Dueling Documents – The New AIA A201 or…

By Terry Olsen, AIA, CSI, LEED AP

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Having recently attended a webinar on the new AIA contract documents, I anticipated a repeat performance with this program.  However, new information is always presented at our CSI Programs, and this event didn’t disappoint.

AIA Contract Documents

Before a building project is designed, the Architect signs a contract with the Owner for the scope of the work to be provided.  Before a building project is constructed, the Contractor signs a contract with the Owner for the amount and end result to be provided.  The Architect and Contractor have no contractual relationship; however, their mutual contracts often reference construction-related activities expected of each of them.  Typically, these documents have been from the same family, all issued by the AIA.

Historically, the American Institute of Architects (AIA) has been around since 1888, and there is a long track record of precedents set in interpreting documents in the legal arena.  Through this wealth of knowledge and years of experience, the AIA contract documents have been written and revised generally on a ten-year basis.

New 2007 AIA A201 – Knight #1

This past year, 2007, concluded the latest round of revisions and a new series of documents were released in November.  Some of the major changes include:

  • Initial Decision Maker – Previously, the Architect was the initial decision-maker during disputes between the Owner and the Contractor, as the Architect was familiar with the intent of the construction documents.  However, the Contractor often questioned whether the Architect could be impartial, when the Architect is paid by the Owner and thus could show favoritism in decisions.  This clause now allows for a pre-decided third-party to be the Initial Decision Maker in disputes.  If a third-party Initial Decision Maker is not selected during contract negotiation, the Architect will be the default.
  • Mediation and Arbitration – Previously parties in conflict had to go through mediation and then arbitration prior to allowing the issue to proceed into litigation, in the hopes of earlier resolution and lower expense.  Arbitration is like a private trial and is binding, but does not go before a jury that may not be educated in construction processes and terminology.  In the new clause, mediation is still mandatory.  However, for the first time since 1888, arbitration is no longer mandatory and parties are now permitted to go right into litigation, which is the new default.
  • Consolidation and Joinder – Previously, disputes had to be arbitrated separately between parties on the same issue, i.e. arbitration of disputes between Owner and Contractor separated the Architect and subcontractors from the original dispute and an independent arbitration was required to pursue the additional parties.  Now the Owner and Contractor may consolidate arbitrations on a single issue, if conditions are met.  But both the Owner-Architect and Owner-Contractor contracts must have the same joinder clause.
  • Statutes of Limitations – Previously there was an inconsistency between the Owner-Contractor and Owner-Architect contracts on the time limit for claims.  The Owners felt the contract limit restriction was unfair and preferred relying on state law.  Now there is a ten-year “discovery rule” after Substantial Completion.
  • Additional Insured Language – The previous version of the contract called for Project Management Protective Liability (PMPL) coverage, but did not allow for additional insured status for the Owner and Architect on the site.  Now PMPL has been removed and replaced with the Owner, Architect and Architect’s consultants as additional insureds for claims from Contractor negligence or omission.
  • Subcontractor and Owner Protection – The Contractor now MUST pay subcontractors within 7 days of receiving payment.  If there is suspicion the subcontractors are not being paid, the Owner may now issue joint checks to the Contractor and subcontractor.  Rather than stopping work and stopping payment, this can help a project move forward.
  • Owner’s Financial Information – Before a contract is signed, the Contractor may inquire about the Owner’s financial information.  After work commences, however, the Contractor has the right to information about the Owner’s sources of funds only under 3 conditions: 1. The Owner fails to make payments 2. if the contract sum changes materially, or 3. if the Contractor states a reasonable concern about an Owner’s ability to pay.  Of course, the Owner would then decide if the concern was “reasonable” and could choose not to release the information at the dismay of the Contractor.  These impediments for contractors to get the information they used to get upset many contractors in these uncertain times.

These items listed above were some of the major changes initiated by the AIA in the next round of revised contracts.  But this is where the duel begins. 

Consensus Documents 200 - Knight #2

As it was, not all the players at the construction roundtable joined in revising this document.  The Association of General Contractors (AGC) did not endorse or participate in this revision of the A201.  Instead, with the perception that construction contracts by one association favors that association’s members, they formed a separate set of Owner-Contractor contracts, with participation by general contractors, subcontractors, some designers and some Owners in the interest of their membership.  The Consensus Documents generated replace the AGC family of contracts.  The EJCDC joined in the process as well, but in the end has not chosen to endorse this family of contracts.  As the AGC declined to participate in the AIA A201 revisions, the AIA declined to participate in the formation of the Consensus Documents.  

Controversy - The Joust

It is perceived that the organization releasing contracts for use has a significant moneymaking venture.  Of course, with AIA getting the goods, the AGC wanted a share of the loot.  In the most reverent of intents, each association proclaims their documents are neutral, and yet are protecting their own membership. 

Differences Between AIA A201 and the Consensus Documents 200

So what are the major differences between what the AIA released and what the AGC has proposed?

  • Disclosure of Owner’s financial information (AIA protects Owner’s privacy and AGC demands Contractor’s right to know.)
  • Order of precedence of documents if there is a conflict in documents (AIA does not provide guidance, as the interpretation of intent is by the generator of the construction documents, who is familiar with the codes and requirements, whereas the AGC starts with priority given to Change Orders, then Contracts, then Drawings, then Specifications, then Addendum, and so on.  Specifications are not delegated a high level of importance in priority – speak up CSI members!!)
  • Change Directives if there is a disagreement of cost (AIA says the Architect selects the method to achieve agreement.  AGC looks at savings opportunity to Owner.)
  • Indemnification of Owner by Contractor – (AIA says Owner to make that part of the project whole.  AGC says Owner must pay for Owner’s actions that harm Contractor but does not adjust overhead and profit value.)
  • Dispute resolution – (AIA calls for mediation, then optional arbitration or litigation.  AGC is more elaborate and calls for direct communication, then project sources to resolve in 5 days, then send issue to executives of the Owner to resolve in 5 days, then to mitigation, then to mediation, then to litigation.)

Coordination Between Documents is Key – Avoiding the Slaying

Requirements of the B141 are not consistent with the Consensus Documents and may call for tasks not under the contract of the other party.  One thing the legal representatives wanted to emphasize is that mixing documents or revising to meet the various parties’ needs and desires requires the expertise of legal council.  So pay attention before you sign those contracts, read everything first, and see your friendly lawyer.