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AIA 2017 Contract Documents - What's New?

05/18/2017 01:45:00 pm | Viewed: 666

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Posted: 5-18-2017, 3:03 p.m.

The American Institute of Architects rolled out its once-a-decade revisions to the A201 family of construction contract documents in April. Here is a summary of what has changed.

The Michigan law firm of Dickinson Wright PLLC published in Mondaq a 12-point summary of the most important changes. That's a good place to start. One of the most significant overhauls has to do with insurance rules, and Faegre Baker Daniels offers an in-depth examination of that in JD Supra (see below).

Dickinson Wright says,

Building Information Modeling and Digital Data: The use of AIA Document E203–2013 to establish protocols for the development, use, transmission and exchange of digital data is the default. Also, if the parties fail to agree upon protocols governing the use of and reliance on information in a building information model ("BIM"), a party relies on such BIM at its own risk. Sections 1.7 and 1.8.

Evidence of Owners' Financial Arrangements: The new A201 expands and strengthens the Contractor's ability to enforce its right to evidence that the Owner has made financial arrangements to fulfill its payment obligations. Section 2.2.

Minor Changes in the Work: The provision regarding minor changes in the Work has been expanded. Importantly, if the Contractor performs work in an architect's order for minor changes without objection, the Contractor waives any adjustment to the Contract Sum or extension of the Contract Time. Section 7.4.

Indemnification Against Lien Claims: The A201 includes a new provision that specifically requires the Contractor to indemnify against lien claims and nonpayment claims asserted by subcontractors or suppliers. Section 9.6.8.

 

Agreements Between Owner and Contractor (A101, A102 and A103)

Assumptions: The new A102 requires that assumptions upon which the Guaranteed Maximum is based be incorporated in the Contract Documents by revision. Section 5.2.6.

Contractor Progress Payments: The schedule of values, progress payment calculations and retainage provisions have been expanded
and rewritten to be more consistent with common practice. A101, Article 5; A102, Article 12.

Owner Termination: The agreement now specifically provides that the Owner pay a termination fee if the Owner terminates for convenience and that costs and damages be deducted from any amount owed the Contractor if the Owner terminates for cause. A102, Section 14.1.1.


Agreement Between Owner and Architect (B101)

Supplemental Services: The B101 introduces a new term – Supplemental Services, which are services in addition to Basic Services that are identified and authorized in the agreement. Additional Services are now limited to extra services that arise after the signing of the agreement. Sections 4.1 and 4.2.

Modifications to Reduce Costs: If the Architect could not have reasonably anticipated certain market conditions that caused a bid or proposal to exceed the Owner's budget, the Architect is now entitled to Additional Services for modifying the Construction Documents to comply with the budget. Section 6.7.

Termination Fee: The agreement now provides for a termination fee in the event the Owner terminates for convenience. Section 9.7.

Architect Progress Payments: The payment provisions provide more clarity on calculating compensation based on a percentage basis. Sections 11.1, 11.5 and 11.6.

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Kim Slowey at ConstructionDIVE makes a pertinent observation about the architect relationship with owner and GC and how that changes:

One of the hallmark elements of AIA contracts is that, by default, the architect is the initial decision maker. Introduced in the A201-2007 revision, the AIA specified that the architect is the first stop in claims resolution between the parties on a construction project. Because the architect is almost always paid by the owner, that provision raised some contractors' eyebrows.

In an acknowledgment of that question of fairness, the AIA has added into the contract documents that the architect must make their decisions without favoritism to either the owner or contractor.

That feature, as well as others that give architects a significant hand in certain construction aspects of a project, are not always suitable, according to Alex Ferrini, partner at Olshan Frome Wolosky in New York.

Contracts that have architects recommending an action that a contractor should take in relation to its work or what constitutes a reasonable delay are not always fitting, according to Ferrini. "On some projects it's appropriate," he said, "but that's a very small slice of the market. If you have a homeowner who hires an architect [to act as] an agent and advisor, it would be appropriate."

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Faegre Baker Daniels on Insurance

The 2017 documents, however, mark a significant departure from the past. With the introduction of an insurance exhibit, the AIA has raised the profile that insurance is likely to play in the contract formation process. The new insurance exhibit prompts parties to explore insurance as a risk-management device in greater depth than they might otherwise have undertaken.

 The 2017 Insurance Exhibit provides a much richer menu of potential coverages, durations, and limits. While the Exhibit prompts the parties to consider numerous options for insuring the project, they need only address limits for: (1) commercial general liability (§ A.3.2.2); (2) automobile liability (§ A.3.2.3); (3) employer’s liability (§ A.3.2.6), where the Contractor’s work does not involve (1) the transport, dissemination, use or release of pollutants; (2) the furnishing of professional services; or (3) maritime/aviation liability risks. If the Work implicates these risks, the parties are required to identify the limits for the applicable insurance addressing the particular risks at issue.5

The parties are not required to insert any information into the Exhibit with respect to insurance coverage other than for specifying the liability limits for commercial general liability insurance, automobile insurance, employer’s liability insurance, and where the work involves such risks, contractor’s professional liability insurance, pollution liability insurance and insurance for maritime liability/aircraft liability risks. The parties need complete no other “check box” or “fill point” contained in the Exhibit if they wish.6 In this regard, the completion of the Insurance Exhibit should not be materially more difficult than completing the insurance information required by the current AIA Owner and Contractor Agreement forms.

This is not to suggest, however, that the parties need only attend to § A.3.2 (Contractor’s Required Insurance) in order to properly address the project’s insurance requirements. While this is the only section where the parties must provide information with respect to insuring the project, there are other provisions which may well require the parties to secure specific insurance depending upon the nature of the work. For example, § A.2.3.3 requires the Owner to purchase and maintain insurance on an existing structure where the work involves remodeling that structure or constructing an addition to the existing structure. The parties are not required to fill out any information with respect to this insurance, but it is an obligation placed on the Owner in the event the work involves an existing structure. Moreover, the exhibit and Article 11 of A201™– 2017 provide much detail regarding required and optional coverages and related requirements and prohibited exclusions. For these reasons, even though the parties only need to fill out the liability limits for the insurance called for under § A.3.2, the parties are well-advised to carefully review the entire Exhibit, as well as Article 11, and to have the Exhibit reviewed by their insurance broker or policy provider.

Faegre Baker Daniels also discusses at length the Tailoring of Coverage by Exercising Options and Specifying Limits and Durations. For more on that, go to JD Supra. Also, it should be noted that there are Insurance Requirements Contained in the 2017 General Conditions Document. Feagre Baker Daniels said, "it may seem odd to split the insurance requirements between the General Conditions Document and the Insurance Exhibit, this was done as a precaution in the event the parties failed to make the Insurance Exhibit part of their agreement."

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Edited based on reports from JD Supra, Mondaq, ConstructionDIVE


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Adolfo Pesquera
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adolfo@virtualbx.com

Adolfo Pesquera is a veteran news journalist. He has worked for Hearst Corp., American Lawyer Media, News Corp and Freedom Communications. His work has been published in newspapers and magazines across the USA. He is a journalism graduate of UT-RGV. He writes, edits and creates digital pages for VBX.