White Out Smelled Great, But Our Contracts Need to Evolve

And there's a lot of tongue in cheek in there because we have a lot of fun in these conversations . If you're not following KP on LinkedIn , you should be .

He posts two , maybe three times a day about what he's seeing , what he's hearing , as he goes around and consults with different AEC firm leaders , as he's out on the speaking circuit , as he's writing books , as he's out on the speaking circuit , as he's writing books , as he's investing in startups that are focused on the built environment .

That's what he's posting about . He's posting about the things that he sees , the things that peak his interest , the things that confuse him .

Hey , why don't we do this ? And all of these posts are sometimes they're meant to stir the pot , certainly , but they have a lot of insights in them . So you should be following KP .

You won't be able to connect with him , probably , because he's usually maxed out on this number of connections there on LinkedIn , but KP Ready R-E-D-D-Y is who you should be following there on LinkedIn . So , hi KP , how are you ?

a piece of glass sounds like an entertaining podcast . As usual . You have posted on LinkedIn and garnered a good bit of reaction over AIA contract documents , so we'll start this out the way that we always do . I'll read this is a very short post . I'll read it and then you and I can unpack it together .

It goes something like this Industry standards like AIA contract documents could be the single industry artifact that tethers the industry to . This is the way we've always done it . All right , so in there you have included the phrase that I think is the most dangerous phrase in our society today .

This is the way we've always done it , or because this is the way we've always done it . But tell me more AIA contract documents . I've got some thoughts on this . We've talked about this before we went live , but AIA contract documents could be the single industry artifact that tethers the industry to . This is the way we've always done it .

So I teach pro practice at the undergrad and the grad level and this is generally the industry standard textbook , if you will , for pro practice in architecture school and it's published yeah by the american institute of architects and when was it published , like when was the original published uh , the version that I have and you know I've had this for a while ,

but the version that I have is copyright 2016 . As we're talking on Google , let's see what the most recent version is .

Boys and girls so many things in there . Paper ivm selector so many uh old typewriter .

Probably before those people were born came up with some standards , and those best practices and ideas came from working on lots of projects and understanding hey , here's a better way to do it . And they started to go down this road of standardization . So all this kind of institutional knowledge got curated on stone tablets to be put into a book , right .

And so then we took all this- .

Some of those formulas got thrown into spreadsheets early on and those spreadsheets turned into software right . So the basis of almost all software in our industry is driven by this institutional knowledge that was codified in books . Sure , Right , Some of those are great , Like some of them are physics based , right .

And I think what happens is when you look at some of these standardized docs that are not relevant anymore , people just kind of go through the motion and it doesn't change anything . They're not thinking about improving . You know , in the government world for like RFPs , right , we went from SF-254 , 255 . Now I think it's the SF-330 .

So I have to submit to the government . Here's my experience in the forms by which they've been provided right . And what does it tell you ? It tells you nothing tells you absolutely nothing . It's not a decision point , it's a standard , you know , um ?

So I think these are the type of things that kind of hold us back , because we've created forms for everything , which which made a lot of sense when you had to use a typewriter and white out to make your corrections I think you're right I mean white white house smelled great , but beyond that it wasn't really that there's a blast from the past .

We talk about this , this constant pushback against those forms for the rfps , because those , those forms don't allow the engineering firm , right from from their point of view , to stand out , right , to differentiate themselves , nor are they a good mechanism for making good decisions right in terms of hiring the appropriate firm for this project or that project or the

other project . They're great for creating checklists . So you know that maybe that's the end all and be all for standardization of these forms .

One thing I think is different about the AIA contract documents is , you know we've got years and years of learning and this cuts both ways Right why there are plenty of architects out there that are not using a contract documents who suffer because they're of documents . That represents , well , all parties in the agreement , as the architect .

So , says the architect ? Sure , um , well , it's , it's when the owners wanted to put in indemnification clauses and things like that . But , um , but you know , these , these things are iterated . They're updated every seven years or so , which means that a committee goes over these things and tweaks them Right . And what happens ?

Things like COVID happen , things , you know , all kinds of things happen . Covid would be a big game changer in terms of of things that might influence acts of God and whatever clauses in AIA contract documents .

But what they don't catch up with and we know who's not on that committee the people that are not on those committees are people that are looking at innovation . They're thinking about different

ways that things could be designed , built , delivered , operated , et cetera . All the different sections , all the different agreement types that are in the contract documents . So are they relevant ? Maybe they're relevant . Are they irrelevant ?

