August 02, 2018
THE AIA FAMILY OF DOCUMENTS1
I. Overview: The Prominence Of The AIA Documents
The American Institute of Architects (AIA) has taken the lead over the past century in drafting documents to standardize and formalize the roles and responsibilities of parties for design and construction contracts. The AIA publishes a numerous forms, tailored to address a variety of contracting structures and formats, including the single prime contractor format, the design-build format, the separate design and construction format. The AIA documents also provide for different financial structures including the lump-sum contract format, and the cost-plus-fee contract format.
As you would expect with documents prepared by the American Institute of Architects, the AIA documents tend to favor the architect’s position. However, the AIA has sought input from other trade groups, particularly the A series of AIA forms, which include forms for agreements between owners and contractors and between contractors and subcontractors. While the AIA has obtained input from other industry groups in developing the AIA forms, the AIA still controls the process. The widespread use of these forms throughout the private design and construction industry has been described to have reached the point that participants in the construction process essentially regard AIA forms as “the only game in town.” Sweet on Construction Industry Contracts: Major AIA Documents §3.4 at 29 (1987). (John Wiley & Sons).
The prominence of the AIA contract forms assures that the AIA’s decennial revisions to the documents will substantially affect the interests of virtually every participant in the construction industry. Not surprisingly, the AIA documents and their decennial revisions receive significant review and analysis from all segments of the design and construction industry. One of the most thorough reviews and critiques of the AIA forms is found in Sweet on Construction Industry Contracts: Major AIA Documents (1996) (formerly published by John Wiley & Sons and now published by Aspen Law & Business). Moreover, every segment of the construction industry has its own view of the forms and while each segment of the industry can find some terms that appeal to their interests, each segment is also likely to have its own issues and disagreements with the forms. For example, the Associated General Contractors of America (AGC) did not endorse the 2007 version of the documents. The AGC stated: “the new edition does not fairly balance risk among all parties but instead significantly shifts risk to general contractors and other parties outside of the design profession.” "AGC Members Unanimously Vote Against A201 Endorsement: General Terms and Conditions Document Fails to Provide Balance"; The Associated General Contractors of America; October 12, 200, cited by R. Dean and S. McLendon, Standard Construction Contracts: New Forms From Three Sources, ARCHI-TECH, January 2008. (Stamats Buildings Media). http://www.architechweb.com/ArticleDetails/tabid/254/ArticleID/5588/Default.aspx
Other groups have created competing sets of forms. For example, the Engineers Joint Contract Drafting Committee (EJCDC) has had a family of contract forms for many years. In 2007, a group of general contractor, owner, subcontractor, and surety groups created a new group of design and construction forms called the ConsensusDOCS. The ConsensusDOCS were created and endorsed by more than twenty member organizations, representing owners, general contractors, subcontractors/specialty contractors, designers, and sureties (including the National Association of State and Facilities Administrators, Construction Users Roundtable, Construction Owners Association of America, Associated General Contractors of America, Associated Specialty Contractors, Inc., Construction Industry Round Table, American Subcontractors Association, Inc., Associated Builders and Contractors, Inc., Lean Construction Institute, Finishing Contractors Association, Mechanical Contractors Association of America, National Electrical Contractors Association, National Insulation Association, National Roofing Contractors Association, Painting and Decorating Contractors of America, Plumbing Heating Cooling Contractors Association, National Subcontractors Alliance, Sheet Metal and Air Conditioning Contractors’ National Association, National Association of Surety Bond Producers, The Surety & Fidelity Association of America, Association of the Wall and Ceiling Industry). Thus, the AIA documents are encountering more competition but, for the time being, the AIA documents are still the most prevalent standard form contracts.
