In April of 2017, the American Institute of Architects (“AIA”) released updated and revised versions of its standard form construction agreements as it does every 10 years. This newest release includes revised versions of the Owner-Contractor Agreements A101, A102, and A103, the A201 General Conditions, and the B101 Owner-Architect Agreement. The AIA also issued modified versions of its other forms that govern relationships between Owners, Contractors, Architects, Sub-Contractors and Consultants1.
While AIA’s 2017 release of contract forms includes numerous revisions, this article discusses a sample of 10 revisions. The Stites & Harbison Construction Service Group will soon be conducting a series of workshops that will explore the release of the AIA 2017 contract documents in greater depth. Please watch for an announcement as to the dates and locations for these workshops. The AIA 2017 standard form construction agreements release includes the following updates:
• Termination Fee: For many years the AIA forms have contained a provision that allows the Owner to terminate the contract for convenience. The 2007 version of the A201 termination for convenience clause not only allowed the Contractor to recover payment for completed work and cost of termination, but it also provided for the Contractor to recover overhead and profit on unperformed work. Now, section 14.4 of the A201™—2017 gives the parties the option of agreeing to a termination fee. Therefore, the parties are free to negotiate the amount, if any, of a termination fee that is appropriate for the particular project.
• Liquidated Damages/Incentives: The 2017 AIA Owner-Contractor agreements have blanks that provide the parties with options to include liquidated damages for late completion as well as bonuses to incentivize early completion. As with the termination fee provision discussed above, the form defers to the parties’ agreement on those specific monetary terms.
• Guaranteed Maximum Price: In the A102™—2017 Guaranteed Maximum Price (“GMP”) Contract, section 12.1.5 specifies that the schedule of values will now include a contingency line item for costs included in the GMP that are not allocated to other line items. The new form also addresses a source of prior confusion by clarifying in section 22.214.171.124 that the GMP is the total cost of the work for all items listed in the schedule of values, NOT a separate GMP for each line item.
• Choice of Law: As in the past, the A201™—2017 contains a choice of law provision that selects the law of the jurisdiction where the project is located. The 2017 revision goes one step further by “excluding that jurisdiction’s choice of law rules”.
• Electronic Notices: The A201™—2017 notice provision adds electronic transmission as a means of providing contractual notices, except in the case of a notice of claims, which still must be served by certified mail, registered mail, or courier with proof of delivery.
• Owner’s Financial Arrangements: In section 2.2 of the A201™—2017, the Contractor still has the right to request the Owner to demonstrate its financial ability to fund the project prior to starting construction. If the Owner fails to do so, the Contractor is not required to commence work on the project. After construction starts, the Contractor is entitled to request proof of financing only if: (1) the Owner fails to pay the Contractor, (2) the Contractor provides written notice of a reasonable concern regarding the Owner’s ability to pay, or (3) a change in scope materially alters the contract price. If after 14 days from the Contractor’s request, the Owner fails to provide evidence of its ability to perform, the Contractor has the right to stop work. Section 2.2.4 provides that if the Owner provides financial information, it has the right to designate that information as confidential to prevent its disclosure by the Contractor.
• Architect’s Compensation for Revising the Contract Documents: Under the previous versions of the B101 Owner-Architect Agreement, the Architect was obligated to modify the construction documents without additional compensation, and to make revisions to the construction documents necessitated by the lowest bid or negotiated price exceeding the Owner’s budget. The 2017 revision provides for compensation to the Architect whenever the budget over-run is the result of market conditions that could not have been reasonably anticipated by the Architect.
• Dates for Commencement and Substantial Completion: The 2017 revised forms provide for the parties to select the date of commencement by checking the date of the Agreement, date of Owner’s issuance of a notice to proceed, or a mutually agreed upon date. As to Substantial Completion, the parties can choose to insert a specific date or designated number of days from the date of commencement.
• Insurance and Bonds Exhibit: For the first time, the AIA forms include a separate, multiple page exhibit for the parties to specify the project’s insurance and bonding requirements. This exhibit contains a menu for various types of insurance that the parties may or may not choose to require. The insurance exhibit can be easily transmitted by the parties to their insurance brokers or advisors to obtain the appropriate guidance on the increasingly complex subject of insurance and risk management. While the 2017 insurance exhibit significantly modifies the previous AIA insurance provisions, a detailed discussion of those revisions is beyond the scope of this article.
• Exhibits for Sustainable Projects and BIM: The 2017 AIA documents compiled the provisions that are specifically applicable to sustainable projects in E204™—2017 Sustainable Projects Exhibit. Likewise, for projects that use building information modeling (BIM), AIA contract documents must be supplemented by the use of the E203™—2013 Digital Data Protocol Exhibit that governs the parties’ use and exchange of digital information relating to the project.
For a comprehensive review and discussion of the 2017 AIA contract documents release, please plan to attend one of the upcoming workshops to be presented by the Stites & Harbison Construction Service Group.
1The AIA plans to release in the fall of 2017 updated forms regarding contract administration and Architect’s scope of services.