No , they're not irrelevant , but they're definitely not pushing us forward in terms of evolving the business of the built environment .

So I hate that clients are commoditizing us , but here's the form that we filled out . So there's pattern thinking there around , like I don't want to be a commodity , but I want everything to fit into a form . The second piece that is fascinating fit into a form . The second piece that is fascinating . The owner is our client .

We are going to tell them how they can buy from us . So go into an AT&T store and when they show you like , hey , here's how we sell self-service to you , no , no , no , that's not what . I don't want to do it that way , I want to do it this way . I want you to charge me based on the quality of my call , not the quantity of my calls .

See how that conversation goes . I think that's this weird thing . It's this very similar pattern around the differences at AT&T . They can dictate these things . It's their business , you can choose it or you can go down the street .

But when the industry writ large says here's how we're going to do business , and the owner is now being told like this is how I want to do business , this is the only way you can do business . You know it's borderline collusion in a way , right Like here's how we're going to tell people how they can do business with us , which I think is just fascinating .

You know the blame , the client that you know we've talked about , blame , the client , scenarios , but I don't think that there's an incentive to do something different that aligns with the owner's difference .

And if we say every project is different , we can say those things , but if we're going to default to some forms and contracts that apply to all projects , then every project isn't that different per se , and I'm not just picking on . AIA contract documents .

There's just plenty of standardized documents which made a lot of sense at a point in time pre-technology , pre-ai , pre-everything that maybe it's time to re-look at some of those things .

They're not coming from the AEC side , the architecture or the engineering side , nor are they part of the AIA contract documents . So if anybody out there is listening and you're unfamiliar , it's like there's we are blurring the lines a little bit between some of the documents that we're talking about . Yeah , I think it is interesting .

Architects will , or engineers or whoever will , say this is the way that we want to work with owners , and I was actually having this conversation . I met a friend for breakfast this morning and we were talking about the difference between .

Maybe that's not the right way to explain it , but we were talking about hey , we've got subject matter experts , we've got subject matter experts in our firm . That's fantastic . How does that expertise mesh with what clients want and what clients see as value , right ?

So in our incubator so for those of you that are not familiar we have a startup incubator and I guess it's two Mondays a month KP and I sit down with our startup founders and we work through their issues and we focus heavily on customer discovery . How many firms in the AEC world are doing customer discovery right Now ?

That's that's not specifically related to contract documents . But if we were to take that idea and go , what about customer discovery as it relates to AI ? Contract documents , which you know are much to to a celebration , are essentially the industry standard documents .

A lot of those departments of transportation that , um , that have their forms would likely uh , push , push the AIA contract documents . Um , a lot of colleges , universities , health , health , uh uh networks will insist on AIA contract documents as their , their agreement basis .

But but when those committees get together to discuss the next version whatever the next version of AI contract documents is , it seems like it ought to be coming out in a couple of years from now they're not going through a customer discovery process before doing that .

They're looking at , you know , theoretical protections , but they're not looking at how how can professionals serve clients better ? That's , that's nowhere in the equation .

There's so many people that use AI contract documents that don't actually know what the documents say ,

they don't actually follow the documents , and I think that that's an oddity of this as well . Right , hey , we've got these documents . They've been the standard , like you said , since typewriters or before , since stone tablets . But but many aren't actually educated , don't actually know what those , those documents say .

Now you may be at a firm that has a specialist in your firm , or maybe even in-house counsel that that deals with with these documents , but my , my guess is that most architects , engineers , contractors , back in a past life , when I was doing design , build , development , and you know , I'm working with a subcontractor one day and so here's the agreement , and he

looks at it and it's one of the standard AIA contract documents . There were more . I had this figure in my head at one point there were more pages in that thing that he had to sign than he was going to get paid , like if you were to sign $100 to each one of those pages .

He wasn't getting paid that much to do his work , but he had to sign this , you know , like this 32-page document . And he looks at it and he goes this is absurd . He lays it on the hood of his pickup truck , flips to the back and signs it Doesn't read any of it , right , right . So there's that reality of it , right , right , right .

So there's , there's that reality of it , but there's , there's a good bit of of of . I don't think there are that many cases that go to court , but there's a good bit of dispute that's handled .

