For over 100 years, the American Institute of Architects (“AIA”) has published form contracts for use in the construction industry. AIA form contracts and general conditions are widely used in connection with private construction projects, and AIA documents are also used in many Idaho public works construction projects. Periodically, (typically every ten years or so) the AIA revises its documents. In the Fall of 2007, the AIA revised its documents and this article will focus on a few of the revisions made.
In the past, a great many of the AIA documents have been a collaborative effort with more than a dozen industry organizations representing contractors, subcontractors, engineers, and owners. Previously, the AIA sought and received the endorsement of the Associated General Contractors (“AGC”) organization for one of the industry’s fundamental documents, the AIA A201, General Conditions of the Contract for Construction.
However, in 2007 the AIA contract documents were not endorsed by the AGC. AGC’s chief executive, Stephen E. Sandherr, stated in a letter to the AIA, “…Considering that the AIA A201 has received AGC’s endorsement for the past 50 years, I was taken by the consistently strong message [by AGC members against endorsing] the revised A201. …[O]ur membership expressed grave concerns that the new 2007 edition of the A201 significantly shifts risks to General Contractors and other parties outside of the design profession. …This approach starkly contrasts with the more collaborative and innovative direction of our rapidly changing industry. …Consequently, our membership concluded that the A201 does not positively serve the industry as a standard document because it does not fairly balance risk amongst all parties.” This debate could be the subject of a separate article, but suffice it to say that the AIA and the AGC did not collaborate on key 2007 construction documents.
Some of the significant changes in the 2007 documents are: Mandatory Arbitration is Out. In the new AIA A201 document, perhaps one modification stands out from all the rest. Despite the fact that the AIA has incorporated an arbitration clause in its documents for over 100 years, mandatory arbitration is no longer contained in the AIA A201 document. Traditional litigation now becomes the default way to settle a dispute, unless the parties have actively chosen arbitration. In the past, arbitration was the preferred method of dispute resolution, but as of 2007, arbitration becomes a secondary option that the parties must opt for.
Other changes to the A201 and other documents include modifications to the role of the Initial Decision Maker, consequential damage waiver, increased liability exposure regarding hazardous materials, and time limits on claims. Members of the Construction Specification Institute have expressed concerns over the 2007 A201 lack of definition of the term “RFI” – request for information or request for interpretation – a potentially fuzzy area that, if suggested language contained in the A511 were to be included in the Supplementary General Conditions, could lead to reimbursement for the Architect’s time to review such questions. A detailed discussion of these changes and others is beyond the scope of this article, but changes need to be reviewed prior to contract execution.
The new AIA A401 Contractor-Subcontractor Agreement form includes changes that will have a noticeable effect on the way subcontractors conduct business. Mediation and binding dispute resolution provisions are covered in Article 6, which provides a detailed path by which mediation will be made. Any claims not settled by mediation will fall to the form of binding dispute resolution chosen at the onset of the contract — arbitration, litigation, or other. Also new in the 2007 A401 is inclusion of an additional insured requirement. This provision has raised the concern of the American Subcontractor Association, which states in its website: “ ‘Additional insured’…their [those two words] inclusion can result in numerous headaches for subcontractors, their presence should always immediately signify increased costs and more exposure to claims and loss.” Additionally, Article 11.3 of A401 increases the period of time contractors have to pay subcontractors from three working days to 10 working days after the contractor receives payment from the owner.
Also, Article 12.2 of A401 states, “Acceptance of final payment by the Subcontractor shall constitute a waiver of claims by the Subcontractor, except those previously made in writing and identified by the Subcontractor as unsettled at the time of final application for payment.” In other words, subcontractors need to make sure their paperwork is in order and all claims have been submitted in writing before accepting that final payment.
Geoff McConnell is a partner at McConnell, Wagner, Sykes + Stacey PLLC, focusing his practice in the areas of construction law, commercial litigation and business law. He has been recognized each year since 2008 by Best Lawyers in America and Mountain States Super Lawyers for his legal expertise in construction law, litigation and government contracts. Mr. McConnell can be contacted at (208) 489-0100.
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