Assessing Changes in the Latest AIA Construction Contract Documents
The American Institute of Architect’s series of construction contracts are likely the most commonly used construction contracts throughout the United States. The AIA recently released the 2007 A201 General Conditions (“General Conditions”) and Standard Forms of Agreement Between Owner and Contractor (A101, A102 and A103) to which it has made significant revisions.
The dispute resolution provisions have changed. The prior versions provided for the resolution of all disputes by binding arbitration in accordance with the Construction Industry Rules of the American Arbitration Association. Because owners and contractors often deleted this provision, the revised General Conditions now allow the parties to “check a box” and select from arbitration, litigation or “other.” If no box is checked, litigation is the default. The new General Conditions now also acknowledge that the parties may choose an arbitration service provider other than the AAA.
Prior versions of the General Conditions identified the architect as the “Initial Decision Maker” for claims and/or disputes between the parties. This dispute resolution mechanism received criticism on the grounds that the architect was not impartial since she/he was typically hired and paid by the owner and was often being asked to analyze claims based upon issues with the design documents prepared by the architect or one of its consultants. The revised General Conditions now allow the parties to designate another person as the “Initial Decision Maker,” to whom claims must be submitted as a condition precedent to initiation of other dispute resolution procedures. If no person is selected, the architect is the default and will serve in this capacity.
The previous General Conditions included a provision stating that the statute of limitations for claims based upon acts or failures to act prior to substantial completion commenced at the time of substantial completion. There was significant controversy over this provision because it, in many cases, conflicted with applicable state law. Section 13.7 of the revised General Conditions now requires claims be brought “within the time period specified by applicable law, but in any case not more than 10 years after the date of Substantial Completion of the Work.”
Also, Article 9.6.2 now requires contractors to pay subcontractors “no later than seven days after receipt of payment from Owner.” Another benefit to subcontractors is a new provision allowing owners to request written confirmation from the contractor evidencing that payment had been made to subcontractors. If the contractor fails to reply within 7 days, Article 9.6.4 of the new General Conditions allows the owner to contact the subcontractors directly to confirm payment.
Also, the revised General Conditions reduce the procedures an owner must follow prior to correcting a contractor’s defective work. Under the old General Conditions, the owner was required to give two written notices before performing corrective work, but now the owner is only required to give one 10-day notice. If the contractor fails to correct the defective work the owner may correct the deficiencies without prejudice to other remedies it may have.
The revised General Conditions change the insurance requirements. Under the previous version, contractors could be required to maintain “Project Management Protective Liability Insurance.” The revised General Conditions now require the contractor name the owner, architect and the architect’s consultants as additional insureds under the contractor’s commercial liability insurance policy. Also, contractors must maintain completed operations coverage until the expiration of the period for the correction of work, or for such other specified period.
These changes will have a significant impact on the use of the AIA construction contracts and, in many instances, the way in which construction projects are administered. While these are not the only revisions reflected in the new General Conditions, it is clear from these key changes that use of the new document warrants careful consideration, thorough review and a clear understanding.