I just think , you know , I hear about all these liabilities and liabilities and it feels like a lot of the small liabilities right , like oh , we didn't you know , we we missed something on a set of drawings somehow kind of gets figured out between the architect and the contractor , it's like incorporated in a change order or what like you know , like that , somebody

pays for it I mean , no one pays for everything , but you know , generally speaking , but it doesn't feel like , you know , when people say , oh , contractors , take on so much liability . I haven't seen a lot of contractors go out of business .

I'm sure they're , I'm sure they exist , you know , and of course I deal with a different line of contractors and I'm sure there's some smaller contractors that mess up , but any contractor of size , right that that you know name brands . I've never heard of like one of these big company , big firms , big construction companies going out of business .

They all seem to be doing okay , they're , you know , I mean sure Then maybe they have to like settle some stuff here and there or whatever . Sure , they have their levels of insurance and and and all that , but it doesn't feel like as much as people , I would say as much as people talk about liability in our industry .

I don't feel like I see much evidence of detrimental liability in terms of how many architects lost their license last year , how many , like , how many architecture firms got in , construction companies and engineering firms like went out of business last year .

And I was talking to some private equity people that are , you know , buying these firms and , um , you know , like , because they're buying liability too , and I was like how often do you not do a deal because there's too much liability on the books ? now , never , we still do the deal . The only liability we care about is receivables liability .

A lot of the professional liability is kind of maybe over , maybe a little bit exaggerated no , maybe it is .

But you know , I I've seen instances over the course of my career in firms where , you know , the architect ends up ponying up , maybe it's , maybe it's the deductible for their insurance , or maybe it's $20,000 or something to to pay for moving a wall , or you know whatever .

You know , whatever those things are , but you know that that liability , that that that legendary liability , is generally catastrophic things right , we actually we , we had a uh an example here in Indianapolis . It was just a catastrophic thing . It was a parking garage collapse . That's real right . But that's pretty rare .

If only they were our peers and you end up with a bunch of people on it . So it's like , okay , we're not going to jury because , like nobody will understand this at all right right , uh , and if , if anything , they , you know they might blame the architect because they're too fancy , they're the fanciest people in the room they'll probably blame the architect .

I mean that poor contractor , he's just one of us , like he couldn't have done it wrong , like it's always trying to go after the little guy you know , like who knows what happens in a jury trial ?

So got into a situation um like that years ago and , as it turns out , the um how much can I say ? It was a . It was a multi-family project and many of the multi-family developers have their own in-house construction managers etc . That that are .

You know , they're kind of charged with with constructability and things like that and somebody in-house yeah , was learning in house was learning you know , was learning Revit , I guess it was . And they , they actually changed one of our drawings . They changed a certain detail that produced an ADA violation and we were eventually dismissed from the case .

It was , it was originally . It was brought against us , we were dismissed from it . Of course they name everybody .

And then what's interesting in those types of cases is once , once they find one , they go back and look at all of your , all of your , by the way , there are lawyers that just specialize in this have some friends in multi-family development .

Oh , let's just move it this way a little bit like they do with all this on the fly stuff like let's just move it this way um , so that was like a whole growth industry for the legal profession , but the good news is like . There's nobody at the ADA right now because they've all been dozed out . Not to worry about that anymore .

So I get tapped and I've got a student this year and he's doing a fantastic job . I love , I love what he's doing , I love the way he's demonstrating what he's learning and everything else .

And one of the things that's things that has struck me this semester is as we have all these like mid-semester reviews is he has other advisors that are focused on the design side and those advisors have said out loud that they do not understand . They do not understand the architect as developer business model , so they're not going to comment on that .

And my point is this is one of the problems when you don't understand your client , when you don't understand the owner and what matters to the owner and how the owner's pro forma , or even what a pro forma is , there's a problem right , how do you serve clients that you don't have any idea how they operate or how they derive value or anything like that ?

And so in working with this particular student on this project , we go through these things and one of the biggest things that is misunderstood or not understood or not even realized about that

business model is that the reason people shy away from it is that they don't understand risk . They don't understand and we're talking financial risk at this point Maybe not the same necessarily as AIA contract documents , but the documents cover that . They don't understand the mitigation of risk .

Now , if I'm an architect , as a developer , nobody's got timesheets . There's no timesheets . It's like get it done Right , get it done . Here's the economics of it and we need to make X right . You know , risk is Y , we need to make X and let's run . So I think that is a .

