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IMPACT OF THE NEW
1997 AIA DOCUMENTS
Paul M. Lurie and Mark C. Friedlander
The American Institute of Architects
(AIA) has just issued new revisions of its two primary documents,
the A201 General Conditions and B141 Owner/Architect Agreement.
Consulting engineers and architects often work on projects in which
the contracts include one or both of these forms and should be aware
of the nature and impact of the major changes to these documents.
The AIA has also issued revisions to the C141 Owner-Consultant Agreement
to reflect new responsibilities assumed by the architect and engineers.
The purpose of this article is to highlight the changes to A201,
B141 and C141, which should be of interest.
Unlike the B141, the formats of the
A201 and the C141 were not radically revised. However, substantial
changes have been made to the documents. Indeed, there were some
154 changes to A201. The following is a list of major changes in
the A201 along with comments on the B141 and C141 substantive changes:
- Financial Condition. Since the 1987 edition
of A201, a contractor could require evidence of the owner’s
financial arrangements as a condition to starting the work. As
revised in 1997, any material change in the financial arrangements
can affect the contractor’s obligation to continue the work.
While the concept is not unfair, the vague language may cause
problems for owners as well as an interruption of the project.
- Termination. The 1997 revision now gives
the owner the right to terminate a project for convenience; in
such an event, the contractor is entitled to "reasonable
overhead and profit" on uncompleted work. Owners may object
to this and may prefer to pay a liquidated amount. Similarly,
the architect now has a right to terminate the consulting engineer
for convenience with an obligation to pay a defined termination
fee.
- Design and Performance Criteria. Under
the provisions of the 1987 version of the A201, the owner and
architect had the power to require the contractor to hire a licensed
design professional to complete the designs for specific portions
of the work. However, Section 3.12.10 of the 1997 version provides
that as a condition of the contractor’s assumption of this
responsibility, the architect is required to specify all design
and performance criteria. This is an important responsibility
with loss control implications. This provision is of particular
importance to structural engineers. Engineers should be concerned
about the identity of persons with delegated responsibility and
the professional liability insurance which will cover their errors
and omissions.
- Contractor’s Review of Design. The
contractor’s obligation to review the plans and specifications
have been strengthened. While the contractor is not a guarantor
of the adequacy of the plans and specifications the contractor
is required to perform a review process in order to discharge
its obligations.
- Consequential Damages. Owners and design
professionals must understand the trade-offs involved in the waiver
of consequential damages provision. Although Owners may be getting
waivers of the types of claims which have supported claims-conscious
contractors, particularly claims for extended home office overhead,
they are giving up virtually all claims except for the cost of
repair or replacement of defective work. Further modifications
need to be made to the comparable provision of B141 and C141 to
make it consistent with the waiver in A201. If claims involving
this waiver of consequential damages are not resolved by mediation
or arbitration and are allowed to go to court, we can expect years
of litigation interpreting the waiver.
- Warranties. Under 12.2.2.1 of A201, the
owner may waive its right to claim breach of warranty and to require
correction if the owner discovers non-conforming work during the
one-year correction period, and fails to give contractors timely
notice and an opportunity to cure. Many industry professionals
are unaware that the AIA warranty in A201-3.5 can be enforced
for a period as long as that permitted by the Statutes of Limitations
and Repose, which may be ten or more years depending on the jurisdiction.
Design professionals should be concerned about the proper discharge
of their duties if they are engaged to continue their representation
of the owner during the correction period.
- Limitations Periods. Where the contractor
does corrective work before and after substantial completion,
different contractual limitation periods govern expiration of
the owner’s rights involving defective corrective work. There
should be a clear statement as to who is responsible for keeping
track of those dates.
- Architect as Neutral. The architect continues
in a "neutral" capacity as an initial decider of claims.
Some owners, especially those with their own construction staffs
or a construction manager, object to such a role. As revised,
these claims must be decided within 30 days of submittal, rather
than 45 days. The claimant is entitled to a preliminary response
within ten days. Engineers whose input may be necessary to resolve
a claim also must understand these time limits.
