modifying aia contract documents: advanced strategies for
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Modifying AIA Contract Documents: Advanced
Strategies for Owners, Developers, and
Contractors
Today’s faculty features:
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
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have any questions, please contact Customer Service at 1-800-926-7926 ext. 1.
WEDNESDAY, NOVEMBER 3, 2021
Presenting a live 90-minute webinar with interactive Q&A
Sharon M. Lewonski, Partner, Culhane Meadows, Atlanta, GA
Anthony J. Manhart, Partner, Preti Flaherty Beliveau & Pachios, Portland, ME
Kenneth E. Rubinstein, Director, Preti Flaherty Beliveau & Pachios, Boston, MA
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Design-Bid-Build
Pros:
• Traditional / Known
• High Transparency
• Owner Control
• Checks & Balances
Cons:
• Adversarial Approach
• Linear Design and Construction Process
• Lack of Collaboration leads to Missed Opportunities
Construction Management At Risk
Pros:• Design Assist Presents Greater
Collaboration• Less Conflict• Opportunities to Identify
Improvements and Savings• Fast Tracking Possible Through
Phased Scheduling
Cons:• Still Leaves Room for Conflict
Between CMR and Design Professional
• Premium Placed on CMR - Less Basis for Comparison of Pricing
• Added Administrative Expenses
Design-BuildPros:
• Single Point of Contact for Design and Construction
• Eliminates Conflict Between Design Professional and Contractor
• Greater Ability to Fast Track Due to Overlap Between Design and Construction
• Schedule Compression Can Result in Cost Savings
Cons:
• Owner Cedes Some Control Over Design
• Can Lead to Compromise of Quality and Detail
• Lack of Checks and Balances
Payment Structures
• Lump Sum
• Cost Plus (with no Guaranteed Maximum Price
• Cost Plus with GMP
• Open Book
The ConstructionContracts
The Design Contract
The Prime Contract
The Subcontract and the Supply
Purchase Order
•The main business of a lawyer is to take the romance, the mystery, the irony, and
the ambiguity out of everything he touches.
•Antonin Scalia
Atlanta / Austin / Boston / Chicago / Dallas / Houston / New York / Philadelphia/ Washington D.C. /Wilmington
GENERALLY…
• ** COMPLETE the AIA Forms AND attach all ‘Contract Documents’
DATE OF COMMENCEMENT (A101, Art. 3; A102, Art. 4)
§ 3.1 The date of commencement of the Work shall be:
(Check one of the following boxes.)
[ « » ] The date of this Agreement.
[ « » ] A date set forth in a notice to proceed issued by the Owner.
[ « » ] Established as follows:
(Insert a date or a means to determine the date of commencement of the Work.)
« »
If a date of commencement of the Work is not selected, then the date of commencement shall be
the date of this Agreement.
12
CONTRACT SUM (A101, ART. 4; A102, ART. 5)
A101: Stipulated Sum:
The Owner shall pay the Contractor the Contract Sum, which shall be
$______________, subject to additions and deductions as provided in the
Contract Documents.
● Alternates, Allowances, Unit Prices (See GC A201, §9.1.2)
A102: Cost of the Work, + Fee, W/Guaranteed Maximum Price (GMP)
• Reimbursable = “Cost of Work” (A102, Art. 7, as supplemented by General
Conditions-G201)
• Contractor’s Fee (lump sum, %, or other)
• GMP (assumptions; conditional alternatives to the calculation; subcontractors)
13
SUBSTANTIAL COMPLETION (A101, §3.3, A102, §4.3)
§ 3.2 The Contract Time shall be measured from the date of commencement of the Work.
§ 3.3 Substantial Completion § 3.3.1 Subject to adjustments of the Contract Time as provided in the Contract Documents, the
Contractor shall achieve Substantial Completion of the entire Work:
(Check one of the following boxes and complete the necessary information.)
[ « » ] Not later than « » ( « » ) calendar days from the date of commencement of the Work.
[ « » ] By the following date: « »
§ 3.3.2 Subject to adjustments of the Contract Time as provided in the Contract Documents, if
portions of the Work are to be completed prior to Substantial Completion of the entire Work, the
Contractor shall achieve Substantial Completion of such portions by the following dates:
Portion of Work Substantial Completion Date
§ 3.3.3 If the Contractor fails to achieve Substantial Completion as provided in this Section 3.3,
liquidated damages, if any, shall be assessed as set forth in Section 4.5.
