Bonus Post: Other Notable Changes to the A201 Construction Contract (law note)

Bonus

Following our deep-dive into the newest A201 changes, and as promised in yesterday’s Insurance changes post, here are a few bonus changes to the General Conditions of the Contract:

  • If the Architect is terminated, the Owner must identify a successor Architect that the Contractor agrees with (Section 2.3.3)
  • The Contractor’s schedule is to include interim milestones and apportionment of the Work (Section 3.10.1)
  • The Contractor can rely on the accuracy of the design criteria in the Documents (Section 3.12.10.1)
  • Minor changes in the  Work- must be in writing; are deemed accepted at no cost unless Notice is given (Section 7.4)
  • The Owner may contact not only Subcontractors to determine payment, but also Suppliers (Section 9.6.4)
  • The Contractor indemnifies the Owner for lien claims, if paid in full (Section 9.6.8)

Do you have a question or comment about the A201, or the revisions to the A201?  If so, drop me a line below or through email.

Photo via AlphaStock images via Creative Commons license.

 

Contract Change #1- Insurance in the A201 (law note)

At last, we have arrived at the Top Change in the AIA A201— and it deals with the subject that everyone loves to hate (until they need it!), Insurance.  (Go here for yesterday’s post on Digitial Data changes).

Got Insurance

Insurance– everyone needs it; everyone would just as soon not have to deal with it.  I get it, I do.  Attorneys, Insurance Agents– no one likes spending time with those folk!  Good news though.  The changes to the A201 mean that you may end up spending less time with both!

The most important change to the Insurance requirements of the AIA contract is that most of it has moved to a new Exhibit.  Why is this important?  Instead of having to send the entire contract to your agent or broker, you can now send them only the section that they really need to review for compliance.  This also means that if insurance policies change (as they surely will), the entire contract document does not need to be re-written– the Exhibit can be updated accordingly, leaving the rest of the A201 alone.  Nice, right?  This change was made to streamline insurance review and provide for that flexibility of the changing insurance market.

Does this mean that there are *no* insurance requirements in the A201 anymore?  Unfortunately, no.  There are still some insurance provisions in Article 11, such as the requirement that both parties maintain insurance.  (11.1.1 and 11.2.1).

Most notably, it is now the Owner & Contractor, and not the insurer’s, requirement to provide each other with notice of cancellation/expiration within 3 days.  (Section 11.1.4 and 11.2.3).  The party receiving notice can stop work until the insurance lapse is cured.  The reason for the notification change is that prior editions of the A201 required that the insurer notify the Owner of a pending lapse in insurance.  That provision was ultimately removed from the certificates of insurance issued by most insurers, so it was eliminated as a requirement to codify what was happening on the ground between the parties.

There are also some changes to property insurance losses.  The Owner must notify the Contractor of proposed settlements and allocations, and the Contractor has 14 days to object or he will be bound by the allocation.  (See 11.5.2).

The main take-away here is that most insurance will now be in a streamlined, stand-alone exhibit which will make it easier for you to ensure your agent/broker is on board with the requirements before work begins.

In case you are wondering why, as the architect or engineer, you need worry about insurance of the contractor, just remember that it is in your own financial interest to make sure they are properly insured for the project.

That’s it.  You’ve made it through the Top 10 changes.  I do have a few other changes of note, which will be in my next post.  Stay tuned!  As always, if you have any comments or questions, drop me a line or comment below.

Photo (c) CheapFullCoverageAutoInsurance.com

Contract Change #2- Digital Data in the A201 (law note)

BinaryDataComing in at #2 on our Top A201 Contract Changes is Digital Data.  (Yesterday’s post on Termination for Convenience changes is here.)

Building Information Modeling (BIM) is fast becoming common place on larger construction projects.  However, there are multiple risks associated with using digital formats that can be manipulated by multiple parties.

In the 2017 revisions to the A201, there is now a requirement that data protocols be established concerning the development, use, transmission, and exchange of all digital data, including BIM data.  (See Section 1.7).

The E203 form is the suggested document to create the digital protocol.  Note, however, that if the parties have not established a protocol, the use of any digital data is at that party’s own risk.  (Section 1.8).

Further, revised section 3.11 clarifies that the Contractor can keep contract documents, change orders, construction change directives, and other modifications at the site only in electronic format, if it so chooses.

Again, a common theme about these contract changes– they are small, but they are important.  As the designer of record, it is vital that you play a lead role in determining the who/what/when/where/why of data transmission.

Tomorrow, we finally come to Contract Change #1, dealing with Insurance.  It’s a doozy! Stay tuned!

 

Photo (c) W. Rebel via Creative Commons.

 

 

Contract Change #3- Termination for Convenience in A201 (law note)

money down drainToday in the Top 10 Changes to the A201, we are discussing Termination for Convenience provisions.  (Yesterday’s post discussing contract changes dealing with commencement & completion is here).  The Termination for Convenience provision (14.4.3) has an interesting history which explains why this small, but very specific, change was made.

Termination for Convenience, an exclusive owner right, was added in the AIA contracts in 1997.  However, contractors and architects were losing the benefit of their bargains, including the fixed overhead and the fee or profit on the portion of Work which was terminated.

To alleviate that problem, in 2007, the contracts were revised to allow the contractor/architect to get payment for work executed, costs of termination, and reasonable overhead and profit on the work not executed.

As many of you know too well, Owners, in response, often completely struck through that provision, denying any overhead or profit for work not yet performed after a termination for convenience.

In the 2017 revision, the A201 (as well as the related Owner-Architect agreements), the automatic entitlement is eliminated, in favor of a fill point to prompt the parties to discuss a fair fee before the project begins.

A negotiated amount also serves to liquidate the Owner’s liability to the Contractor (lost business opportunity and overhead and profit on the Contractor’s unperformed work).  However, the fee is not necessarily designed to completely liquidate the Owner’s liability to the Contractor’s downstream parties.

To protect the Owner from downstream claims, the A401 will need to be edited and coordinated, so that the Owner’s entire liability to the Contractor, inclusive of subcontractors and suppliers, is established in the Termination fill point.

Likewise, if you utilize subconsultants in your architecture or engineering practice, be sure that your contracts are likewise modified to track your entitlement for termination expenses.

Tomorrow, Change #2, dealing with Digital Data.

Photo (c) TaxRebate.org.uk via Creative Commons.

Contract Change #4: Commencement & Completion dates in the AIA documents (law note)

We’re in the final countdown of the Top 10 Changes to the AIA A201 contracts.  [For the previous post, on Liquidated Damages, go here].

start

Today, dates of commencement & completion.  Technically, I’m cheating today, because these changes are in the related contracts, not the A201 itself, although A201 Section 8 discusses commencement & completion dates in general.  However, in the related contract documents (A101 Section 3; A102 Section 4; A103 Section 4), changes were made to encourage specificity.

There is now a check box that allows the parties to select as the Date of Commencement as one of the following:

(1) the date of the Agreement

(2) the issuance of a Notice to Proceed (NTP) by the Owner; or

(3) a different date as agreed to by the Parties.

If no box is checked, the default is the date of the Agreement.  The check box format is meant to clarify any confusion between the parties before the contract is inked.

For Substantial Completion, there is also a new check box to indicate whether such is obtained no later than a specified calendar date or within a certain number of days from commencement.  There is also a new section that addresses Substantial Completion of certain phases of the Work prior to full Completion.

Finally, a new section has been added to cross-reference the new liquidated damages fill point.

Tomorrow, change # 3 on the countdown, Termination for Convenience.

 

Photo (c) Steven Depolo via Creative Commons license.

 

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