituencies within the architecture profession fear that owners -- at the urging of software vendors -- seek to impose technologies and methods (and related costs) on architects without adequate compensation and without assurance of tangible benefit.

Thus, we see owners pointing fingers at A/Es, A/Es questioning the motives of software vendors who whisper, Iago-like, in owners' ears, while constructors and designers point fingers at each other in a dispute over the basic ground rules of the game (which is what AIA's A201 document represents). On an industrywide basis, studies in both the United States and the United Kingdom show that as much as 30% of the total cost of construction is wasted due to inefficiencies in project information management. If aggregate A/E fees in the United States amount to 5% of construction cost, then one interpretation of these numbers would be that for every $1 spent on creating project information, $6 is lost in managing that information. Even if that ratio is off by an order of magnitude, any unfavorable ratio is not sustainable when technology-driven alternatives are available to radically improve the process.

I am not singling out architects, constructors, or any other industry participant to shoulder blame for the cost of unmanaged project information; everyone who supports "the way we've always done things" must also share responsibility for the present state of affairs, as well as the hope for future improvement. What I believe all parties in AEC/O need to address in their contractual relations is a realignment of compensation and risk to reflect the value of information added to a project by each participant. One way of correlating information and risk is to recognize that greater information reduces uncertainty. Reduced uncertainty, in turn, represents decreased risk. Therefore, as project information increases, project risk should decrease. What remains in question is whose risk is mitigated by which information created by which other parties -- and how much compensation does that mitigated risk deserve?

At the end of the day, the dispute over specific wording in this unendorsed version of the A201 document is not the real point. As I see it, the point is that all parties to the process must bring a collaborative attitude to the task of crafting documents for a technology-driven, collaborative working environment in AEC/O.