If you think about AI on its own , like , well , we were going to build less hours , or what like that efficiency . Efficiency to what benefit ? Efficiency to the current business model ? That doesn't . That's really not that helpful .

Efficiency to be in the architect as developer business a hundred percent yeah , efficiency to the current business model is commoditization , right , right , that's .

He , he's one that he charges everything hourly and you've got to get away from that .

Well , I , you know , I , I can't get away from that and and it's like , well , here's the thing , if you're charging hourly , then you're penalized for efficiency , you're penalized for doing your job better , because if it , you know , if you charge $150 an hour , $200 an hour , $400 an hour , and it used to take you 10 hours , and now suddenly you can do it in

eight hours , you got better and you lost , so that that efficiency to the current business model is actually a detriment to the business model so what you know , I know you like teach some stuff , but is there a defined model , like I'm an architecture firm and I want to be a developer architect as a developer .

One is architect and developer , the other is architect as developer and I can never remember which one is which , but they have kind of created the playbooks . Jonathan is two decades down the road . Further than James Petty is just experience and age and everything he is currently .

I haven't talked to him in a in about a year now , but last we talked he was getting ready to self-finance . Okay , this is an architect right he's getting ready to self-finance a 100 and some odd million dollar project yeah and he's done that . Yeah , I think it's an interesting topic you should have him on .

I mean , I , I think in a world like we've gone to a whole nother , I think we could probably edit this pod into three pods , um , but I do think in the world of like , what does AI mean for the profession ? I think this is what AI means for the profession . Right , like it means . Like , what is the net new business model ?

Everybody's like oh , should we do lump sum now ? It's like you're still in the same construct right . But if you can tell me I can use AI to design a building in the 10th of the time , then you should be a developer , right ?

Because one of the biggest areas and oh , by the way , oh , I can use AI to adapt and change as the project needs change faster , right , I'm not having to redraw everything or whatever . I mean , I think like AI could be the number one catalyst for moving into that model .

Why is this developer keep pushing the schedule so much ? Well , because every day is costing them money . So if you do it faster , it's , it's more margin , or maybe it's the difference between between profitability and not . Yeah , yeah . So that's a really good point . If you can , then maybe you do move into that model .

And I think the big point is what's the new value proposition ? It's not the documents . You've got the AIA contract documents .

You know , that's one type of document that we've been talking about , um , though those are protecting things that that are evolving faster than they ever have , and the documents are already there , are only being updated about every seven years or so . I'd have to fact check that . If you're listening to this , I think that's accurate , but it may not be .

So they're certainly not keeping up with changes in emerging technology .

That's , that's not the value proposition . The value proposition is what does this thing that you're designing for your client allow them to do ? Sell pizzas , showcase art , run data centers , whatever the project is .

It's not actually a sport , it's an activity .

They're buying the availability to play as much pickleball as possible , right ? And if every time it rains you can't use the pickleball court , yeah that's a great example right that . It's not about the court . It's about the life I want to have . I want to play as much pickleball as possible .

Not me , don't quote me , don't take that quote out of context , um , but it's one of those things you put that into a social media post . Right , kate loves pickleball um it's , but it's really more about that , right , it's really more about the quality of life , and you just need to put that into a social media post .

Kate P loves pickleball it's , but it's really more about that , right ? It's really more about the quality of life and availability , and if you want us to raise the pickleball court a foot and a half , it increases your quality of life , if that's what you want to do . It's not about the court . It's not about the court .

You know it's about the , about play time . So I do think it's it's .

Hey , we can charge you know x for whatever . Or we have more , more uptime , or , or we can be open longer , or we have more seats , or whatever it is . The value proposition transcends the thing that you're designing 100% . Yeah , all right , so we have two quotes

We've solved everything . We solved everything and we have two great social media quotes White out smelled really good and KP loves pickleball . Those are your takeaways from our conversation today , but let me go back . Let me reset your post for those of you that are listening to this in the future . It's from about March 19th , I guess 2025 .

It goes like this Industry standards like AIA contract documents could be the single industry artifact that tethers the industry to . This is the way we've always done it . I actually agree with that . I think KP was wanting an argument , but he's not really going to get an argument from me on that .

Currently , as we're speaking , we have two innovation leaders mastermind groups , and so the folks in those groups are generally director of innovation , chief innovation officer , other folks with those types of roles . We have a construction technology leader leaders mastermind group .