II. Standard Forms: Allocation Of Risks And Responsibilities
The design and construction process is a complex set closely interrelated, contractual relationships involving parties with often differing interests other than, hopefully, a mutual interest in the successful completion of the project. An ordinary construction project commonly involves the participation and financial commitment of: owners and developers; construction lenders; construction schedulers, project managers; architects; prime contractors or construction managers; trade subcontractors; material and equipment suppliers; consulting, testing, and design engineering firms of many different disciplines; surety companies providing surety bonds for many of these other parties; insurance companies providing various forms of insurance to many of these parties; or inspection services; and the list goes on.
These participants typically have one or more contractual relationships creating rights, duties, obligations, and great risks. Many of the participants must simultaneously manage multiple contractual relationships on the same project. The relationships and conduct of one participant can affect the risks of many, if not all, of the other participants in the process. If one fails, others may follow. The risks extend beyond those who have direct contracts with a failing party.
Not only are the parties affected by their own agreed duties on the project, they are also subject to numerous regulatory schemes: environmental laws and regulations; OSHA requirements; zoning restrictions; building codes and ordinances; statutory schemes such as mechanic's lien laws; labor laws; union rules; and various permitting and licensing statutes that vary from one location to another. Additionally, the Uniform Commercial Code may applies to some of these transactions and relationships—for example, contracts for the supply of building materials or equipment—but not to others. Changing technology, advances in material and equipment design, improvements in construction techniques and methodology, changes and advances in architectural and engineering design methods and techniques, and changes in user demands relating to the function and aesthetic features of the ultimate product all work constantly to spice the construction process, and each contract on each project, with new and different measures of risks.
Add to this that many design and construction contract relationships take many months and often years to perform. Personnel changes and substantial changes in the financial capacity and condition of some of the customary participants are likely to occur in any construction project. Unanticipated subsurface conditions and unusual weather conditions pose other project risks. Economic variables such as recessions, fuel and material shortages and price spikes, and wage and price inflation, unanticipated new projects competing for the available local skilled labor force can also present problems for project participants.
Prudent construction participants manage and allocate their risks. Economic realities on any project promote a quick conclusion of negotiations on many complex two-party agreements. For this reason, a well-understood set of industry contracting customs and practices setting the project rules is critical. Standardized forms such as the AIA documents help the parties allocate risks and responsibilities. A reasonable allocation of such risks among so many parties would take forever without some commonly understood, standardized rules. The AIA forms partly reflect and partly provide those rules. The AIA documents not only allocate risk among the parties, they also provide a road map that may be used by courts in their apportionment of liability between the parties of the contract and construction disputes. For example, both the AIA B101-2007, Standard Form of Agreement Between Owner and Architect, and AIA A201- 2007, General Conditions of the Contract for Construction, provide that the architect is not responsible for the failure of the contractor to perform its work in accordance with the contract documents, but should be held liable for the architect's own negligent acts or omissions. See Donald H. Fisk and R. Carson Fisk, “Comparative Contract Fault: Using the AIA Documents to Apportion Contract Damages,” 26 The Construction Lawyer 23 (No. 2, Spring 2006) (interpreting the 1997 versions of those agreements). Similarly, the AIA documents shift various risks to the contractor. For example, the A201-2007 shifts various risks to the contractor, including:
Risk in the Search for Errors
Section 3.2.2 increases the Contractor’s duties when reviewing the Contract Documents. While a Contractor has always been required to review the Contract Documents for purposes of facilitating construction, it now also has the stated obligation to review them for purposes of facilitating “coordination.” While “coordination” is not defined, this change presumably obligates the Contractor to note those issues which may cause scheduling difficulties. With this change, Contractors may not be able to assert claims for scheduling difficulties it could have found during its review of the documents.
Section 3.2.2 obligates the Contractor to alert the Owner not just to errors it discovers, but also those errors “made known” to the Contractor. Section 3.2.4 follows this change by deleting provisions which only placed liability upon the Contractor for a willful failure to
notify the Owner of errors. Section 3.7.3 deletes the acknowledgment the Contractor was not obligated to determine if the documents complied with applicable laws. These provisions certainly increase the Contractor’s risk arising from errors in the documents, but to what degree? Some have expressed concern that these changes (including the addition of the undefined phrase “made known”) now impose upon the Contractor a duty to affirmatively look for errors, and not simply report those it may find. Others believe the use of the word “known” means a Contractor still must have actual knowledge of an error before being required to report it, and has no duty to look for errors. Until the courts begin interpreting these provisions, it is impossible to say with certainty which view is correct.
