Some Key Changes in the New 2007 AIA Documents

April 12, 2008 David C. Tierney Construction Law

The latest revision of the form documents (released in December 2007) has altered a few of the numbers in the numbering system by which we all used to refer to the AIA form documents

Since 1888, thus for 120 years, The American Institute of Architects (“AIA”) has promulgated standard form documents for use in construction projects. The AIA General Conditions document (known as the A201) has gone through 16 revisions since 1911.

This latest revision of the form documents (just released in December 2007) has altered just a few of the numbers in the numbering system by which we all used to refer to the AIA form documents.

Here is a little table to help you quickly find the key documents using the old numbering system compared to the new system for the AIA form contracts:

Old Number

Contract

New Number

A101

Owner / Contractor Stipulated Sum Agreement

A101

A107

Abbreviated Owner / Contractor Agreement – Stipulated Sum (Limited Scope Projects)

A107

A111

Owner / Contractor Cost Plus Fee with GMP

A102

A114

Owner / Contractor Cost Plus Fee Without a GMP

A103

A201

General Conditions

A201

A401

Contractor / Subcontractor Agreement

A401

B151

Abbreviated Owner / Architect Agreement

B101

B141

Owner / Architect Without Predefined Scope (likely just design work)

B102

B141

Owner / Architect Agreement for a Large Complex Project

B103

B141

Owner / Architect Full Agreement with Scope of Services, Design through Contract Administration

B201

 

Architect / Consultant Agreement

C401

Available at http://www.aia.org/docs_free_paperdocuments are some marvelous AIA prepared “Comparatives and Comparisons” that chart the new document and show particular clauses or changes from the former document.

If you go to the AIA website, you will particularly want to look at two commentaries: (a) A201-2007 regarding key clauses in the A201, and (b) B101-2007 (used to be B141) Owner / Architect Agreement. Likewise, on the AIA website, you will find: (i) the new AIA A201 (2007) line by line comparison to the old AIA A201 (1997), and (ii) the new AIA B102 and B201 (Parts I and II) compared line by line to the old AIA B141 (1997).

If you go to the AIA website, you will particularly want to look at two commentaries: (a) A201-2007 regarding key clauses in the A201, and (b) B101-2007 (used to be B141) Owner / Architect Agreement. Likewise, on the AIA website, you will find: (i) the new AIA A201 (2007) line by line comparison to the old AIA A201 (1997), and (ii) the new AIA B102 and B201 (Parts I and II) compared line by line to the old AIA B141 (1997).

The rest of the following 8 pages of materials are going to address what key changes were made in the relationships on the job by the text of the 2007 new AIA documents, particularly the A201 General Conditions. There are changes in the A101 or the B101, but they track what was done to the A201.

So, let’s now consider the AIA A201 (2007) General Conditions, going article by article, to see the key changes departing from the 1997 version. These are my ideas on what are the important alterations of the A201 General Conditions document.

The rest of the following 8 pages of materials are going to address what key changes were made in the relationships on the job by the text of the 2007 new AIA documents, particularly the A201 General Conditions. There are changes in the A101 or the B101, but they track what was done to the A201.

So, let’s now consider the AIA A201 (2007) General Conditions, going article by article, to see the key changes departing from the 1997 version. These are my ideas on what are the important alterations of the A201 General Conditions document.

ARTICLE 1

  1. INSTRUMENTS OF SERVICE AND ELECTRONIC DATA:

    In Article 1 (§1.17) in the new A201, the old term “Project Manual” is removed from use. A new “ample” definition of the “Instruments of Service” is inserted into the General Conditions. The definition is widened so as to include any creative work (tangible or intangible) prepared by the architect under his new B102 and B103 Agreement. New Sections 1.5.1 and 1.6 clarify that these may be electronic documents and refer the parties to a very extensive separate “protocol” document for transmitting information and contract documents electronically. That protocol can be filled out and attached to the A101 or to the B102 contracts. In other words, the new 10 year revision by AIA has acknowledged what we owners of IPODS and MP3 players and digital PAD phones would be quick to say: 80% of all data these days is electronic or stored electronically, and the architects wanted that data protected regarding their copyright in the data. Under new Sections 1.5.1 and 1.5.2, anyone other than the architect has a limited license to use the broadly defined instruments of service, and then only for the purpose of performing this project (and its remodel or repairs).

