PROJECT DELIVERY METHODS
By Paul Potts
Project Delivery Methods (PDM)
The project delivery method (PDM) is a responsibility matrix used in construction as an organizing principle to finance, design, contract, and construct a project. AIA agreements are central to PDMs, but the PDM is a holistic view of all the agreements signed on the project in addition to other activities, financing, surveying, permitting and inspections by authorities having jurisdiction for example. The owner selects the project delivery method (PDM) often in consultation with an architect. There are three PDMs discussed in this article: AIA A102 design-bid-build; AIA C132 construction manager as an advisor (CMa); and AIA A133 construction manager as constructor. The PDM provides an overview of the roles and financial liabilities that the owner, architect, contractor, subcontractor and construction manager accept as individual signatories to AIA agreements.
While the design-bid-build (AIA A102) PDM does not provide the fast-track opportunities that more recent project management PDMs do, it is still the most popular construction method used in the United States and Canada. It is simple, straightforward and economical. The owner selects and contracts with an architect once the design is complete, general contractors are either invited to bid on the documents, or the project could be put out for public bids. The successful general contractor then contracts with their selection of subcontractors using A401- 2017 Standard Form of Agreement Between Contractor and Subcontractor.
Subcontractors and prime (sub) contractors do not have agreements with each other and thus cannot sue each other for lack of privity. More on that later.
What is the PDM?
In this article for simplicity, I often associate the project delivery method (PDM) with an AIA agreement. This is not coincidental since AIA Agreements have much to do with the organization of the construction project but not everything. The PDM refers to all activities on the project including other specialized consultants working for the owner, the architect, and the contractor - the soils testing agency that works for the owner for example and are paid from general conditions money without a contract. The knowledge, experience, and organization of a mason or electrician are not fully described in the AIA agreements, and building authorities having jurisdiction have much to do with the construction of a project in accordance with building codes, but this is not a matter of contract it is a matter of the building code. It is still not too farfetched to say that the core of the PDM is the AIA agreement.
The American Institute of Architects (AIA) publishes as many as 200 contracts and forms that are recognized as the benchmark documents for managing transactions and relationships in design and construction. While the AIA self-authored documents exhibit a prejudice favoring architects, these thoroughly researched, regularly upgraded and reliably integrated documents continue to be the standard agreements between parties to contract for work and services in the construction industry.
Fast Track and Phased Construction
Even in a straightforward project like a school building, design by the architect may take up to a year to complete. In a design-bid-build PDM, construction doesn’t get started until the whole design is complete. Enter phased construction where part of the work is started and sometimes completed while the remainder of the design is still in the CAD hard drive. Earthwork, foundations and even building walls are good candidates for early completion in phased construction. Phased construction or fast track construction takes more advanced management techniques than are needed for design-bid-build construction PDMs.
Phased construction is the father of construction management. Fast track and phased construction require more advanced construction management techniques than are required for design-bid-build projects. Exotic and expensive management planning is justified on projects like water treatment plants, nuclear power plants and automobile manufacturing plants that could result in huge cost overruns for delayed completion. Without construction management flexibility and decision-making freedom built into AIA owner-construction management agreements fast track and phased construction would not be possible. But, very often owners are sold on construction management services that come with extra fees when the truth is that not all projects are so complex as to require specialized management services.
Construction companies are eager to convince owners that phased construction will save money when that is often not the case. It is certainly the case that many projects built with more sophisticated PDMs could be built just as well with the traditional design-bid-build PDMs with savings in management costs.
Privity in Contract Law
Contract law governs most issues in construction except for some tort law issuing from the tort of negligent misinformation. Benjamin Cardozo, sitting on the New York Court of Appeals in 1932, but later a Supreme Court justice, described the doctrine of privity this way: “The Doctrine of Privity provides that suits against parties to a contract for negligence in the performance of the duties and obligations of the contract could only be brought by signatories to the contract, not by third-party strangers.” In construction law subcontractors and prime contractors cannot sue each other because there is no contract between them.
In two of the three PDMs discussed in this article, AIA A102 general contractor PDM and AIA A133 construction manager as constructor PDM, the general contractor or construction manager as constructor has contracts with the subcontractors and are financially responsible for their performance and progress, but there is no contract between subcontractors.
Construction Manager as Adviser
In AIA agreement C132™ – 2019 Standard Form of Agreement Between Owner and Construction Manager as Adviser1 the construction manager acts as adviser to the owner but takes no responsibility for the performance and progress of the subcontractors. Instead, the owner signs individual contracts (A132 – 2019 Standard Form of Agreement Between Owner and Contractor, Construction Manager as Adviser Edition).
In AIA C132 the owner signs contracts (AIA A132 CMa) with each subcontractor, now called prime contractors, and takes full financial responsibility for performance and progress of the prime contractors. If prime contractor A loses money because prime contractor B fails to make progress in accordance with the critical path schedule, prime contractor A due to lack of privity must sue the owner to recover financial losses caused by prime contractor B’s delay of project. The owner in turn would have to sue prime contractor B to recover the money paid to prime contractor A the injured party. The financial liability for the performance and progress of all subcontractors falls onto the shoulders of the owner in this PMD. Thus, the construction manager as advisor sheds many risks that are normally the responsibility of the builder onto the shoulders of the owner
Construction Manager as Constructor
The AIA A133-2019 Standard Form of Agreement Between Owner and Construction Manager as Constructor form of agreement is intended for use on projects where a construction manager in addition to serving as an adviser to the owner during the preconstruction phase also provides management of the construction of the project with a guaranteed maximum price. Construction managers as constructors are financially responsible for the performance and progress of all subcontractors.
The construction manager as constructor provides the owner with a guaranteed maximum price proposal, which the owner may accept, reject, or negotiate. The document divides the construction manager’s services into two phases: the preconstruction phase and the construction phase, portions of which may proceed concurrently to fast-track the process. The construction manager as constructor takes full responsibility for the performance and progress of subcontractors.
This is an ideal arrangement for the owner needing phased construction but also not wanting to take on financial responsibility for the subcontractor’s performance and progress
AIA Document C132–2019 is not coordinated with, and should not be used with, documents where the construction manager acts as the constructor for the project, such as in AIA Document A133™–2019 or A134™–2019.
Disclaimer: This article represents the observations and opinions of the author and does not reflect the position of the AIA or any civil law. Civil law varies within the United States from state to state. The author’s experience is limited to the state of Michigan. The reader should consult with legal counsel to determine the complex interaction of laws, suggestions, and illustrations within their geographic area of construction activities.
About the Author
Paul Potts has 24-years' experience working as an owner's and architect's representative during construction and working as an estimator and clerk of the works for a mechanical contractor on large manufacturing projects. I have edited MasterSpec specifications for SpecGuy Incorporated. Since my retirement from active field work, I have written several articles appearing in national magazines on subjects of contract relationships and construction materials including articles of your specific trade of masonry.