Consulting Architects of Alberta |Contract Issues

Alberta Infrastructure’s New Consultant Agreement

Updated 12/10/2024

Alberta Infrastructure (AI) has developed new Consultant and Construction Contractor Agreements for use on its projects. AI has implemented these agreements through current RFPs on some projects. The Consulting Architects of Alberta (CAA) and the Consulting Engineers of Alberta (CEA) have expressed concerns to AI about the new Consulting Agreement, and the Alberta Construction Association has done the same with regard to the Construction Agreement.

Alberta Infrastructure has responded positively by initiating a series of meetings to review these agreements. We very much appreciate the intent, but do not yet know the extent to which the Consultant Agreement will be changed. In the meantime, as the agreement and portions of the agreement are currently being used in some of AI’s RFP’s, we feel it is important for the CAA to share its concerns with member firms.

We have compiled the following overview of comments expressed to the CAA and the CEA by consulting firms providing services in Alberta and a major professional liability insurance provider. It attempts to state the implications of the new contract conditions in plain English as follows.

Member firms must make their own determination of the risk posed by the terms in the new Consulting Agreement and decide whether or not to participate on work using the new agreement as well as the risks and/or costs posed.

Tai Ziola
Board Chair
Consulting Architects of Alberta

NEW CONSULTANT CONTRACT CONDITIONS	POTENTIAL IMPLICATIONS
Indemnification: Indemnification in the Agreement is broadly defined and not restricted to negligence. The description of professional liability insurance coverage to be provided by the Consultant in the Agreement is not limited to negligence.	Indemnification claims may not be covered by professional liability insurance. Consultants can only provide professional liability insurance to cover negligence, that is, negligent errors, omissions and acts of the Consultant.
Limit of Liability: No limit of liability is included in the Agreement.	Agreements that do not include a limit of liability expose Consultants to major claims that could threaten the financial wellbeing of their firms. A limit of liability commonly considered reasonable to limit the liability to the amount of professional liability insurance available to satisfy the claim.
Consequential Damages: The definition of “Consequential Loss” in the Agreement carves out loss of use and all third-party claims, including third-party claims in contract, rendering the waiver included in the Agreement ineffective.	Consequential damages are not typically covered by professional liability insurance policies so Consultants may not be insured for such losses.
Standard of Care: The Standard of Care included in the agreement is elevated, lengthy, and qualified.	A Standard of Care that exceeds the industry standard definition could lead to professional responsibility that extends beyond negligence and may not be covered by professional liability insurance policies.
Reliance on Direction from the Province: Multiple clauses limit the Consultant’s ability to rely on information provided by the Province, yet the agreement requires strict adherence to provincial direction and make the Consultant responsible for the cost of changes required by changes in provincial standards.	Consultants could become responsible for information, direction and approvals provided by the Province as well as the cost of redesign to standards that changed after award of the contract.
Time is of the Essence: A “time is of the essence” clause is included in the Agreement.	The “time is of the essence” clause may jeopardize the Consultant’s ability to perform within the Standard of Care or result in uninsured liability for delay(s).
Pay When Paid: The Agreement exempts the Province from the Prompt Payment legislation, yet it states that Consultants may not include ‘pay when paid’ provisions in their subcontracts.	The inability to include a ‘pay when paid’ clause in subconsultant agreements imposes unfair and uncompensated risk on Prime Consultants.
Dispute Resolution: The dispute resolution mechanism relies on arbitration without appeal	Professional Liability Insurers are clear that dispute resolution mechanisms should allow for due legal process and appeal as well as equal participation by the parties.
Withholding and Set Off: The ability to withhold and set-off is at the Province’s discretion and includes the right to set off against any payment owing to the Consultant, including for work with the Province outside this agreement. No interest is allowed on overdue payments.	Set Offs at the discretion of the Province and the cross-contract liability could expose the Consultant to broad financial risk, interest payment on operating funds, cash flow issues, and increased administrative burden.
Payment Allocation by Phase: The Agreement refers to an out-of-date payment allocation by phase which could delay payment relative to the completed scope.	This payment allocation by phase does not recognize the progress of digital (BIM) documentation which brings forward scope design process, resulting in delayed payment for completed work. It needs to be replaced by the current industry standard allocation set out in the 2024 CAA/CEA Reference.
Additional Services: No Additional Services are payable for changes in budget, estimates, or the actual cost of construction.	Consultants typically set fees in response to an RFP by using percentage references (such as the CAA / CEA Guidelines) based on the Construction Cost budget stated in the RFP. They are therefore determined based on preliminary budget assumptions. If the budget increases as the design proceeds through the design phases, it is usually an accurate reflection of the actual scope required to complete the project and compensation should be adjusted accordingly.
Reliance Letter to Contractor: The Agreement requires the Consultant to deliver a reliance letter to the Contractor in a form acceptable to the Province.	This letter would make the Contractor a third-party beneficiary of the contract and facilitate claims by the Contractor against the Consultant. It could result in significant, uninsurable claims by the Contractor against the Consultant and could also be seen to increase the Standard of Care bearing on the work.
Scope of Services: The Agreement contains the following, all-encompassing scope clause: “By entering into the Agreement, the Consultant expressly represents that it has fully reviewed and understands the meaning and scope of the Services stated herein, and is satisfied that no further clarification, communication, fee, remuneration, or reimbursement is necessary in order to understand and deliver the Services to the satisfaction of the Province”.	This clause establishes a responsibility for project unknowns with the Consultant, extends the Standard of Care and the scope, and requires the Consultant to deliver the services “to the satisfaction of the Province”, which is not an objective measurement. The Consultant could have unforeseeable costs and responsibilities under this clause.
Record Drawings and As-Built Documents: The terminology and responsibilities related to these are switched from normal usage in the Agreement. It asks the Consultant to provide services and necessary coordination to obtain … information selecting (sic) all changes and locations of concealed services, then to verify and coordinate the construction and concealed systems as installed and document them in certified as built documents. The Consultant cannot “verify and coordinate the construction and concealed systems” as stated, nor “certify” them as complete—Consultants simply document the information provided by the Contractor.	As-Built drawings are typically prepared by the Contractor who is responsible for documenting the changes made from the contract documents. The information on the As-Built is documented by the Consultant in Record Documents as an Additional Service completed by the Consultant. The Consultant could be held responsible for the consequences of inaccurate documentation of as-built conditions recorded by the Contractor under this agreement. Note that typical fee references such as the CAA and/or CEA Guidelines assume the preparation of Record Documents is an Additional Service, and therefore, Consultant fees need to be increased to include this service.
Reimbursable Costs: This agreement states that payment for all reimbursable costs is included within the Consultant’s fee.	Typical fee references such as the CAA and/or CEA Guidelines assume that reimbursements are chargeable, and therefore, Consultant fees need to be increased to allow for this exclusion.
The Project Evaluation Services: This Agreement includes a comprehensive evaluation of building performance up to two years after occupancy, including conducting inspections and interviews lasting up to 5 days, evaluating user needs, and comparing performance and operational criteria.	This is a major undertaking that is well beyond the normal scope of services. Consultant fees need to be increased to allow for this scope.