  2. DUTIES INFERABLE FROM AND CONSISTENT WITH CONTRACT DOCUMENTS:

    This very important clause remains in place and unchanged.

  3. INITIAL DECISION-MAKER (“IDM”) AND COURTHOUSE LITIGATION INSTEAD OF ARBITRATION:

    In the old AIA (1997) A201, the architect was always and universally the first “station” to which a contractor/owner dispute had to be taken. Only after an initial decision made by the architect could a claim move on to a mediation, and then to arbitration. Arbitration was where all disputes ultimately would go for resolution under the 1997 A201 General Conditions.

    As we will see below in Article 15 of the 2007 documents, it is no longer necessarily true that the initial decision-maker will be the architect.

    And, litigation (instead of arbitration) is offered in a “check the box” format, as was never the case before. In Section 1.1.8 of the new AIA document A201, the term “initial decision-maker” is defined to indicate that the decision-maker may not be the architect.

    These are two huge changes in the long history of AIA form documents.

ARTICLE 2

  1. INFORMATION ON FINANCES THAT THE CONTRACTOR CAN PRY OUT OF THE OWNER:

    It used to be, under the 1997 version, that whenever (before and during the job), a general contractor just requested in writing that the owner give the contractor documents to prove that the owner had funding available to do the work, and those documents had to be supplied to the contractor. Owners used to alter that clause often, annoyed that they had to “stop and fetch it” whenever the contractor “yanked the chain.”

    Now, under the 2007 version of the A201 General Conditions (§2.2.1), after the commencement of the work, the contractor’s right to demand proof of finances from the owner is limited. A request can only be made if (i) the owner fails to make payments when payments are due; (ii) there is a material increase in the contract sum by change order, or (iii) the contractor can show, in writing, that there is some reasonable concern that the owner is or will be unable to make a payment.

  2. NOTICE OF CONTRACTOR DEFAULT:

    It used to be under the 1997 version that, the owner had to give a 7-day notice and then a 3-day separate second notice to be able to have the right to jump in and perform work that the contractor had done wrong and was not removing or correcting. In the 2007 version, this has changed in § 2.4 to one 10-day notice by an owner.

ARTICLE 3

  1. CAVEAT REGARDING THE CONTRACTOR’S OBLIGATION TO CATCH CODE NON-COMPLIANCE IN PLANS:

    Sections 3.2.3 and 3.7.3 have only a few words that have been altered, but the change slightly broadens the contractor’s obligation to report any violation of ANY code that the contractor discovers in the plans, not just a “Building Code.”

  2. BURIAL GROUNDS:

    New Section 3.7.5 deals at length with a problem that has interrupted projects in our Western States, the discovery of archeological sites or “burial grounds.” It also deals with wetlands, which we rarely have here in the West. The Section requires the owner to act promptly to avoid a discovered burial ground from delaying the work and raises the possibility of the contractor being entitled to an equitable adjustment, i.e., a change order for delay costs, etc. See §3.3.1 for an added bit of text about such costs imposed on the owner.

  3. VETTING THE CONTRACTOR’S PROPOSED SUPERINTENDENT:

    Sections 3.9.2 and 3.9.3 are changed so as to expressly require the contractor to notify the owner and architect of the name and qualifications of the proposed job superintendent. The owner has the right to make a reasonable and timely objection to the proposed superintendent.

ARTICLE 4

  1. ARCHITECT:

    Many pieces of Article 4 are “scissored out” and relocated. The title, which used to be “Administration of the Contract” is revised and broadened to simply read “Architect.”

    Section 4.2.1 appears to shorten the time during which the architect’s contract administration duties continue so those duties no longer extend into the one-year warranty period.

    The entire process for making claims is moved out of this Article (Sections 4.3.1 – 4.6.6) and is relocated to a new Article 15 (specifically, Section 15.1). As mentioned before, the sections relocated to the new Article 15.1 no longer assume that the architect will serve as the person initially deciding the claims related to the project.

ARTICLES 5, 6, 7, AND 8

No changes of significance occur. Since Article 7 is about change orders, this is a good portion of the A201 to leave untouched. It should be noted that when CCDs are issued, revisions to Section 7.3.9 have the architect (or “IDM”) rendering an opinion as to what portion of that CCD work that the owner ought to be paying to the contractor while the work is being done and while the correct amount owed for the work is being sorted out through the claims process.

