Relational Contract Already Used as a Model

The goal of William A. Lichtig’s integrated form of agreement is to turn adversaries into building teams and eliminate project litigation

If all lawyers were like William A.  Lichtig, there would be no more bad-lawyer jokes. Weary of two decades of construction litigation, Lichtig decided to take action to prevent claims rather than feed off of them in court. In 2005, he blotted the ink on a radically different kind of contract, called the integrated form of agreement (IFOA). The multiparty agreement reduces the adversarial relationships on a project by having the owner, the designers and the contractors share risks and rewards. Sources say the IFOA is already changing the business model for design and construction of buildings in the U.S.

Sutter Health San Carlos Center architect NBBJ crafted its relational contract after Lichtig’s.

Lichtig, a shareholder with Sacramento-based McDonough Holland & Allen PC, first wrote the IFOA for his main client, Sutter Health, a Sacramento-based owner of medical facilities . “With classic entrepreneurial reflex, Will sought a better model and Sutter, to its great credit, recognized the value to be had,” says Lichtig client F. Martin Booth, CEO of Frank M. Booth Inc., a Marysville, Calif.-based mechanical contractor.

Lichtig didn’t stop with Sutter. Soon  he wrote a generic form of Sutter’s IFOA, known as a relational contract, for the Lean Construction Institute. Lichtig serves on the group’s board and travels the country, without compensation, to speak on LCI’s behalf about the IFOA.

Louisville, Colo.-based Gregory Howell, a co-founder of LCI, says,“The term ‘thought leader’ isn’t enough to describe Will.”

Multimedia  View Award of Excellence Luncheon and Acceptance Speech of William A. Lichtig  April 3, 2008

Howell says Lichtig applies the same skill he uses as a river guide—his passion is whitewater rafting—to navigate the  rapids of complex construction projects: “He is the careful guide and coach the industry needs for radical change,” says Howell.

The IFOA has already been used to help craft the ConsensusDOCS 300 Tri-Party Collaborative Agreement, published last year. “Sutter Health’s advancement and real-world experience with a tri-party collaborative agreement, along with [St. Louis-based contractor] Alberici’s experience at SSM Cardinal Glennon [a hospital project that used Lichtig’s contract] provided the foundation for the ConsensusDOCS drafting group to draft the industry’s first standard integrated agreement of owner, constructors and design professionals,” says Brian M. Perlberg, senior counsel with the Associated General Contractors of America, Arlington, Va. “Many owners are intrigued by and are actually signing ConsensusDOCS 300 as a better path forward for a contractual relationship that increases efficiency and reduces adversarial posturing.”

Lichtig’s influence also is in Integrated Project Delivery: A Guide, released in June by the American Institute of Architects and AIA California Council. A major design firm also has used Lichtig’s contract to craft its own relational contract. Architect NBBJ emulated the IFOA “because we believe it consists of the best ideas for a collaborative design-and-construct process between the designer and contractor while preserving rights for the owner to direct the process and redress any failures of the design/construct team,” says Tom Owens, a principal and general counsel for the Seattle-based firm. “NBBJ believes that Will Lichtig’s IFOA delivers the spirit of collaborative models formulated outside the U.S. in a format that will be acceptable to the construction culture of the U.S.”

The idea behind the relational contract is to distribute project leadership and decision-making. Decisions are made from a system point of view not from a selfish point of view. “The question isn’t ‘how does this affect me commercially;’ It is ‘how does this affect the project,’” says Lichtig.

Lichtig says the IFOA was received cautiously at first, especially by the design community. “We were asking them to align themselves in different ways with constructors, working elbow-to-elbow through design” and sharing risk and reward, he says. That was major.

Sources say if anyone can move the industry forward, Lichtig can. “Will is a quick study and a precise listener wielding impressive candlepower,” says Booth.  “The lean concept Will and Sutter Health have introduced is the beginning but not the end of what will rationalize the existing construction model.”