B. Risk from Owner-Required Means and Methods
2007 change to Section 3.3.l regarding Owner-Required Means and Methods of Construction is one of the most obvious examples of the 2007 A201’s shifting of risk from the Owner to the Contractor. Under 1997 A201, the Owner was solely liable for extra time and expense incurred as a result of Owner-required means and methods of construction. However, the 2007 A201 changes the wording of Section 3.3.1 subtly, but significantly, so now the Owner is only responsible for extra time and expense “arising solely” from those required means and methods. Now, the Owner is only responsible for the extra time and expense caused 100% by the Owner. The Owner is no longer responsible for extra time or expense caused in some part by any work of the Contractor.
C. Risks of Concealed Conditions
In the 1997 A201, all parties had an obligation to each other to observe and report previously concealed or unknown conditions. In Section 3.7.4 of the 2007 A201, that duty now resides solely with the Contractor.
D. Risks Arising from Human Remains and Wetlands
Section 3.7.5 is a new provision for the 2007 A201 which imposes a duty on the Contractor to cease work and notify the Owner and Architect when it finds “human remains … burial makers, archaeological sites or wetlands not indicated in the contract documents.” First, none of these terms are defined in the document, making it difficult for a Contractor to determine in any given situation if it must actually stop work. The lack of definition will be even scarier to Contractors when they realize the document is silent about what liability they may suffer if they make the wrong determination in that situation. Might the Contractor be liable for damages suffered by the Owner if the Contractor mistakenly continues work when it should have stopped? If so, how might this liability differ from any common law liability the same risk may have previously presented? Might the Contractor be liable for damages if it stops work when it should not have? No one knows the answers to these questions, as they are not found in the contract documents.
E. Risks Arising from Delayed Processing of Submittals
Pursuant to Section 3.10.2 of the 2007 A201, a Contractor must submit to the Architect a proposed schedule for review of submittals, and must do so “promptly” after being awarded the project. However, the term “promptly” is not defined. The section goes on to say if this schedule is not submitted, a Contractor loses the right to seek costs and time incurred because of an Architect’s delays in reviewing the submittals. While this new requirement of a submittal schedule may be difficult for the Contractor to meet, such potential difficulty is not the scariest part of this section.
The punishment for failing to submit a submittal schedule seems excessive in comparison to the “crime”. Without the schedule, an Architect can take as long as it pleases to review submittals, and can do so without penalty.
F. Hazardous Materials
Under Section 10.3 of the 2007 A201, the Contractor can be liable for the mishandling of hazardous materials, even if Owner or Architect required their use on the project. This does shift risk from Owner to the Contractor, but the Contractor’s liability is not based on strict liability. The Owner must still prove actual fault or negligence on the part of the Contractor before the Contractor is liable.
The AIA forms have several advantages for managing risks and responsibilities. One advantage is that the AIA forms contain contract provisions and language that have been frequently interpreted in the courts. The AIA has sought to eliminate from its forms the ambiguities and unintended results that have led to litigation. The forms are far from perfect, but they are much more predictable in result than custom contracts. This experience factor also gives the AIA forms an edge, other things being equal, over competing form contracts such as those found in form books and those produced by other trade associations. The AIA forms are much more widely used and understood. The AIA has produced a wider variety of forms to accommodate different types of construction projects. This is important because different contracting structures (i.e., firm fixed price contracts vs. guaranteed maximum price or typical owner contractorsubcontractor vs. construction management contracts) carry different risks and responsibilities to individual parties. For instance, competitively bid single prime contracts based upon final and complete plans and specifications follow different customary rules and procedures from those that apply to negotiated fast-track designbuild contracts. The popularity and prevalence of the AIA forms permit the AIA to keep the various contract forms updated for changes and new developments in contracting structures and formats.