ARTICLE 9

  1. JOINT CHECKS WHEN SUBS ARE UNPAID:

    This article is on “Payments and Completion” and a new Section 9.5.3 states that, if an architect refuses to certify a contractor’s Payment Application, under § 9.5.1.3 (failure of the contractor to pay subs properly), then the owner has the option (risky though it may be) to pay subs on the job with joint checks. If he does so, the owner has to inform the architect so that such is reflected in the next Payment Application.

    This change gives owners a little more control when relations with a general contractor have broken down and the owner is attempting to prevent key subs from demobilizing and walking off the job, only to have to get them back later on.

  2. PROOF THAT THE GENERAL CONTRACTOR IS TIMELY PAYING SUBS:

    A new Section 9.6.4 permits an owner to make a written demand on the general contractor for proof that the general has properly and timely paid over to the subs sums that the owner has given to the general contractor for subcontracted work. If the general contractor does not reply within 7 days, then the owner has the right to approach the subs directly to ascertain their payment status.

    This means that the owner no longer has to wait an entire 30-day payment cycle (when lien waivers have to be provided) to learn if the last payment he made did or did not get properly paid to the subs. It gives the owner a tighter leash on a general contractor who seems to not be paying subs, “enjoying the float,” and thereby slowing the subcontractors’ motivation to perform on the job.

ARTICLE 10

In this article on Protection of Property and Hazardous Materials, Section 10.3.5 now says that when a contractor brings on-site a hazardous material and negligently handles it, the contractor has to pay the owner any remediation costs or damages.

ARTICLE 11

  1. RENEWALS OF INSURANCE CERTIFICATIONS:

    Section 11.1.3 now requires the contractor to not only deliver to the owner the initial Certificates of Insurance, but also all renewals and all replacements of those original certificates.

  2. It used to be that Section 11.3 in the A201 provided an option whereby the owner could force the contractor to purchase general liability coverage for the owner as primary coverage. This is stricken from the A201 and, instead, Section 11.1.4 requires the contractor to name (i) the owner, and (ii) the architect as “additional insureds” on the contractor’s general liability insurance coverage during the job AND requires the contractor to name just the owner as an “additional insured” during the completed operations coverage.

ARTICLE 12

NO SIGNIFICANT CHANGES.

ARTICLE 13

FEDERAL ARBITRATION ACT

Section 13.1 used to say that the law of the place of the project’s performance was the governing law for the contract. However, as it is now rewritten, the following has been added: “except that, if the parties have selected arbitration as the method of binding dispute resolution, the FEDERAL ARBITRATION ACT (FAA) SHALL GOVERN [as to claims handled under the new] SECTION 15.4.

This change has potentially significant importance because a construction contract’s arbitratable disputes were handled under the old 1997 A201 by AAA Arbitration Rules. Now, a whole body of Federal Law about arbitration has suddenly been made applicable, IF arbitration (instead of litigation) has been selected for dispute resolution purposes.

ARTICLE 14

There is no important change in the Termination for Cause or for Convenience sections. However, I note that the old requirement that an owner had to prove a contract, or that the contractor “persistently” failed to perform or follow the laws or codes, no longer exists. Now, mere repeated violations will be enough to allow termination to occur. It does not seem like a real change – just a minor clarification.

ARTICLE 15

In the old 1997 A201 General Conditions, there never had been any Article 15. Claims processing requirements were included in the section on the architect’s Administration of the Contract portion of the 1997 A201 (old Section 4.3.1 – 4.6.6). However, all of those claim-related provisions have been moved into the new Article 15 and a wholesale revision has been made in (a) the question of whether the initial decisions on claims will be automatically made by the architect, AND (b) whether a disappointed party will take that claim’s initial decision to arbitration, or to litigation.

  1. INITIAL DECISION-MAKER (“IDM”) ROLE:

    Section 15.1.2 repeats the old requirement that WRITTEN NOTICE must be given of all claims, whether for money or for time or for consequential damages or for other relief.

    All the way through Article 15, reference is made to the initial Decision-maker (“IDM”) who was first mentioned in Section 1.1.8 as being a person to be selected and identified in the contract (in the A101 or the B102, for example). BUT, IT IS NOTED THAT THE IDM IS NOT NECESSARILY THE ARCHITECT. If no other person is chosen as the IDM, then the architect is to serve as the IDM.