We have a early and mid-career mastermind group soon to come , our owners group and our sustainability group and our ai on the keyboards group . All those are rolling out soon . If you'd like to connect with the type of people that participate in those discussions in those groups , you should come to atlanta .

The link , the registration link , will be in the comments here , wherever you're seeing this YouTube , or in the show notes .

I think if you are in the AAC industry and you are ambitious , not joining our group is career limiting behavior . I mean that is where it's going to . I mean , when I have a call later with CEO of an ENR 50 company and he's like asking like hey , where are all the talented people hanging out ? Like what should I be doing ?

I mean it's becoming like one of those things . It's starting to become one of those things I really do think . I mean if you're not ambitious , then you can unfollow me on LinkedIn , but if you are ambitious and want to drive change in this industry , I think it's literally like I mean I'm just seeing the fruits of our labor .

I mean , because getting these things going , as you know , and I'll tell you , it's very , very hard ,

you know , and I think the way I'm seeing the collaboration and how people are working together and how they're , you know , adopting things faster and mitigating risk together , and it's become a very interesting group . And I think , you know , unless you lack ambition , then uh , I don't know , I don't know how else to stress it , can't stress it enough .

And now that we have , now that we have owners in the mix , and the owners are telling me , like I only want , I mean I only want to meet with the most innovative firms , like you know , uh , and I think we're we haven't formally announced that people can , they'll listen .

It's's a little Easter egg here , like I think we're doing an industry demo day , because all these owners , these 50 owners , have come to me and said we never get yeah , we never get to talk to AE firms outside of the procurement process . And once we're in the procurement process , we don't get to . We have to follow our process .

We don't get to have certain conversations and all that . So it's going to be a really interesting opportunity for some of these AEC firms that are doing highly innovative things to pitch some of the biggest owners in the world .

This is not a user conference , by the way it is not .

It's a group of people that , to the person , all have growth mindset , all show up to give and take away and , like you said , they're learning together , they're developing together , they're figuring out how to be more innovative together and they , they , the group , think , amplifies and accelerates the growth .

And I don't I don't know that , I know a better way to describe it . You know , you think about whatever it is that you're struggling with . There's somebody else probably multiple somebody else's in that mastermind group .

They're struggling with the same thing and you all get together and you have that aha moment together and you all overcome and accelerate your growth together . And I mean that's that's what happens in these groups .

If you want to be a better business person , if you want to , like , understand the complexities of technology , if you want to be a better business person , if you want to understand the complexities of technology , if you want to kind of use that part of your brain that you're maybe not get , that's not getting developed at your firm or through the alphabet soup

of organizations , I really think it's . I mean , it's really that . I mean I get the feedback from . Folks are like man , I don't know where I would have even learned this Right , do they learn this at Harvard and MBA school ? Or like no , I don't think they do there either . Like you , you just learn things that just are kind of not written down anywhere .

It's funny you say that because you and I I don't know three , four , five months ago something like that we were talking about we launched the early and mid-career mastermind group , and part of the impetus for that was my background is architecture and I don't do architecture .

Your background is civil engineering and you don't do civil engineering , and we're not really interested in teaching people to be a better architect or a better civil engineer .

We're interested in supporting the people that want to do something else , that look up to the innovation leaders or the construction tech leaders , or or want to be on the front edge of innovation for the built environment , and that's what that group is for .

And and I love that group because we've got you know , on any , any given week , you know we'll have 20 or more people showing up and they ask fantastic questions of our , our guest mentors , and , and you know we'll have 20 or more people showing up and they ask fantastic questions of our , our guest mentors , and and you know they're .

Well , my background is is structural engineering , but what I do is this and I love it . I love that introduction because it's it's your introduction and it's my introduction , and it's the introduction that really um . If we look at the change makers , it's the same introduction that all the change makers have yeah I love it . All right , fun conversation today .

Again , everything that we've talked about that deserves a link will be in the , in the show notes , wherever it is that you're consuming this video or audio as you listen to this .

Post your comments , post your questions , post your recommendations for other things for us to talk about , other resources , and and our production team will make sure that we , our production team , will make sure that we gather up all of those comments and incorporate them in the future . So , kp , thanks for joining me today .

All right , thanks , jeff , and for all of you out there that are listening or watching , wherever you are , thanks for joining us . We'll be back again . Can you hear that ?