NEW CONSULTANT CONTRACT CONDITIONS

POTENTIAL IMPLICATIONS

Indemnification: Indemnification in the Agreement is broadly defined and not restricted to negligence.

The description of professional liability insurance coverage to be provided by the Consultant in the Agreement is not limited to negligence.

Indemnification claims may not be covered by professional liability insurance.

Consultants can only provide professional liability insurance to cover negligence, that is, negligent errors, omissions and acts of the Consultant.

Limit of Liability: No limit of liability is included in the Agreement.

Agreements that do not include a limit of liability expose Consultants to major claims that could threaten the financial wellbeing of their firms.

A limit of liability commonly considered reasonable to limit the liability to the amount of professional liability insurance available to satisfy the claim.

Consequential Damages:

The definition of “Consequential Loss” in the Agreement carves out loss of use and all third-party claims, including third-party claims in contract, rendering the waiver included in the Agreement ineffective.

Consequential damages are not typically covered by professional liability insurance policies so Consultants may not be insured for such losses.

Standard of Care: The Standard of Care included in the agreement is elevated, lengthy, and qualified.

A Standard of Care that exceeds the industry standard definition could lead to professional responsibility that extends beyond negligence and may not be covered by professional liability insurance policies.

Reliance on Direction from the Province: Multiple clauses limit the Consultant’s ability to rely on information provided by the Province, yet the agreement requires strict adherence to provincial direction and make the Consultant responsible for the cost of changes required by changes in provincial standards.

Consultants could become responsible for information, direction and approvals provided by the Province as well as the cost of redesign to standards that changed after award of the contract.

Time is of the Essence:

A “time is of the essence” clause is included in the Agreement.

The “time is of the essence” clause may jeopardize the Consultant’s ability to perform within the Standard of Care or result in uninsured liability for delay(s).

Pay When Paid: The Agreement exempts the Province from the Prompt Payment legislation, yet it states that Consultants may not include ‘pay when paid’ provisions in their subcontracts.

The inability to include a ‘pay when paid’ clause in subconsultant agreements imposes unfair and uncompensated risk on Prime Consultants.