    THE IDM MUST STILL RECEIVE A CLAIM 21 DAYS AFTER OCCURRENCE OF EVENT(S) GIVING RISE TO THE CLAIM, OR 21 DAYS AFTER RECOGNITION OF THE EXISTENCE OF THE CLAIM. This very important notice requirement remains unchanged.

  2. TIME TO ARBITRATE OR LITIGATE A CLAIM:

    The rule used to be that, within 30 days after an architect/IDM’s initial decision, a disappointed party had to challenge the decision by demanding arbitration OR ELSE he lost his right to ever go to arbitration. (Old Section 4.4.6.)

    However, the new rule is that (under new Section 15.2.6.1) a happy party may, within 30 days after the initial decision, demand that the other guy (the disappointed party) file for mediation within 60 days of the initial decision. And, if the disappointed party then fails to file for mediation within those 60 days, then the initial decision by the IDM becomes final. That means that any chance to arbitrate or litigate is then lost by the disappointed party.

  3. ARBITRATION vs. LITIGATION:

    In the new 2007 B102 or A101 Contracts, the AIA has made a huge departure from the 1997 versions and all earlier versions. For some 80 years, AIA contract forms have been set up so that all disputes (after initial decision) simply GO TO ARBITRATION.

    In the new 2007 B102 or A101 Contracts, the parties check a box whereby, after mediation, the unresolved dispute goes to litigation OR goes to arbitration. The document forces the parties to select either some trial judge in the courthouse, or an arbitrator as the final decision-maker, whereas before, it used to always be an arbitrator who was the final decision-maker.

    The new AIA A201 (2007) Section 15.4.1 says that if arbitration has been selected in the underlying contract, then an arbitration under the AIA Construction Industry Rules will occur and ALL KNOWN CLAIMS MUST BE INCLUDED IN THE DEMAND WHEN IT IS MADE. The FAA and Federal Law are relevant if there is a question of whether or not a dispute is an arbitrable dispute.

  4. CONSEQUENTIAL DAMAGES WAIVER CLARIFIED:

    The new 2007 AIA A201, Section 15.1.6 repeats the old Section 4.3.10 waiver of consequential damages that owners don’t like. But, the new section explains in detail just which consequential damages are expressly included in the waiver. This is really a clarification.

    The new Section 15.1.6 says:

    “This mutual waiver [of consequential damages] includes [but is not limited to]:

    .1 damages incurred by the owner for rental expenses, loss of use, income, profit, financing [costs], business and reputation [losses], and for loss of management or employee productivity or of the services of such persons; and

    .2 damages incurred by the contractor for principal office expenses, including the compensation of personnel stationed there, for losses of financing, business or reputation [losses], and for loss of profit except anticipated profit arising directly from the work.

     …nothing … shall be deemed [however] to preclude an award of liquidated damages when applicable, in accordance with the requirements of the Contract Documents.” (Emphasis added.)

  5. CONSOLIDATION OF ARBITRATIONS:

    For nearly 60 years, the AIA documents have contained clauses that fought against one arbitration under an AIA contract being consolidated into some other arbitration under the same contract. The new Section 15.4.4.1 expressly allows consolidation if everyone consents and the arbitrations employ similar procedures for selecting arbitrators.

  6. STATUTE OF LIMITATIONS:

    Under a new 2007 AIA A201, Section 13,7.1, there is a hard “end-stop” for the State Statutes of Limitations, which is made applicable. No action can occur later than 10 years after substantial completion. The State Statutes control, but this says that no claim can be made, in any event, after then (10) years have elapsed from final completion.

CONSENSUS DOCUMENTS

Several organizations, not happy with the new AIA 2007 form contracts and the 2007 A201, have “bolted” and refused to endorse (for their members) the new 2007 AIA documents. Instead, they have produced what they have called “the Consensus Documents.” It is not my task here today to address “the Consensus Documents,” and where they are different than the AIA 2007 documents. However, one key feature that appears to be different is the Consequential Damages waiver clause. “The Consensus Documents” contain what is called a LIMITED waiver of consequential damages. “The Consensus Documents” have limited the waiver and have thereby made points with owners.

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