14
LIQUIDATED DAMAGES
Two express provisions addressing liquidated damages (A101, §§3.33, 4.5;
A102 §§4.33 &5.1.6)
“COST-SAVINGS” PROVISION
Reward vs. Punishment?
§ 4.5 Liquidated damages, if any:
(Insert terms and conditions for liquidated damages, if any.)
« »
§ 4.6 Other:
(Insert provisions for bonus or other incentives, if any, that might result in a change
to the Contract Sum.)
« »
15
RETAINAGE (A101, § 5.1.7; A102, § 12.1.8)
MANY STATES HAVE LAWS GOVERNING THE AMOUNT OF RETAINAGE PERMITTED TO BE HELD
AND/OR THE PROCESS FOR RELEASE -
§ 5.1.7 Retainage § 5.1.7.1 For each progress payment made prior to Substantial Completion of the Work, the
Owner may withhold the following amount, as retainage, from the payment otherwise due:
(Insert a percentage or amount to be withheld as retainage from each Application for Payment.…
The amount of retainage may be limited by governing law.)
« »
§ 5.1.7.1.1 The following items are not subject to retainage:
(Insert any items not subject to the withholding of retainage, such as general conditions,
insurance, etc.)
« »
§ 5.1.7.2 Reduction or limitation of retainage, if any, shall be as follows:
(If the retainage established in Section 5.1.7.1 is to be modified prior to Substantial Completion
of the entire Work, including modifications for Substantial Completion of portions of the Work as
provided in Section 3.3.2, insert provisions for such modifications.)
« »
§ 5.1.7.3 Except as set forth in this Section 5.1.7.3, upon Substantial Completion of the Work, the
Contractor may submit an Application for Payment that includes the retainage withheld from
prior Applications for Payment pursuant to this Section 5.1.7. The Application for Payment
submitted at Substantial Completion shall not include retainage as follows:
(Insert any other conditions for release of retainage upon Substantial Completion.)
16
ROLE OF THE ARCHITECT
● Initial Decision Maker (IDM)
(A101, §6.1; A102, §13.1 and GC A201, §15.2.2)
● Substitution of “Owner” for “Architect” in the Agreement
● Owner-Contractor communications
● Owners-Architect Agreement (AIA B101-2017 B102 and B-series docs)
§ 6.1 Initial Decision Maker
The Architect will serve as the Initial Decision Maker
pursuant to Article 15 of AIA Document A201–2017,
unless the parties appoint below another individual,
not a party to this Agreement, to serve as the Initial
Decision Maker.
(If the parties mutually agree, insert the name,
address and other contact information of the Initial
Decision Maker, if other than the Architect.)
17
DISPUTE RESOLUTION PROCESS (A101, §6.2; A102, §13.2)
§ 6.2 Binding Dispute Resolution For any Claim subject to, but not resolved by, mediation pursuant to Article 15 of AIA Document
A201–2017, the method of binding dispute resolution shall be as follows:
(Check the appropriate box.)
[ « » ] Arbitration pursuant to Section 15.4 of AIA Document A201–2017
[ « » ] Litigation in a court of competent jurisdiction
[ «XX» ] Other (Specify)
« To be decided by the claiming Party if not subsequently agreed to in writing
If the Owner and Contractor do not select a method of binding dispute resolution, or do not
subsequently agree in writing to a binding dispute resolution method other than litigation, Claims
will be resolved by litigation in a court of competent jurisdiction.
