A Step Up

 NEW AIA DOCUMENTS 01The AIA's new owner-contractor documents, explained. 

By James M. Doerfler

Many business executives eagerly await the latest smartphone upgrade to take advantage of the latest features and improvements.  However, these same executives are often reluctant to update their foundational commercial construction documents.This could be a mistake. Like improvements in smartphones, the 2017 upgrades to the suite of owner-contractor agreements and other form construction contracts published by the industry-leading American Institute of Architects (AIA), the first such major update in 10 years, contains a host of improvements, many of which individually might seem small but collectively represent a substantial upgrade. 

In discussions with many construction industry clients about the 2017 contract forms, I often receive comments that they are comfortable with the "devil they know" in the 2007 contract forms and are not yet comfortable with the provisions of the 2017 forms. These clients don't want to be first adopters and want to see how the new provisions are adopted by industry. They ask the bottom-line practical question: if I am comfortable with the 2007 contract forms, then why should I switch to the 2017 forms? Like the smartphone upgrade analogy, the series of improvements in the new AIA contract forms allow users to keep pace with emerging industry innovations, are more comprehensive in scope and afford greater legal protections. 

On the theory that sometimes what you don't know can hurt you, this article outlines some of the principal reasons for considering an update to your current AIA documents, with a special focus on the owner-contractor documents.

Most people will be upgrading soon: Many of the firms that use the AIA documents do so through the AIA contract-drafting platform. AIA has essentially forced users to upgrade by establishing a sunset date of October 2018 after which you will be unable to generate the old 2007 forms using the AIA contract-drafting platform. Thus, if you are not using the 2017 forms yet, you will be soon and you need to be prepared.

The new insurance exhibit: One of the biggest substantive changes and improvements to the full-service owner-contractor documents is the creation of a comprehensive insurance and bonds exhibit. Rather than having insurance requirements buried in the middle of the general conditions of the contract, the insurance-related requirements are now segregated into a separate and more user-friendly exhibit. This exhibit uses a check-the-box style "menu" of insurance options to detail what insurance types and amounts the owner and the contractor will provide under the contract. Under the 2007 forms, most sophisticated parties often created separate insurance exhibits and required review and approval of insurance requirements by corporate risk managers or insurance brokers. The AIA now essentially adopts this practice. Please note the separate insurance exhibit is only used with the full long-form (A101, A102 and A103) construction contract forms, but is not used with the short-form agreements.

Greater financial protections: Based on lessons learned during the great 2008 financial recession, contractors gain new protections in the form of owner disclosure requirements regarding its financial arrangements for the project and the ability to stop work if the requisite assurances are not provided. Owners likewise benefit because contractors are now required as a matter of standard practice to provide releases and waivers of liens with their applications for progress payment, and to protect the owner against subcontractor and supplier lien claims.

Greater efficiency through direct owner-architect communications: Direct communications between the owner and contractor, as opposed to communicating only through the architect, are now authorized, which should lead to project efficiencies. The architect still needs to be kept in the loop about matters affecting the performance of architectural services.

Better schedule information: If a project goes bad it is often because of schedule delays. Given this fact, prior versions of the AIA documents surprisingly had only minimal scheduling requirements. The 2017 version now requires the contractor to specify in greater detail the information to be included in schedule submittals, including critical schedule milestone dates and apportionment of the work by construction activity.

Keeping pace with industry trends: Finally, the new documents seek to keep up with industry trends, such as: "green" building requirements through its use of the E204 Sustainable Projects Exhibit; electronic communications through its E203 Electronic Data Exhibit, which governs the use and transmission of digital data; and the use and risk of building information modeling (BIM) technology.

The 2017 AIA contract updates were released after detailed input from various industry stakeholders. For this reason, the new forms incorporate a number of the most commonly adopted changes seen in the construction industry. While these updated forms will not be preferred by everyone, they represent an overall positive step forward that should benefit many industry participants and represent industry trends. Forward-thinking construction industry executives should take the time to understand the new 2017 forms and the industry trends they represent in order to reap the benefit of their newly introduced protections. 

James M. Doerfler is former construction industry project manager turned lawyer who counsels construction industry clients nationwide as part of the Reed Smith law firm's multi-office and multi-national construction and engineering team.

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