Dispute Resolution: The dispute resolution mechanism relies on arbitration without appeal

Professional Liability Insurers are clear that dispute resolution mechanisms should allow for due legal process and appeal as well as equal participation by the parties.

Withholding and Set Off: The ability to withhold and set-off is at the Province’s discretion and includes the right to set off against any payment owing to the Consultant, including for work with the Province outside this agreement.

No interest is allowed on overdue payments.

Set Offs at the discretion of the Province and the cross-contract liability could expose the Consultant to broad financial risk, interest payment on operating funds, cash flow issues, and increased administrative burden.

Payment Allocation by Phase: The Agreement refers to an out-of-date payment allocation by phase which could delay payment relative to the completed scope.

This payment allocation by phase does not recognize the progress of digital (BIM) documentation which brings forward scope design process, resulting in delayed payment for completed work.

It needs to be replaced by the current industry standard allocation set out in the 2024 CAA/CEA Reference.

Additional Services: No Additional Services are payable for changes in budget, estimates, or the actual cost of construction.

Consultants typically set fees in response to an RFP by using percentage references (such as the CAA / CEA Guidelines) based on the Construction Cost budget stated in the RFP. They are therefore determined based on preliminary budget assumptions.

If the budget increases as the design proceeds through the design phases, it is usually an accurate reflection of the actual scope required to complete the project and compensation should be adjusted accordingly.

Reliance Letter to Contractor: The Agreement requires the Consultant to deliver a reliance letter to the Contractor in a form acceptable to the Province.

This letter would make the Contractor a third-party beneficiary of the contract and facilitate claims by the Contractor against the Consultant.

It could result in significant, uninsurable claims by the Contractor against the Consultant and could also be seen to increase the Standard of Care bearing on the work.

Scope of Services: The Agreement contains the following, all-encompassing scope clause: “By entering into the Agreement, the Consultant expressly represents that it has fully reviewed and understands the meaning and scope of the Services stated herein, and is satisfied that no further clarification, communication, fee, remuneration, or reimbursement is necessary in order to understand and deliver the Services to the satisfaction of the Province”.

This clause establishes a responsibility for project unknowns with the Consultant, extends the Standard of Care and the scope, and requires the Consultant to deliver the services “to the satisfaction of the Province”, which is not an objective measurement.

The Consultant could have unforeseeable costs and responsibilities under this clause.

Record Drawings and As-Built Documents: The terminology and responsibilities related to these are switched from normal usage in the Agreement. It asks the Consultant to provide services and necessary coordination to obtain … information selecting (sic) all changes and locations of concealed services, then to verify and coordinate the construction and concealed systems as installed and document them in certified as built documents.

The Consultant cannot “verify and coordinate the construction and concealed systems” as stated, nor “certify” them as complete—Consultants simply document the information provided by the Contractor.

As-Built drawings are typically prepared by the Contractor who is responsible for documenting the changes made from the contract documents. The information on the As-Built is documented by the Consultant in Record Documents as an Additional Service completed by the Consultant.

The Consultant could be held responsible for the consequences of inaccurate documentation of as-built conditions recorded by the Contractor under this agreement.

Note that typical fee references such as the CAA and/or CEA Guidelines assume the preparation of Record Documents is an Additional Service, and therefore, Consultant fees need to be increased to include this service.

Reimbursable Costs: This agreement states that payment for all reimbursable costs is included within the Consultant’s fee.

Typical fee references such as the CAA and/or CEA Guidelines assume that reimbursements are chargeable, and therefore, Consultant fees need to be increased to allow for this exclusion.

The Project Evaluation Services: This Agreement includes a comprehensive evaluation of building performance up to two years after occupancy, including conducting inspections and interviews lasting up to 5 days, evaluating user needs, and comparing performance and operational criteria.

This is a major undertaking that is well beyond the normal scope of services. Consultant fees need to be increased to allow for this scope.

The Consulting Architects of Alberta has issued this commentary to help facilitate review by its member firms. The CAA has not engaged any legal counsel to review the agreement or comment on or negotiate terms with Alberta Infrastructure. The CAA does not provide legal advice and strongly recommends that member firms have legal counsel review this and any other agreement before considering its use.

CAA Commentary on “Consultant as Prime Contractor” Clauses
Updated: June 6, 2024

Summary of the Issue

The CAA’s Procurement and Contracts Committee has noted that several public sector clients have included a clause in their consultant agreements assigning prime contractor responsibilities to the Consultant.

We assume the intention is that, while on site preforming any site observations or investigations required prior to the appointment of the construction contractor as the “Prime Contractor”, the consultant team will follow applicable occupational health and safety regulations and Client protocols regarding site access.

