Source: https://www.icemiller.com/ice-on-fire-insights/publications/summary-of-changes-in-aia-contracts-between-owner/
Timestamp: 2019-02-19 03:59:50
Document Index: 265170945

Matched Legal Cases: ['§ 7', '§ 8', '§ 9', '§ 5', '§ 8', '§ 12', '§ 2', '§3', '§3', '§ 3', '§ 4', '§ 7', '§ 9', '§9', '§14', '§ 15']

Summary of Changes in AIA Contracts between Owner and Contractor
Every ten years the American Institute of Architects (AIA) publishes revised versions of its widely recognized and utilized standard form contract documents. Per its traditional cycle, the AIA published updated form contracts and documents in 2017. This article summarizes some of the terms that have been revised in the following, frequently-utilized, AIA form contracts between Owners and Contractors: A101-2017 (stipulated sum agreement form), A102-2017 (cost-plus agreement form), and A201 (General Conditions).
A101-2017: Agreement between Owner and Contractor utilizing stipulated sum as basis for payment
Contract Time Provisions (Article 3) – The revised standard form provides options for selecting when the work will commence and when it will be substantially complete. It also provides opportunity for including different substantial completion dates for separate parts of the project.
Contract Sum Provisions (Article 4) – Specific sections are included for insertion of liquidated damages and also for bonuses and other incentives that might impact the Contract Sum.
Payment Provisions (Article 5) – More detailed provisions have been included for computing progress payments, including specific references for adding amounts for portions of Construction Change Directives the Architect determines are reasonably justified and for deducting amounts for sums not intended to be paid to subcontractors or suppliers. There also are places to list any items to be excluded from the withholding of retainage ("such as general conditions, insurance, etc."). The agreement contemplates an application for payment, upon Substantial Completion, specifically for all retainage that has been withheld.
Termination Fee (§ 7.1.1) – The revised standard form contract contemplates there will be an agreed-upon termination fee paid to the Contractor in the event of termination for convenience. The termination fee might be used by the parties to capture the concept (removed from the revised A201 General Conditions, see below) of compensating the Contractor for overhead and profit on work not yet completed.
Insurance and Bonds – The revised form deletes the sections on insurance and bonds and moves them to a new Exhibit A to the A101. Exhibit A lists types and descriptions of various insurance coverages, and parties are able to mark those coverages they agree will be required.
Notice (§ 8.6) – The new form encourages the parties to agree to a structure for providing notice to each other through e-mail or other electronic means.
Enumeration of Contract Documents (§ 9.1) – Although Building Information Modeling (BIM) has not yet been adopted across the board on all construction projects, perhaps in anticipation of its continued increased use, the revised form contract lists a BIM and Digital Data Exhibit as one of the contract documents. The default also lists a Sustainable Projects Exhibit and Plan as contract documents.
A102-2017: Agreement between Owner and Contractors where basis of payment is Cost of the Work Plus a Fee (with a GMP)
Changes noted above for the A101 also appear in the A102. Additional revisions include:
Guaranteed Maximum Price (§ 5.2) – The Owner authorizes the preparation of revisions to the Contract Documents to incorporate any assumptions identified by Contractor as forming the basis of the GMP, and the Contractor has a duty to advise of any inconsistencies. The parties are allowed to identify conditional alternates in the GMP calculation. Subcontracts are presumed to be for a lump sum. If a subcontract is awarded on the basis of cost plus a fee, the subcontract shall be subject to record-keeping and audit requirements. Labor rates that form the basis of the GMP shall remain unchanged for duration of the project unless changed by a Modification.
Reimbursable Expenses (Article 7) – A number of expenses are listed as being reimbursable, including self-insurance costs, captive insurer costs, wages of supervisory and administrative personnel even when located off-site, on site storage costs and costs of defense arising from infringement of patent rights (provided the Contractor did not have reason to believe the requirements of the Contract Documents were a copyright or patent infringement and did not fail to provide such information to the Architect). Bonuses, profit-sharing incentive compensation and other discretionary payments are not reimbursable without Owner's approval. (§ 8.1.2).
Payments (§ 12.1.5) – The revised form requires that an agreed schedule of values allocate the entire GMP among various portions of the work, any contingencies and the Contractor's fee (though such allocation shall not constitute separate GMPs for each item in the schedule of values), and that each application for payment show the percentage of completion for each portion of the work. Proposed transfers of costs from a contingency to other cost items must be submitted with supporting documentation.