18
According to the Institute …
“The general conditions are an integral part of the contract for construction for a large project and
they are incorporated by reference into the owner/contractor agreement. They set forth the rights,
responsibilities, and relationships of the owner, contractor, and architect. (… ) AIA Document
A201™–2017 is adopted by reference in owner/architect, owner/contractor, and (…) thus, it is
often called the “keystone” document.”
o Dispute Resolution ( GC A201, Art. 15)
➢Claims (§ 1);
➢Initial Decision (§2);
➢Mediation (§ 3)
➢Arbitration/Consolidation/Joinder (§ 4)
19
§ 15.1.2 Time Limits on Claims
The Owner and Contractor shall commence all Claims and causes of action against the other and
arising out of or related to the Contract, whether in contract, tort, breach of warranty or otherwise, in
accordance with the requirements of the binding dispute resolution method selected in the Agreement
and within the period specified by applicable law, and the applicable statute of limitations shall
commence to run not later than the date of Substantial Completion for acts or omissions prior to, or
the date of issuance of Final Payment for acts or omissions occurring thereafter. but in any case not
more than 10 years after the date of Substantial Completion of the Work. The Owner and Contractor waive all Claims and causes of action not commenced in accordance with this Section 15.1.2
§ 15.1.3 Notice of Claims
§ 15.1.3.1 Claims by either the Owner or Contractor, where the condition giving rise to the Claim and
the resulting impact is first discovered prior to expiration of the period for correction of the Work set
forth in Section 12.2.2, shall be initiated by notice to the other party and to the Initial Decision
Maker with a copy sent to the Architect, if the Architect is not serving as the Initial Decision Maker.
Claims by either party under this Section 15.1.3.1 shall be initiated within 21 days after occurrence
of the event giving rise to such Claim or within 21 days after the claimant first recognizes the
condition giving rise to the Claim and the resulting impact, whichever is later.
§ 15.1.7 Waiver of Claims for Consequential Damages
20
MEDIATION
§ 15.2.6 Either party may file for mediation of an initial decision at any time, subject to
the terms of Section 15.2.6.1. Mediation of a Claim shall be required only if both parties
consent thereto in writing.
** § 15.2.6.1 Either party may, within 30 days from the date of receipt of an initial
decision, demand in writing that the other party file for mediation. If such a demand is
made and the party receiving the demand fails to file for mediation within 30 days after
receipt thereof, then both parties waive their rights to mediate or pursue binding dispute
resolution proceedings with respect to the initial decision.
** INTENTIONALLY DELETED
21
• Termination & Suspension Rights; Remedies & Termination Fee
(A101, §7.1.1; A102, §14.1.3 and GC A201, Art. 14)
• Change Orders (GC A201, Art. 7)
• Insurance/Bonds (GC A201, Art. 11; New Ex. A)
• Indemnification (GC A201, § 3.18.1)
• Notice Provisions /Electronic Data (GC A201, §1.6)
22
Where’s the Force Majeure Provision in my AIA Contract?
§ 8.3.1 If the Contractor is delayed at any time in the commencement or progress of the Work by (1)an act or neglect of the Owner or Architect, of an employee of either, or of a Separate Contractor;(2) by changes ordered in the Work; (3) by labor disputes, fire unusual delay in deliveries,unavoidable casualties, adverse weather conditions documented in accordance with Section15.1.6.2, or other unforeseeable causes beyond the Contractor’s reasonable control; (4) by delayauthorized by the Owner pending mediation and building dispute resolution; or (5) by other causesthat the contractor asserts, and the Architect Owner determines, justify delay, then the Contract timeshall be extended for such reasonable time as Architect Owner may determine. A new outbreak orrecurrence of COVID-19, or outbreak of other widely reported, highly contagious pathogens,whether viral, bacterial or otherwise (“Pathogens”) causing a local or regional epidemic orpandemic, may be deemed a force majeure event if and to the extent that it causes delays that couldnot have reasonably been anticipated or foreseen and where the resulting delays could not have beenprevented through reasonable preparation. In such event, Contractor shall take all reasonable stepsto mitigate any resulting delay. Notwithstanding the foregoing, no adjustments to the Contract Timeshall be made: (a) unless the delayed Work is denoted as being on the critical path in theConstruction Schedule, (b) if the cause of the delay was reasonably within the control of theContractor, or those for whom it is responsible, and (c) if there is a concurrent delay or contributingcause for which Contractor would not be entitled to an extension of time.
