New AIA Documents Change Rules and Relationships

This is the first in a series of articles discussing the 1997 editions of AIA documents issued for publication on October 17, 1997. This first article outlines the general scope of the changes made by the new documents. Future articles will deal with particular issues affecting contractors, design professionals, and owners that have been modified by the many changes in the documents.

The American Institute of Architects publishes a series of contract documents for the construction industry that are the most widely used documents of their kind in the world. Literally hundreds of thousands of copies are sold by the AIA each year. Because of the widespread use of AIA documents in private and public construction in this country, the approaches to particular issues, and use of language, are often borrowed (or counteracted by specific provisions) by other contract drafters. AIA documents are an accurate barometer of the present and future of construction contract relationships in this country.

AIA updates its basic contract forms each 10 years. The 1987 editions of its General Conditions and contracts between owners and contractors and owners and design professionals were controversial and relatively slow to be implemented. The early drafts of the 1997 revisions have had unprecedented exposure to AIA members as well as contractor and owner groups. As a result, it is anticipated that the new documents will come into widespread use much more quickly than their predecessors.

At this time, the AIA has issued new editions of its major documents. These include: A101 (Standard Form of Agreement Between Owner and Contractor where the basis of payment is a Stipulated Sum); A107 (Abbreviated Standard Form of Agreement Between Owner and Contractor for Construction of Projects of Limited Scope Contractor where the basis of payment is a Stipulated Sum); A201 (General Conditions of the Contract for Construction); A111 (Standard Form of Agreement Between Owner and Contractor where the basis for payment is the Cost of the Work Plus A Fee with a negotiated Guaranteed Maximum Price); A401 (Standard Form of Agreement Between Contractor and Subcontractor); A701 (Instructions to Bidders); B141 (Standard Form of Agreement Between Owner and Architect); B151 (Abbreviated Standard Form of Agreement Between Owner and Architect); C141 (Standard Form of Agreement Between Architect and Consultant); and C141 (Abbreviated Standard Form of Agreement Between Owner and Architect). The Associated General Contractors of America (AGCA), the nation's largest general contractor trade association, has endorsed the 1997 editions of A101, A107, A201, and A111. The American Subcontractors Association and the Associated Specialty Contractors have endorsed A401. Each document bears the caveat that — "This document has important legal consequences. Consultation with an attorney is encouraged with respect to its completion and modification." This is certainly good advice.

An example of the magnitude of the changes made by the 1997 edition is evident in comparison of the old and new versions of A201. There are changes to each article, and each subarticle in the document. In addition, there are changes in over half the individual paragraphs, and over half of the sentences in each paragraph. Some of the changes are relatively minor and simply serve to coordinate new concepts within the family of documents. Many of the changes are major and reflect new approaches to legal relationships, insurable interests, design of projects, and contract administration. This column highlights some of the more significant of these changes in the two cornerstone documents — A201 (General Conditions of the Contract for Construction) and B141 (Standard Form of Agreement Between Owner and Architect). Future columns will focus in more depth on particular issues.

Major Changes or New Concepts in A201 (1997)

• Owner and contractor each waive claims for consequential damages against the other. Liquidated direct damages, and bonus payments for early completion, are allowed, but claims for such things as loss of use by the owner and extended home office overhead of the contractor are waived.
• Delegated design responsibility (termed "incidental design" by architects) is clarified. These provisions, which permeate the entire document, are intended to deal with such issues as vendor design of subsystems like HVAC, curtain wall design, or design of structural steel connections. The owner must now specifically designate which portions of the overall design will be delegated to the contractor.
• Mediation of disputes is required.
• Indemnification is of the "limited" variety, and there is provision for waiver of indemnification if a new insurance product — Project Management Protective Liability Insurance (PMPL) — is purchased for the project.
• The definition of hazardous materials is significantly broadened, and owner responsibilities if such materials are encountered is more specifically defined.
• There are clarifications to the contractor's responsibility for correction of defective work.
• Except in certain defined circumstances, the architect is no longer the representative of the owner. The owner is required to designate a representative who has authority to make decisions on the project.
• The concept of "intended results" has been changed and clarified so that contractors are held to "indicated" features rather than what the architect or owner may have subjectively intended.
• Many new or expanded duties are required of the owner, including financial reporting and maintenance responsibilities, and definition of information or services that will be provided to the contractor.
• Contractors are charged with the responsibility of studying and comparing the various components of the design and contract documents, as well as other owner-furnished information, make field measurements, and generally plan their work. Discrepancies noted in this process are to be communicated in writing to the architect. Knowing failure to inform may subject the contractor to the penalty of having to pay for correction of errors, omissions, or inconsistencies.
• Contractors may now be paid the value assigned by the architect to Construction Change Directives even while dispute resolution procedures continue.

Major Changes or New Concepts in B141 (1997)

• The document itself is a new two-part format. The instructions for use of the form are fifteen pages long in and of themselves, and supplementary forms are expected to be issued in the near future. The first part of the document sets forth information about who the parties are and the names of their representatives. It also outlines the general scope of the project, design professional compensation, time parameters, and the general terms and conditions relating to such matters as ownership of "instruments of service", changes, and dispute resolution. The second part of the document is designed to be flexible to meet the needs of a particular project and to allow the architect to identify and define the services needed. Reportedly, the new format was intended to help architects secure additional fees for their work — a concept strongly endorsed by the AGCA.
• Architects take on added responsibility, in terms of remedial design services, to meet owner budgets.
• The concept of "phasing" of design and project documentation is no longer present.
• As in the A201, there is a mutual waiver of consequential damages and mandatory mediation of disputes.
• Termination for convenience is now available to the owner.
• The document integrates with the delegated design aspects of A101, A111, and A201.

Both the AIA and AGC are promoting the new documents heavily through regional educational opportunities. Combined with the early exposure of the documents to all user groups it is anticipated that these 1997 editions will rapidly become the standards of the industry creating new project relationships, new contract administration requirements, new insurance needs, and a general change in many of the economics of the construction industry. Future columns will explore these changes in more depth.

This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations.

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