A201-2017: General Conditions of the Contract for Construction.
Evidence of Owner's Financial Arrangements (§ 2.2) – The new form provides that in the event of one of the following, the Owner is required to provide the Contractor with reasonable evidence of financial arrangements to fulfill contractual requirements if requested by the Contractor: failure of the Owner to make a required payment; Contractor identifies a reasonable concern regarding Owner's ability to make payment when due; or there is a change in the work that materially changes the Contract Sum. If Owner fails to provide the reasonable evidence within 14 days of such request by Contractor, Contractor shall be entitled to stop the work, and the Contract Time and Contract Sum shall be extended and increased, respectively, for any reasonably resulting delay or cost caused by such shutdown and start-up. The Owner may designate the financial information furnished under these provisions as "confidential," in which case, the Contractor may not disclose the information unless required by law.
Warranties (§3.5.2) – All warranties shall be issued in the name of the Owner or be transferable to the Owner.
Schedule (§3.10) – Contractor is required to include specified details in the Schedule including, interim schedule milestone dates, apportionment of work by construction activity and time required for completion of each portion of work. Contractor also shall provide a submittal schedule. Contractor's failure to provide, or meet the requirements of, the submittal schedule shall bar Contractor from an increase in Contract Sum or extension of Contract Time, based on the time required to review submittals.
Reliance on Performance and Design Criteria (§ 3.12.10.1) – More than just not being responsible for the adequacy of the performance and design criteria specified in the Contract Documents, the revised form states that Contractor shall be entitled to rely on such criteria.
Communications (§ 4.2.4) – Owner and Contractor are no longer required to communicate with each other through the Architect but are to include the Architect in any communications that relate to or affect the Architect's services and are to notify the Architect of the substance of any direct communications between them regarding the Project.
Minor Changes in the Work (§ 7.4) – Under the revised form, if Contractor believes a proposed minor change in the work will affect the Contract Time or Contract Sum, Contractor shall notify the Architect and shall not perform the work. If Contractor performs the work without prior notice of the affect to Contract Time or Contract Sum, Contractor waives any right to an adjustment.
Releases and Waivers of Lien (§ 9.3) – Contractor is required to provide releases and lien waivers from subcontractors and suppliers with its payment application. If the Owner has met its payment obligations, the Contractor is required to indemnify and defend the Owner against any lien or other claim for payment by any subcontractor or supplier. (§9.6.8).
Termination by Owner for Convenience (§14.4.3) – The revised form no longer explicitly requires the Owner to pay the reasonable overhead and profit for work not executed when there has been a termination for convenience; however, it provides Contractor shall be paid for costs incurred by reason of the termination, including costs attributable to terminating subcontracts, as well as the termination fee set forth in the primary agreement. The termination fee may serve as a mechanism to compensate the Contractor for the overhead and profit provision that was deleted from the A201.
Time Limits on Mediating or Challenging Decision by Initial Decision Maker. (§§ 15.2, 15.3) – As before, disputes between Owner and Contractor are submitted to an Initial Decision Maker that has been designated by the parties. If an initial decision has not been rendered within 30 days after the Claim is referred to initial decision maker, the party asserting the claim may demand mediation and binding dispute resolution without a mediation having been conducted. Either party may, within 30 days of conclusion of a mediation, or 60 days from the date a mediation was demanded, demand in writing the other party file for binding dispute resolution. If such a demand is made and no filing for binding dispute resolution is filed within 60 days thereof, then both parties waive their rights to binding dispute resolution with respect to such initial decision (and it becomes binding.)
The provisions discussed above are not an exhaustive list of all the revisions to these contracts, and other AIA forms not discussed here also have been revised. However, these provisions illustrate how substantive rights are potentially impacted by the revisions. Thus, parties to proposed contracts should review carefully the new forms in their entirety and/or consult with legal counsel, prior to executing.
Rebecca Seamands is a partner with Ice Miller LLP. Ice Miller's Construction Practice is ranked as a National Tier 1 Practice in U.S. News & World Reports' Best Law Firms. Rebecca practices construction law with a focus on assisting clients in preparing and negotiating construction and design contracts as well as handling construction disputes. She can be reached at rebecca.seamands@icemiller.com or (317) 236-5889.