Another advantage of the AIA forms is that the forms are linked together and each of them fits and accommodates the allocation of risks and responsibilities provided in the other AIA forms for other contract relationships on the same project. This linkage and interrelationship works to minimize concern about how risks and responsibilities are allocated in other critical project relationships. It poses a danger, certainly, to any party who modifies an AIA document. However, this danger would probably exist in greater measure if the links and interrelationships of the forms were not present. Other reasons for using these forms boil down to this: the price and the speed with which the final product, an executed contract, can be delivered given their familiarity and repeated use in the construction industry.
Some projects—large engineering projects, for instance—are no doubt better suited to other available forms of contract documents. On some large projects, the sophistication and bargaining position of the parties and the amount of time and resources available may make the preparation of a custom contract a viable option. In most private design and construction transactions, however, the AIA forms remain the most efficient and practicable option.
Bottom line: The history of these forms, the widespread familiarity and use of these forms, and the scrutiny and commentary these forms receive from industry trade groups operate as inexpensive substitutes for legal review and advice on individual transactions. When the parties sign familiar standard form agreements, such as the AIA forms, they do so comfortably, which can reduce the time and cost of establishing the contract terms. They rely on the legal testing these forms have received over the years in the courts and on their own practical experience with the forms.
III. Modifying The AIA Documents
Individual participants in the construction industry often modify the forms, a practice which is advisable to many participants because rarely does a contract fully address all of the potential problems, rights and responsibilities applicable top different construction projects.
While the different AIA forms are more tailored to different specific types of projects and situations than most other standard form families of contracts, each of these AIA forms only represents one set of balances and compromises between the many different competing interests of the contracting parties. One set of compromises does not necessarily fit all. As Professor Sweet has described the AIA forms as falling into a “flexible” category of forms. Sweet on Construction Industry Contracts: Major AIA Documents §2.4 (2009). Professor Sweet uses that term to describe the leeway the AIA forms allow for price adjustments after the date of the contract. The AIA forms allocate to the owner certain risks that are difficult to evaluate or price at the time the contract is signed. For some projects, over the long term, the owner can be in the best financial position to bear unforeseen risks. However, on other projects, the owner may not be in a better financial position to bear these risks. In such circumstances, a tight contract, giving more importance to the certainty and predictability of the ultimate cost to the owner, may make more overall economic sense than a flexible one does. The AIA forms range from the flexible to the very flexible. In general, the forms are very flexible. In general, a party considering modifications to the form contracts should consult the instruction sheets that accompany the most commonly used AIA forms in The Architect's Handbook of Professional Practice provide some instructions and warnings regarding modifications to the standard forms. For example, for the AIA A201, General Conditions of the Contract for Construction, the AIA provides a set of sample modifications in the form of AIA Document A503-2007, Guide to Supplementary Conditions. A503-2007 (formerly A511-1999). The AIA does not provide any similar form of suggested alternatives or supplemental conditions for its other forms of contract.
Revisions to the forms should be carefully evaluated because a change to one form can have significant implications to other terms in the same form or may modify the interrelated terms in other contracts on the same project. As Professor Sweet stated:
There are too many variables determining which form is best and whether and how to revise one. A drafter must be sensitive to any relationship of the contracting parties, respect customary practices, know local law, be aware of drafting “trade offs” and appreciate different attitudes toward the basic objectives of a contract. Sweet on Construction Industry Contracts: Major AIA Documents, Preface at viii (1996 ed.).
Moreover, it is critical that a party using an AIA contract form from one decennial version must be careful to use other forms from the same decennial version. The architect-owner, owner-contractor, and contractor-subcontractor agreements in each decennial edition are designed to interact. Use of forms from different editions can result in inconsistent obligations between the parties.