23
▪ Excuse From Performance; Equitable Remedies (Force Majeure)
▪ Managing Owner’s Expectations and Demands (e.g., advance purchases & stockpiling; price “lockdown”; shop around)
▪ Healthy Contingency in Bid, Allowances, Contractor “Change Orders”
▪ Narrow the Scope; Quantify the Risk; Communicate Up & Down The Chain
SAMPLE LANGUAGE:
Cost Escalation: In the event of significant delay or price increase of material, equipment or energy
occurring during the performance of the contract through no fault of Contractor or its subcontractors,
the contract sum, time of completion or contract requirements shall be equitably adjusted by change
order in accordance with the procedures of the contract documents. A change in price of an item of
material, equipment, or energy shall be considered significant when the price of an items increases
___% or more between the date of this contract and the date of installation. If the increase in price is
at least ___%, but less than ___%, the equitable adjustment shall be based only on the amount of increase
or decrease greater than ___%, but if the price increase is ___% or more, then the equitable adjustment
shall be based on the entire amount of the price increase. If Contractor makes a request for an equitable
adjustment to the contract price based on an increase in price, Contractor shall be required at that time to
disclose its original price that has increased.
COVID-19 CONSIDERATIONS & ADDITIONAL OWNER PROTECTIONS
Where’s the Force Majeure Provision in my AIA Contract?
§ 14.2.1 The Owner may terminate the Contract if the Contractor:
.1 repeatedly refuses or fails to supply enough properly skilled workers or proper
materials;
.2 fails to make payment to Subcontractors or suppliers in accordance with the
respective agreements between the Contractor and the Subcontractors or suppliers;
.3 repeatedly disregards applicable laws, statutes, ordinances, codes, rules and
regulations, or lawful orders of a public authority, or health and safety executive
orders, industry-specific recommendations or plans;
.4 otherwise is guilty of substantial breach of a provision of the Contract Documents.
See also,
§ 14.1.1.1 (Termination or Suspension of Work by Contractor 30-days);
§ § 14.3 and 14.4 (Termination or Suspension by Owner for Convenience)
25
§ 2.4 If the Contractor fails to correct Work that is not in accordance with the
requirements of the Contract Documents as required by Section 12.2, or, repeatedly
fails to carry out Work in accordance with the Contract Documents, or fails to perform
the Work in a safe manner and in compliance with [all applicable health and safety
requirements, orders or plans] [or][specific health and safety plan specific to the Project
Site], the Owner may issue a written order to the Contractor to stop the Work, or any
portion thereof, until the cause for such order has been eliminated; however, the right of
the Owner to stop the Work shall not give rise to a duty on the part of the Owner to
exercise this right for the benefit of the Contractor or any other person or entity, except
to the extent required by Section 6.1.3.*
*§ 6.1.3 pertains to Owner’s “Separate Contractor”
26
§ 2.5 If the Contractor defaults or neglects to carry out the Work in accordance with the Contract
Documents (including but not limited to all applicable federal, state and local health and safety
requirements and Site Safety Plan, if applicable) and fails within a ten-day period (or twenty-four
hour period for a health and safety default) after receipt of notice from the Owner to commence
and continue correction of such default or neglect with diligence and promptness, the Owner may,
without prejudice to other remedies the Owner may have, (a) correct such default or neglect and
(b) deduct or withhold the resulting costs from payment then or thereafter due the Contractor,
including without limitation, the costs for a Separate Contractor, costs for the Architect’s services
and any consulting or legal costs related to or arising from such deficiencies, default, neglect or
failure. Such action by the Owner and amounts charged to the Contractor are both subject to prior
approval of the Architect and the Architect may, pursuant to Section 9.5.1 withhold or nullify a
Certificate for Payment in whole or in part, to the extent reasonably necessary to reimburse the
Owner for the reasonable cost of correcting such deficiencies, including Owner’s expenses and
compensation for the Architect’s additional services made necessary by such default, neglect, or
failure. If current and future payments are not sufficient to cover such amounts, the Contractor
shall pay the difference to the Owner. If the Contractor disagrees with the actions of the
Owner or the Architect, or the amounts claimed as costs to the Owner, the Contractor
may file a Claim pursuant to Article 15. (…)
27
§ 3.4.3 The Contractor shall enforce strict discipline and good order among the Contractor’s
employees and other persons carrying out the Work. The Contractor shall not permit employment of
unfit persons, persons not properly skilled in tasks assigned to them, or persons who within the last
two weeks have been (a) having been exposed to someone having been diagnosed with a highly
contagious pathogen, whether viral, bacterial, or otherwise, reported to have resulted, or having the
potential of resulting in, a local or regional epidemic or pandemic (“Pathogens”), including,
without limitation, a coronavirus disease (COVID-19) infection; or (b) having exhibited symptoms
of a highly infectious pathogen or disease of any known or reported epidemic, pandemic or
pathogen spread, including without limitation a persistent cough, shortness of breath, or a fever of
100.4 or higher. The Owner reserves the right to have any persons removed from the Project upon
reasonable objection.