The CAA suggests that it is not reasonable on most design and construction projects for a client to require the Consultant to undertake the Prime Contractor responsibilities described in this clause for several reasons, as layout out in this Commentary. We are suggesting that members request the removal of this clause from client agreements and propose wording such as the following to address the client concern:

“Prior to the appointment of the construction contractor as the prime contractor, the Consultant and its subconsultants shall comply with the occupational health and safety regulations during all investigations and activities occurring at the Work Site. No assignment of prime contractor for safety status to the Consultant is implied by this clause. ”

Background

There are no apparent restrictions directly within current OHS legislation as to who may be appointed as “prime contractor”. However, it is implied that this individual or entity be capable of performing these duties from legal, ethical, insurance, practical, and financial standpoints. There may be unintended consequences if these responsibilities are undertaken by individuals and entities who are not capable of performing these duties. Such duties are clearly beyond the scope of professional services and responsibilities on most building design projects. The exception would be projects where the scope of the Consultant’s work includes detailed site investigation services and clearly requires the Consultant to take control of the site and be responsible all activities on that site until appointment of a Construction Contractor.

Recently several Client and Owner groups have inserted provisions within their standard agreements to designate a prime consultant, architect, or engineer as the “prime contractor” for various projects either on a temporary or permanent basis.

Scope of Professional Services

On most building design projects, it is not reasonable to designate a Consultant as “prime contractor” as the responsibilities and services required are outside of those normally provided by architects and engineers. Such a clause could be understood to make the Consultant responsible for ensuring parties

whose actions are outside of the control of the Consultant meet the provisions the OHS act, regulations and code.

There are many instances where a Consultant could be put in a position of responsibility for matters outside of its expertise and control or in a position of a conflict of interest by assuming the role of “prime contractor” in addition to the role of Consultant.

Insurance

Professional Liability Insurance (PLI) is a requirement for being licensed and providing services in various professions including architecture. PLI insurers have advised the CAA that they would offer no coverage for a scenario where an architect is acting as “prime contractor” because the services related to those responsibilities are not considered professional in nature.

Similarly, Consultants accepting Prime Contractor roles could void their Commercial General Liability Insurance (CGLI) coverage. When obtaining CGLI, a firm must provide a description of their business operations, normally considered construction activities by Contractors and design activities by Consultants. If a firm is found to be providing services outside of their declared business operations, the insurer could determine the coverage is void, cancel the policy or both.

Practical Issues

It is not reasonable to designate a Consultant a “prime contractor” for practical reasons. Consultants do not perform this kind of work and are not “in control of the [project/construction] work site.”

Consultants do not perform their work at a “construction work site” because their services are either design or reporting work, not construction work. A Consultant’s “work site” would be their office because they have control over it. A Consultant does not have control of the project site which is under the Owner’s control or the construction work site which is under the Contractor’s control.

Consultants comply with the policies put in place by the Owner or Contractor at the project and construction work site as per the OHS Act. Contractors have the methods, ways, and means to secure a work site, and are therefore best suited to be the “prime contractor”. Where there is no Contractor in place on a project site, the Owner retains control of the project site and is therefore best suited to undertake the responsibilities outlined in the OHS Act.

Illustration

Here is a fabricated illustration to show what this issue might mean. Under this clause, a Consultant is designated “prime contractor” by an Owner on a renovation project within a large functioning hospital until a Construction Contractor is appointed. The Owner has cordoned of access to a dangerous portion of the site to be renovated. As part of its preliminary design scope, the Consultant visits the site to review it as part of the design process and prior to the appointment of a construction contractor. A patient gains access to the portion of the site that was improperly cordoned off and is seriously injured.

The Consultant should have no responsibility beyond the actions of its onsite team members, but could be found responsible for the injury as, under this clause, the Consultant was assigned the prime contractor and owner obligations to ensure compliance with the OHS regulations. The Consultant’s insurers deny coverage for either the proceedings or damages and prime contractor obligations are not insured risks und the Consultant’s insurance policy.

Current Example

Here are two excerpts from a recent example of a City of Edmonton RFP quoted from Section 11 Prime Contractor:

DISCLAIMER

The Consulting Architects of Alberta offers commentary and suggestions on practice matters deemed important to our members but does not offer legal advice. There are no sanctions or penalties from the CAA for any members who choose not to follows CAA suggestions. CAA members are encouraged to seek legal advice on all matters of concern to their practice and govern their actions accordingly.

CAA Commentary on “Consultant as Prime Contractor” Clauses Updated: June 6, 2024

CAA Commentary on “Consultant as Prime Contractor” Clauses
Updated: June 6, 2024