- Changes. The 1997 A201 provides that
issuance of a Constructive Change Directive which can generate
a claim subject to the claims process for the disputed portion
of the cost of the Directive.
- Hazardous Materials. Under the 1987 A201,
owners were responsible for pre-existing asbestos and PCBs. Under
the 1997 version, A201-10.3.3, the definition of pre-existing
hazardous materials is broader. The contractor’s remedies
for project-delaying discovery of these materials include time,
money, and the owner’s indemnity. It is imperative that the
owner undertake adequate pre-construction (and design) investigation
of the site to discover the presence of such hazardous materials.
- Protective Liability Insurance. As revised,
the owner’s (and design team’s) principal source of
protection for worker injury claims is intended to be a form of
OCP insurance called Protective Liability Insurance, rather than
having the owner and design team named as additional insureds
on the contractor’s general liability policy. However, this
coverage is optional, unless required by the contracts documents.
It is importantto understand the advantages and disadvantages
of this change in coverage and the associated cost differences.
- Property Insurance. Property insurance
deductibles are the responsibility of the owner according tot
the 1997 A201. Under the 1987 A201, they were the responsibility
of the contractor. It is common on large projects for there to
be many small claims by the contractor for damage to the work,
each claim being subject to the deductible. Owners may object
to this shift since the contractor is usually in control of the
situations causing these losses.
- Copyrights. According to the revised
A201, the copyright protection in drawings and specifications
remains the architect’s, but also includes protection for
the structural engineer. However, both the architect and the engineer
must agree to license these documents to the owner. It is important
that the provisions in the prime design contact and any engineer
contracts be consistent.
- Scope of Services. The entire format
of B141 has been radically revised, but its substance has not
changed much. The contract has been divided into two parts: Part
1 describes the specifics of the project and the relationships
of the two parties; Part 2 lists the most common architectural
services so that the parties can identify which of them are to
be included in the project. Although the labels "Basic Services:
and "Additional Services" have disappeared, the concept
remains since the document contains seven categories of services
commonly provided to all projects followed by a list of other
possible services. Even though some of the categories of services
sound new, such as "Evaluation & Planning" and "Facility
Operation", the services described in these categories are
those which have always been provided or inferred under the previous
B141’s Basic Services.
- Budget. The concept of a Fixed Limit
of Construction Cost has been deleted from the revised B141 because
the architect is always required to design to the owner’s
budget. Section 2.1.7.6 obligates the architect to modify the
design without additional compensation if the construction price
exceeds the budget. The consultant’s parallel responsibility
is reflected in C-141 Section 3.2.5.
- Disclosure and Confidence. Be aware of
two new provisions governing how the architect and engineer conduct
business. Section 1.2.3.4 of the 1997 B141 forbids the architect
or its consultants from disclosing the owner’s confidential
information except in certain circumstances. Section 1.2.3.5 requires
the architect to disclose or refrain from any activity "that
would reasonably appear to compromise the architect’s professional
judgment" regarding the project. This may include declining
or disclosing perks from certain vendors or contractors who may
become involved in the architect’s other projects. These
responsibilities are reflected in Article 3 of the C-141.
- Mandatory Mediation. Under A-201. B-141
and C-141, non-binding mediation is now required as a condition
to proceeding to resolve claims by either arbitration or litigation.
Significantly, the parties cannot proceed in either arbitration
or litigation for a period of sixty days. This delay is to give
mediation an opportunity to work. Bad faith stalling during this
period could be disadvantageous to the claimant. Design professionals
should benefit from mediation because it has a proven record of
helping resolve disputes between owners and contractors. However,
we expect that architects and their consultant are going to be
more frequently requested to participate in such mediation by
their clients. the circumstances under which compensation should
be due for such service is an appropriate subject for negotiation.
- Lien Rights. The consulting engineer
now has a right to require the architect to obtain information
necessary to protect lien rights. The architect has similar rights
with the owner.
Engineers often work for architects
who will be using the new B141 and A201 documents. Engineers now,
more than ever, need to understand these contractual arrangements.
Paul M. Lurie and Mark C. Friedlander
are attorneys with the Schiff Hardin & Waite Construction law
group. They may be reached at (312) 876-1000.
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