PROPOSE ADDITIONAL § 3.4.4 In addition to all other safety requirements, Contractor shall
provide suitable and a sufficient number of safety related facilities and PPE at the site related to
protection against the spread of COVID-19 or Pathogens, including but not limited to handwashing
stations, hand sanitizer, gloves, masks, face-shields, and other equipment as Owner may reasonably
request, and full compliance with any other “Site Safety Plan” described in the Contract
Documents. Notwithstanding the foregoing, nothing herein shall be construed to delegate or relieve
Contractor from having sole and exclusive responsibility for all worksite safety.
28
Sample Revisions to Owner Indemnification:
§ 3.18.1 To the fullest extent permitted by law, the Contractor shall indemnify, defend, and hold
harmless the Owner, Architect, Architect’s consultants, and the officers, directors, shareholders,
members, agents and employees of any of them from and against any and all claims, damages,
losses, fines and expenses, (including but not limited to attorneys’ fees, expert fees, arbitration fees,
court costs, investigation and settlement costs) arising out of or resulting from performance of the
Work, provided that such claim, damage, loss, or expense is attributable to bodily injury, sickness,
disease or death, or to injury to or destruction of tangible property (other than the Work itself), but
only to the extent caused by the failure to perform the Work in accordance with the Contract
Documents (including but not limited to Article 10 or Article 13.6), any negligent acts or omissions
of the Contractor, a Subcontractor, anyone directly or indirectly employed by them, or anyone for
whose acts they may be liable, regardless of whether or not such claim, damage, loss, or expense is
caused in part by a party indemnified hereunder, or any claim by any employee of Contractor, or its
lower tier subcontractors or suppliers (and their employees) based upon a claim that the project
should not have proceeded. Such obligation shall not be construed to negate, abridge, or reduce other
rights or obligations of indemnity that would otherwise exist as to a party or person described in this
Section 3.18.
29
SOME ADDITIONAL OWNER/DEVELOPER ISSUES:
o § 2.31 – Contractor’s duty to cooperate with safe building practices
o §3.13 – No liability for conditions within the Project Site; control over the Project
Site;
o §3.15.1 – Cleanliness of Project Site; Owner’s Inspections
o §§ 10.1 - Contractor’s safety precautions; infection or exposure prevention measures
o § 10.3.7 – Allocation of risks for Hazardous Conditions (For avoidance of doubt,
COVID-19 shall not be considered a Hazardous Material for purposes of this § 10-.3)
30
This presentation is provided for informational purposes only and should not be considered specific legal advice on any subject matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this presentation does
not create an attorney-client relationship between you and Culhane Meadows PLLC.
Presenter
Sharon M. LewonskiPartner & Real Estate Practice Group Chair
slewonski@law.cm(678) 517-2224
https://www.culhanemeadows.com/attorney/sharon-lewonski/
Responsibility for What is Inferred §1.3
In the first provision of the agreement, theterm “work” should be defined as “thework required by the contract documentsand all work that is reasonably inferabletherefrom” and should clarify that thework “includes all labor, material,equipment, tools, supplies, scaffoldingand other facilities and services necessaryfor the proper execution and completionof the project. “
Termination of Warranty §3.5.3
Clean Up §§ 3.15.2, 6.3
§3.15.2 After the phrase, “the Owner may do so,” add the phrase, “provided that Owner has provided Contractor with notice In Writing, and a reasonable opportunity to cure.
§6.3 After the phrase, “the Owner may,” add the words, “upon reasonable notice and an opportunity to cure.”
Indemnity §3.18 The AIA indemnity clause is very contractor friendly, allowing indemnity only for personal injury, property damage, or death, and only to the extent of the contractor’s fault.
