The Importance of Pre-Referendum Contracts With Architects and Construction Managers

Pre-referendum contracts for architectural and construction management services play an important role in any capital works project. While it is only a small portion of the work necessary to complete the overall construction project, the pre-referendum period sets the stage for the remainder of the project. The scope of work determinations, site investigations, budgets, designs, and other work done during this stage will carry through the remainder of the project. The New York State Department of Education (“SED”) also performs critical reviews and approvals that are necessary to move the project forward. Therefore, it is vital that the school district, construction manager (“CM”), and architect all be on the same page from the beginning.

Typically, a contract is used by the parties to set the terms of the relationship. In the context of a capital works project, it will detail the work each party is to perform, the deadlines required to be met, the responsibilities of each party toward the other, and the cost of the work. For instance, who is responsible for performing the SEQRA review? Who will liaison with SED? How will the architect and CM coordinate? The contract also usually sets forth who owns the designs, establishes conflict resolution procedures, specifies confidentiality requirements, and defines other important nuances of the parties’ relationship.

Pre-referendum contracts can also create clear expectations in the event the referendum fails, or the parties’ relationship breaks down. If the referendum fails, what are the architect and CM’s obligations to modify the project for a second vote, and at whose expense? Does their relationship continue, or do the parties part ways? All of these issues should be addressed in a pre-referendum contract.

In addition to detailing the work to be performed during the pre-referendum stage, a pre-referendum contract can also be used to set post-referendum costs and obligations. Since many design/construction phase architectural and CM contracts are priced as a percentage of the construction costs, there is no reason the parties cannot enter into a contract that binds the parties from the pre-referendum stage all the way through project close out. Setting compensation early can help the school district control costs not only for the pre-referendum work, but for the remainder of the project as well. Another advantage of a pre-referendum contract is that the school district can use it to identify key personnel for the project, such as the lead architect, key designers and CMs, and even the subcontracting engineers the architect engages.

More importantly, the school district is in the best position to negotiate the post-referendum contract at the very outset of the project. In addition, the pre-referendum contract will be ready to go for the duration of the project as soon as the referendum passes. The architect and CM will be ready to launch into the next phase of the design work after the referendum passes.

But what if the architect or CM has agreed to work for free, and not take a fee until the project reaches the post-referendum phases? Does the school district still need a contract? Yes. Even if the architect or CM is not taking a fee for pre-referendum work, a contract at the outset will clarify the parties’ rights and obligations to each other, including that no fee is due for pre-referendum work regardless of the outcome of the referendum, and allow the school district to set its post-referendum costs.

Finally, it is important that the school district carefully review the architect and CM contracts to ensure that they adequately protect the school district’s interests. While architects and CMs will often draft these contracts, their contracts might not adequately protect the school district’s interests. Standard American Institute of Architects (“AIA”) contracts, for example, are not designed to protect the owner’s interest. Therefore, it is important to have legal counsel review or draft the contracts.