Every decade, the American Institute of Architects (AIA) update their construction contract forms for commercial projects. In April of this year, AIA released the latest version.
The previous release, in 2007, resulted in some construction stakeholders to jump out of their seats as many clauses within the contracts were sources of contention, seen by some to be anti-collaborative and placing too much power in the hands of the Architects, yet little risk seemed to go in the direction of the Architect. Because of the 2007 release, other contract forms picked up some marketshare in the contracts arena, modest gains, but gains nonetheless. Perhaps the biggest growth came from the ConsensusDOCS family of documents (which I’ll write about soon). Also, as a result of the 2007 AIA forms, many industry groups across the country documented their issues with the contracts and sent them to AIA to go on the record.
I was part of one industry group that spent a few years (circa 2010 to 2013) debating the AIA contracts. The group was the AIA-MBA Joint Committee. The Joint Committee is an industry group that meets monthly to discuss industry trends and problems, and hopefully from the discussion this group can draft recommendations to improve the construction industry. Concerning the AIA 2007 contract documents, we authored recommended amendments to the 2007 AIA A201 General Conditions. We published this paper on October 15, 2013. Our publication focused on four provisions within the 2007 A201 that we felt needed to be amended for the betterment of the industry.
This AIA-MBA Joint Committee publication was unique in that it was a document created by a task force within this committee that consisted of Contractors, Architects, Owners, and Attorneys. Most of the publications on the AIA contracts that I read were written in a ‘silo’, authored by Contractors or Attorneys or Owners or Architects – but this effort was a collaborative one involving major stakeholders.
Now let’s look at the four provisions that the AIA-MBA Joint Committee recommended to change, and let’s see how these provisions appear in the 2017 A201 version:
- § 2.2 INFORMATION AND SERVICES REQUIRED OF THE OWNER
Due to the financial crisis that doomed the economy during the past decade, the AIA-MBA Joint Committee’s 2013 publication thought a more assertive response was needed concerning an Owner responding to a request to furnish financial information. Back then we recommended using ‘shall’ instead of ‘may’ as one step in the right direction. In the 2017 A201 version, the word ‘shall’ was inserted, plus the updated General Conditions have more comprehensive requirements regarding the Owner’s duty to provide the Contractor with the information concerning its ability to pay, and have provisions allowing a Contractor to refuse to proceed with the work or to suspend work if such information is not provided.
In all honesty, while it may appear the Joint Committee was correct with this recommendation and the AIA wisely conformed to the same logic, one must consider the timing from both groups. The AIA released its 2007 revisions prior to the economic collapse and the Pittsburgh group responded after the collapse as the construction industry was digging out of the recession, a time when financials were extremely important.
- § 3.10 CONTRACTOR’S CONSTRUCTION SCHEDULE
The recommendation to the 2007 A201 was that upon contract award a Contractor should submit a schedule for all work that falls under a project’s critical path; instead of a complete and comprehensive submittal schedule.
In the 2017 A201 release, the AIA responds by stating a Contractor submit a schedule for the Owner’s and Architect’s information; wherein the previous version intended to submit a schedule to be approved by the Architect. Additionally, the newest version states the schedule shall focus on big ticket items – commencement of work; milestone dates; substantial completion; apportionment of work by construction activity; etc. And the schedule shall provide for the orderly progression of the work to completion. By including the Owner in this informational sharing exercise, the AIA demonstrates the collaborative spirit that the industry needs.
- § 4.2 ADMINISTRATION OF THE CONTRACT
For this provision, the Joint Committee did not recommend language change; however, they did want to stress a collaborative approach to a project while abiding by the communication protocols. The 2007 version encouraged communication, but only through the Architect and the recommendation also encourages communication, but direct communication (i.e. Contractor to Owner, Contractor to Architect, etc.).
In the 2017 A201, the AIA improves this provision by authorizing direct communication between the Owner and the Contractor, as opposed to the two stakeholders communicating through he Architect.
- § 9.5.3 DECISIONS TO WITHHOLD CERTIFICATION
A provision in this section was added to the 2007 revisions to the A201 to address the situation where a Contractor has failed to make payment to Subcontractor(s). The intention for this addition a decade ago was to give the Owner an alternative to withholding payment of an entire payment application. AIA viewed it as a way to give an Owner flexibility in avoiding the need to withhold an entire payment, allowing some work to be paid for and enabling the Owner to issue a joint check to the Subcontractor that was not paid. Since there are various reasons why a Contractor may be withholding payment to a Subcontractor (faulty work, non-payment to a Supplier from the Subcontractor, etc.), allowing Owners to issue joint checks prevents the Contractor from adjusting the amount paid to a Subcontractor and it takes away the Contractor’s leverage, putting them in an all or nothing situation – either sign the joint check over to the Subcontractor or to not pay them at all.
The 2017 revisions addressed the industry’s concern in this matter by inserting the Contractor in the process, instead of the Architect. Now if the Owner makes payments by joint check, the Owner shall notify the Architect and the Contractor (No longer the Architect) shall reflect such payment on its next application of payment.
- § 9.6 PROGRESS PAYMENTS
This section was drastically modified in the 2007 update. In the Joint Committee’s commentary on proposed recommended changes, they kept the language the same. But they added caution to any provision that allows for stakeholders without a contract with each other from directly communicating with each other – in this instance it allows an Owner to circumvent a Contractor and directly communicate with a Subcontractor. This sort of communication has potential for a Subcontractor receiving direction from an Owner that could be different information from what they receive from a Contractor. This sort of unorganized process could add costs, delays, deficiencies, problems, etc. to a project.
In the 2017 revisions, for the most part this section remains unchanged, but there is an emphasis to include the Supplier anyplace the Subcontractor is mentioned. Like the previous warning, caution should be used when stakeholders without a contract communicate with each other, and now this expands as it includes both Subcontractors and Suppliers.
Well, that’s a quick glance at a few of the provisions in the AIA A201 2017 General Conditions that were dissected under the microscope by the AIA-MBA Joint Committee. The KCA is still thoroughly reviewing the updated AIA contract forms. Keep an eye for some education on this topic. In the meantime, remember I’m a phone call away if you have construction contract questions.