Consequential Damage §15.1.7 Arguably waives owner’s right to collect damages other than cost of completing work.
Review of Submittals
§4.2.7In the second sentence, after the phrase, “inthe Architect’s professional judgment,” insert“provided that such duration does not exceedseven (7) days, and does not affectContractor’s planned schedule for completionof the Work.”
§5.3
The Contractor shall make available toeach proposed Subcontractor, prior tothe execution of the subcontractagreement, copies of the ContractDocuments to which the Subcontractorwill be bound, and, upon writtenrequest of the Subcontractor, identifyto the Subcontractor terms andconditions of the proposedsubcontract agreement that may beat variance with the ContractDocuments.
Payment for Subcontracted Work § 9.3.1.2
Subcontractor Payment Issues
• Owner Joint Checks §9.5.3 –Intentionally Omitted
• Contractor’s Duty to Pay Subs §9.6.2 – Intentionally Omitted
• Owner’s Right to Share Information with Subs §9.6.3 – Intentionally Omitted
• Termination for Failure to Pay Subs §14.1.2 –Intentionally Omitted
TerminationIssues §14
• Consequences of Owner’s breach (§14.1)
• Need for “repeated” failure; need for notice and opportunity to cure; (§14.2)
• Consequences of Termination or Suspension for Convenience (§§14.3, 14.4)
Notice of Claims §15.1.3.1After the phrase, “21 days after the occurrence of the event giving rise to such Claim or within 21 days after the claimant first recognizes the condition giving rise to the Claim” insert, “and resulting impact.”
Review of Submittals
§4.2.7
Pricing and Schedule are based uponOwner’s issuance of a notice to proceedon or before [ ], with mobilization to thesite on or before [ ], and constructionactivities starting on or before [ ].
Contractor shall be entitled to amend anequitable adjustment to the contractsum and schedule should the start bedelayed more than 60 days.
• Helps temper expectations for parties if access or delay is a problem
• Avoids problems if delays in negotiations
Retainage – Two Aspects
FirstOwner will not withhold retainage on any overhead, profit, general conditions, or materials purchased with 30 day payment terms.
SecondOwner will release all retainage to Contractor for release to trades that complete their scope early in the schedule (prior to 50% overall project completion), upon presentation of proper documentation.
4UnexpectedDelayProvisions
1. Permits, Approvals, Inspections
The Contract Price is based upon a mutualexpectation that reasonable positions will betaken by federal, state, or local inspectors andofficials (“Authorities”), and that such Authoritiesshall act with reasonable promptness anddiligence regarding issuance of permits,approvals, certificates of occupancy, and ininterpreting applicable codes and standards.Contractor shall be entitled to a change orderadjusting the Contract Price and Schedule for anyimpact resulting from a deviation.
Usually related to inspections - examples:
• Delay
• Disagreements regarding code compliance
4UnexpectedDelayProvisions
2. Third Party Approvals
To the extent the Contract Documents mayrequire Contractor to meet any standard ofperformance to be approved by any third party(e.g., LEED), Contractor shall be deemed tohave achieved such obligation upon satisfyingthe required construction in accordance withthe standard of construction specified,notwithstanding any third party agency’srefusal to grant any such required certification.
4UnexpectedDelayProvisions
3. Utility Contract Extensions
Contractor shall be entitled to an extension ofthe Contract Schedule for any delays caused byany utility in connection with the installation,maintenance, service, and repair of all live(permanent) utility installations followingContractor’s request.
4UnexpectedDelayProvisions
4. Materials Pricing
Pricing is based upon reasonable costs in theindustry existing as of the date of the contract.Should materials prices escalate by more than10% following execution of the contract,Contractor shall be entitled to a change ordercommensurate with the resulting additionalcost.
Think Cost Escalation
Think Tariffs
Contact Information
Anthony J. ManhartConstruction Law Group
One City CenterPortland, ME 04901T. 207.791.3251E. amanhart@preti.com
Kenneth J. Rubinstein, Co-ChairConstruction Law Group
57 North Main StreetConcord, NH 03301T. 603.410.1568
60 State Street, Suite 1100Boston, MA 02019T. 617.226.3868E. krubinstein@preti.com
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