AIA Releases Its 2017 Contract Documents – Let’s Focus on Some of the Changes in the A201

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.

A Mega Construction Project is Coming to Harrisburg

When I talk to my construction friends in Pittsburgh, Philadelphia, State College, and other cities across the Commonwealth, I hear about all the activity and major projects in these areas. Don’t get me wrong the Harrisburg, central Pennsylvania region, has had a decent construction market, but we were lacking in the mega projects department. So it’s welcoming news to hear that the federal government is proceeding with its courthouse project in Harrisburg.

courthouse sign

The U.S. General Services Administration (GSA) is proceeding with its plan to build a new U.S. Courthouse at 6th and Reily Streets in Harrisburg. This 243,000 square-foot courthouse is budgeted for around $200 million. In January 2017, the GSA awarded an architectural and engineering services contract to Ennead Architects of New York. Then in March of this year, the GSA awarded Hill International of Philadelphia with a Construction Manager-as-Agent contract (Owner’s Representative).

Around a dozen General Contractors submitted qualifications for the Guaranteed Maximum Price (GMP) contract. The proposals were ranked and the top ranked/shortlisted firms are proceeding with their GMP submission. It is hopeful that the Contractor will be selected in the next few months. The design team will continue working on the drawings the rest of this year, into next year, and then activity should commence in Spring/Summer of 2018.

This project received the boost needed to proceed earlier this year from the KCA’s recent Leadership Series speaker Congressman Barletta, who announced that this project secured the authorization for $194.4 million to cover the new construction project. At the time of the authorization news, Barletta said: “This has been a long time coming, with various baby steps along the way, but now the Harrisburg courthouse will finally become a reality.”

This Courthouse is needed in Harrisburg because the existing Ronald Reagan Federal Building & Courthouse does not meet the federal government’s security and expansion requirements.  Per the GSA’s report, the 1960s Reagan Building was initially built with two courtrooms and later, two more courtrooms were added. Despite the addition, the four courtrooms are not enough to accommodate the increasing caseload of U.S. District Court for the Middle District of Pennsylvania in Harrisburg.

This new Courthouse will contain as many as eight courtrooms, including three for district judges, two for senior district judges, two for magistrate judges, and one for bankruptcy judges. Plus this project will include 43 parking spaces.

From this project, it is hopeful that construction activity will pick up around the Courthouse’s proximity. When it comes to the large mega projects, it’s almost like saying to the industry: “if you build it, they will come” and spin-off activity increases to build up the area around these economic drivers.

Later this year the KCA will host an informational session on this project with the GSA and other entities associated with the project. Stay tuned.

A PA Mechanic’s Lien Law Mid-Year Update

NOTE: Earlier this Spring, this article appeared in the Central Penn Business Journal. This week a few people have asked about the Pennsylvania State Construction Notices Directory (the online Lien site) so I updated the article:

A little over a decade ago, I found myself working with numerous construction trade associations to improve legislation regarding the lien process in Pennsylvania.  As a team, we were successful in prohibiting owners from enforcing ‘no-lien’ agreements.  However, this amendment to the Mechanic’s Lien Law that went into effect in 2007 was not perfect; as a result, surprise liens were popping up from second tier subcontractors and suppliers.

Since there was a major issue in the lien process, I found myself working with the same team of associations again to improve the lien process yet again. This time, when January 1st rolled around, we welcomed a new year and the Pennsylvania construction industry welcomed a new, voluntary procedure concerning the way the industry operates under the Mechanic’s Lien Law. I am referring to the creation of the Pennsylvania State Construction Notices Directory (Directory). The Directory is located at https://apps.pa.gov/scnd.

Created by the State’s Department of General Services, the Directory allows owners of construction projects to use it for non-residential construction projects over $1,500,000. This Directory is an excellent way for owners, general contractors, subcontractors, and suppliers to know each and every entity associated with a construction project.

“It might be too early to have an opinion on this new state-run website, but it is easy to use and the intention of it is good. I think it’s a great idea for a supplier to have our name in front of the owner and general contractor since a lot of the times a subcontractor hires us and others might not know we are even on the project,” said Bonnie Patterson, Credit Manager for York Building Products.

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The Directory works like this: an owner, or an agent of the owner, files a Notice of Commencement for $72 (this is the only fee associated with this website) on the online database for their construction project. This filing creates a project in the Directory and then within forty-five days of first performing work or supplying materials, a subcontractor and supplier must file a Notice of Furnishing (NOF). If this NOF is not filed within the allotted time, the entity associated with the project forfeits its Mechanic’s Lien rights.

Then forty-five days after completion of work, the owner may file a Notice of Completion in the Directory. After the owner makes this filing, any subcontractor or supplier who has not received full payment may file a Notice of Nonpayment. These two notices are not mandatory. These new lien provisions are intended to create a more structured and transparent procedure through an Internet database that is easily searchable.

