• New Construction Contract Documents are Released
  • April 4, 2008 | Authors: Leonard S. Shifflett; Ronald L. Wallenfang
  • Law Firms: Quarles & Brady LLP - Chicago Office; Quarles & Brady LLP - Milwaukee Office
  • In late 2007 two giants of the construction contract industry released their respective versions of "new and improved" construction contract documents. The American Institute of Architects (AIA) issued a family of updated forms, while the Associated General Contractors (AGC) debuted a series of brand new so-called ConsensusDOCS.

    These are important developments for everyone in the industry, as well as for building owners, because writing building and construction contracts is a complicated business. One reason is because of the large number of players who need contracts: owners and their representatives, architects and their consultants; construction managers, general contractors, subcontractors and material suppliers, sureties and insurance companies, and the list goes on. The job of integrating the terms of the many required contracts to make them consistent with each other, as well as sufficiently comprehensive to cover the issues that most frequently arise, is a daunting one even for experts.

    Fortunately, a number of professional organizations have developed, over many years, families of contract forms that have withstood the test of time and that are available to the construction industry.

    AIA Documents

    By far the most widely used are the forms developed by the AIA, which were first issued around 1911, and which are revised and updated approximately every 10 years. The 2007 revisions include the 40-page General Conditions of the Contract for Construction, Form A201, which covers hundreds of legally significant issues of recurring concern.

    The software needed to write AIA contracts is licensed to thousands of participants in the industry: architects, developers and other owners, contractors, subcontractors, and of course, law firms, including Quarles & Brady.

    AIA forms cannot simply be printed out and signed. The business terms have to be added, such as price, time for performance, and the quantity and quality of work. Project-specific and state-specific issues and requirements must also be addressed. To give some examples:
    • Dramatic changes to the AIA language would be needed to accommodate an asbestos abatement contract;

    • The four states in which Quarles & Brady has offices (AZ, FL, IL, WI) vary widely in the extent to which they will enforce indemnification clauses;

    • An owner or contractor who scrupulously follows the AIA payment provisions could find that it has nevertheless violated a state prompt payment statute;

    • Parties would naturally like to bias the terms at least slightly in their favor, especially in "close cases," where this can be done within the bounds of fairness.

    It is difficult for a party to accomplish these goals without the assistance of counsel experienced in construction contract matters.

    Most readers will be insufficiently familiar with the 2007 forms to easily appreciate either the changes from, or the continuity with, the 1997 family of forms. But for those who are familiar with them, here are some highlights of the changes.

    For Owner-Architect Agreements, the 1997 Form B141, the most detailed of the previous forms, has disappeared from view. Its nominal successor, 2007 Form B102, is so much shorter and so much changed that a line-by-line comparison would be futile. Those who like the "cookbook" style detail of 1997 Form B141 will have to add almost all of those details by amending the new form.

    The former "abbreviated" Form B151 has been rebaptized as 2007 Form B101 and does closely resemble its predecessor. It is no longer called "abbreviated," as it is markedly longer than the new B102. (Both the B101 and the B102 have the same name: Standard Form of Agreement Between Owner and Architect.) Changes include the following. 
    • There is an expansion of the list of architect costs subject to reimbursement by the Owner;

    • Without specifying policy limits, the 2007 form requires the Architect to carry errors and omissions insurance;

    • In an arbitration affecting multiple parties, claims by and against the Architect may now be consolidated with the other disputes; the 1997 forms required the Architect's consent;

    • There is an introduction of a minimum standard of care for the Architect, consistent with most state common law standards;

    • There is an introduction of an obligation on the Architect, to consider and discuss with the Owner the feasibility of "environmentally responsible" design approaches.

    Changes in the General Conditions of the Contract for Construction (A201) include:
    • There is sufficient renumbering of sections to make many former cross references obsolete and thus confusing or even inoperative;

    • Arbitrations are made subject to the Federal Arbitration Act rather than state acts. That issue was not addressed in pervious versions;

    • No claims may be made by either party more than 10 years after substantial completion of the work. This limitation is in addition to shorter state statutes that apply to many but not all claims;

    • The parties may appoint, at the outset, an Initial Decision Maker, other than the Architect, to address disputes. If none is designated, the Architect retains that role.

    AGC ConsensusDOCS

    In the preparation of this round of documents, the AGC brought other players in the construction industry to the document drafting table; representatives of building owners, subcontractors and engineers participated in the endeavor. According to the AGC, this inclusive process resulted in a series of contract documents which it calls ConsensusDOCS, that reflect a more balanced approach to the construction contract process.

    Eventually, more than 70 updated forms will be available to address all standard project delivery methods. Several of the documents address cutting-edge issues such as the use of electronic communications and building information modeling (BIM). The AGC is also developing a new Tri-Party Collaborative Agreement (a process commonly used in Australia), which is designed to encourage lean construction.

    These documents contain important changes from past versions. For example, some of the major points of the new ConsensusDOCS 200 (Standard Agreement and General Conditions Between Owner and Contractor [where the contract price is a lump sum]) include the following.
    • Contract and General Conditions are rolled into one document;

    • As between Owner and Contractor, the Owner has all design responsibilities except for design matters specifically allocated in the contract to the Contractor;

    • The Owner is obligated to furnish significant Worksite Information covering all existing conditions, including sub-surface conditions;

    • The Architect/Engineer is removed as arbiter of disputes, issuer or approver of applications for payment or the judge of substantial and final completion;

    • There is language dealing with work performed at the Worksite directly by the Owner or by third parties;

    • The Contractor has the right to correct defective work or materials discovered after the one (1) year warranty period;

    • Provision is made for a Contractor's Safety Representative;

    • An effort is made to prevent using shop drawings and other submittals as a way of making changes in the work without highlighting them to the other party. The Owner is to review and approve all submittals;

    • The Owner is to secure and pay for all required permits;

    • Provisions dealing with Labor Relations are added;

    • A liquidated damages provision, based on delays in attaining Substantial Completion and/or Final Completion, is included in the Contract;

    • There is a detailed limited waiver of consequential damages;

    • In addition to Change Orders, the Owner can issue an Interim Directed Change and pay the Contractor 50% of the estimated cost to perform the work until the adjustment to Contract Price is reached;

    • No additional retainage is to be withheld after the Work is 50% completed;

    • There are detailed provisions for determination of Substantial Completion and Final Completion;

    • The Owner is not an insured under Contractor's insurance. But there are provisions for the Contractor to obtain Additional Liability Coverage;

    • A termination by the Owner for convenience results in payment of a premium, but not 100% of the lost profit.

    • These are multiple-step dispute mitigation and resolution procedures.

    Consideration of even this brief list will suggest some of the pitfalls into which a party may unknowingly stumble by merely accepting the unedited version of these documents. While the ConsensusDOCS are less biased in some respects than the AGC's previous forms, they still must be carefully edited by an experienced construction law practitioner so that subtle but important allocations of risk and reward are clearly flagged for the client and addressed upfront in the contracting process.