Theoretically, this online repository can allow owners and general contractors to check and see all the firms that are working on a project and to make sure each of these firms are being paid. By using this website, an owner potentially can eliminate the risk of a surprise lien. Now that’s theoretically, it may be too earlier to determine if it’s working as designed, but despite being less than a year old the Directory is being used.

There are currently 100 projects in the Directory from across the Commonwealth. As one may expect, the most use of the Directory is happening in the southeastern and southwestern counties since both Philadelphia and Pittsburgh are economic drivers in Pennsylvania. But the Commonwealth is represented with projects in areas like Lackawanna County in the northeast to Cumberland and Dauphin Counties in the center part of the state to Butler County in the west. And while it is being used, it is even being used by the lower tiers on a construction project, which is great news! A major issue for the first three to four months of use was the lack of knowledge of the Directory to the subcontractors and suppliers associated with a project.

“The owner required us to file the Notice of Commencement [on his behalf]. I found it very user friendly and I had no issues since I had all of the information readily available to me,” said Alec Hanley, Project Engineer, Rycon Construction based in Pittsburgh, PA. “It appears that the biggest learning curve will be with subcontractors. We have started to include language in our general scope of work that describes the procedures for filing a Notice of Furnishing and their liens associated with following this process as well as including the Notice of Commencement as an Exhibit to our contract. We’ve also continued to provide courtesy reminders that it is their sole advantage to file a Notice of Furnishing and I’ve had low rate of return.”

However, it appears as though not every general contractor is being proactive to raise the awareness of the Directory. “I found out about this [Directory] from industry trade groups. Had I not gone to a few seminars our company would have had no idea this even exists,” said Bonnie Patterson of York Building Products. “As a material supplier, the information does not always make it to us. Plus, we might be contracted to supply material to a project before the project is even listed in the Directory. I have a system now where I log onto the Directory and compare the new projects that have been added against the projects we are on.”

With this new online process, the Keystone Contractors Association is not only providing educational seminars on it, we are also encouraging all construction companies to be proactive and diligent in protecting their lien rights.

KCA Launches Leadership Series

Today, Monday, July 17, 2017, the Keystone Contractors Association launched the KCA Leadership Series. This ongoing dialogue features established and respected leaders. There are many ways to hone one’s leadership skills – you could find a mentor or join a peer group or take a course – but another way is to hear a leader in action. By listening to a leader, one could improve their leadership skills by listening to the passion, resolve and wisdom.

The KCA audience heard it all from its inaugural speaker Congressman Lou Barletta, and we even heard a little baseball too.

IMG_1938 (Caption: Congressman Barletta with hometown friend and KCA Board Member David Miorelli)

The event kicked off with a special introduction of today’s keynote speaker delivered by State Senator Mike Regan. Right away the audience knew they were in for something special by having a highly respected leader in Senator Regan introducing Congressman Barletta.

When on the stage, the Congressman did not disappoint. The journey he took everyone on was a remarkable one that we all enjoyed learning about. From his days growing up in Hazelton to playing baseball in the Cincinnati Reds farm system to starting his own pavement marking company (with only $29 in his pocket), it truly is a good success story. After years of running his own business, he found himself disagreeing with elected officials so he decided to do something about it and he ran for an elected position.

After successfully leading the city of Hazelton as its mayor, he wanted to have a bigger voice and ran for congress. He jokingly stated that the third time was a charm and he won the congress seat on the third try. But joking aside, the audience could tell that he was determined, even when things don’t go as planned he stayed the course.

When discussing his role as a U.S. Congressman, you could feel the passion in the room that he has for his country. He touched on a wide variety of issues like Public-Private Partnerships for transportation and building projects; infrastructure funding; wasteful government spending; workforce development strategies; and opioid addiction. He stayed until every question was answered.

When the KCA set out to create this KCA Leadership Series, we wanted to feature speakers that could entertain a room full of construction professionals for an hour or so. But what we got today was so much more – we got a leader who inspired the room full of construction professionals. Maybe it’s good he couldn’t hit a curveball since he’s doing such a great job in Congress.

Today, Congressman Barletta set the standard of what the central PA construction industry expects for future speakers in the KCA Leadership Series. Stay tuned to see who we get next….

To view pictures from today visit: https://jonobrien.smugmug.com/KCA-Leadership-Series-o-Congress/

My First Blog Post

This is the post excerpt.

This is my very first post. With this blog, we hope to cover the construction industry issues that are important to the AEC industry in Pennsylvania. While the Keystone Contractors Association cover most of the state, we may not be in the know on all issues. If you’d like to guest write, please let me know. You can either email me (Jon@KeystoneContractors.com) or call the KCA (717.731.6272). I’ll be sure to promote you and/or your company to make it worth your while for contributing something.

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