Modifying AIA Contract Documents: Advanced

Strategies for Owners, Developers and Contractors

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WEDNESDAY, OCTOBER 16, 2019

Presenting a 90-minute encore presentation featuring live Q&A

Sharon M. Lewonski, Partner, Culhane Meadows Haughian & Walsh, Atlanta

Anthony J. Manhart, Partner, Preti Flaherty Beliveau & Pachios, Portland, Maine

Robert J. Olson, Partner, Dorsey & Whitney, Minneapolis

Kenneth E. Rubinstein, Director, Preti Flaherty Beliveau & Pachios, Boston

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SELECTING AND

CREATING

APPROPRIATE AIA

DOCUMENTSCREATING THE CORRECT DOCUMENT FOR YOUR PROJECT

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Initial Thoughts …

Good form documents – if you understand how they work and if

you Identify the type of project and then pick the right document

(not the reverse)

General Construction

Design Build

Construction Management

Design Services

Documents assume that all project contracts are AIA forms

(contractor, architect and subcontractors)

Combine Forms at Your Own Risk

Difficult

Expensive

Fodder for Errors

Tinker here, tinker there

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Selection Process

Identify the general type of project and then select the AIA form

General Construction

Design-Build

Construction Management

Review previously executed documents (e.g., architect’s

agreement, letters of intent, loan documents, etc.)

Identify Project Nuances (design-build aspects, pre-con services,

GMP proposals, etc.)

Revise the selected base form to create a hybrid that accurately

reflects the project specifics

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Does one size fit all?

Likely not, but there is a correct starting form based upon the “general” nature of the project (e.g., general construction, design-build, construction management, etc.) …

Projects today are rarely performed purely along historical lines

Fast Track/Early Start

Reallocation of Responsibilities

Combination of Disciplines

Leases are often involved

Today

General Contractors often perform some work on a design-build basis

General construction contracts typically include pre-construction services and GMP proposals

Architect’s are performing fewer services

Construction Managers are acting more like general contractors

Pure Design-Build and Partial Design-Build Lines are Blurred

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AIA Documents Are Incomplete

The AIA Documents Do Not Address many elements of

contemporary construction projects, including, without limitation:

Design Services Performed by the GC or the CM

Pre-Construction Services

Work Performed Prior to Contract Execution

GMP Proposals

Limited Authorization to Proceed

Leases

Contingencies

Insurance Specifics

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INITIAL QUESTIONS FOR YOUR

CLIENTS

What is the delivery method (e.g., design/bid/build, design-build, construction management, something else)?

What is the anticipated contract sum (this helps identify the correct contract form)

Have you already signed and architect’s agreement/general-construction management agreement?

Is there an RFP/LOI?

Is there a lease?

Is there construction financing?

Will the GC/CM do any work on a design-build basis (e.g., MEP)?

Will the GC perform any pre-construction services and, if yes, is the plan to utilized a GMP proposal?

Did you agree to share any savings?

Do you have any particular issues that may warrant the use of liquidated damages?

Will the work be performed around any sensitive operations (e.g., data center)

Are you purchasing any materials on a sales tax-exempt basis?

Are you an Indian Tribe (sovereign immunity concerns)?

Has the GC/CM/Architect already started work?

Any union issues?

Anything else of note of which I should be aware?

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THANK YOU

Robert J. Olson

Dorsey & Whitney

olson.robert@dorsey.com

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•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/ D.C.

DETAILED DESCRIPTION – PAGE 1

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.

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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)

• Cost of Work (A102, Art. 7)

• Contractor’s Fee (lump sum, %, or other)

• GMP (assumptions; conditional alternatives to the calculation; subcontractors)

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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.

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LIQUIDATED DAMAGES

Now 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.)

« »

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RETAINAGE (A101, § 5.1.7; A102, § 12.1.8)

§ 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.)

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ROLE OF THE ARCHITECT

● Initial Decision Maker (IDM)

(A101, §6.1; A102, §13.1 and GC A201, §15.2.2)

● Powers afforded the Architect under AIA forms

● Substitution of “Owner” for “Architect” in the Agreement

● Owner-Contractor communications

● Owners-Architect Agreement (AIA B101-2017)

§ 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.)

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DISPUTE RESOLUTION PROCESS (A101, §6.2; A102, §13.2)

GENERAL CONDITIONS A201, ART. 15

§ 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

[ « » ] Other (Specify)

« »

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.

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GENERALLY…

• ** COMPLETE the AIA Forms AND attach all ‘Contract Documents’

• 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)

• Mutual Waiver of Consequential Damages (GC § 15.1.7)

• Insurance/Bonds (GC A201, Art. 11; New Ex. A)

• Indemnification (GC A201, § 3.18.1)

• Notice Provisions /Electronic Data (GC A201, §1.6)

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OWNER/DEVELOPER ISSUES

• Landlord/Tenant Relationship (“Owner” as “Tenant” provisions)

• Compliance with Lease, CCRs, building rules, “Work Letter”, etc.

• Adjacent properties, tenants and building operation/maintenance

• Notice & Cure provisions (Lease vs. GC Contract)

• Turn-over during the project (A101, §8.4, A102, §15.4 and GC 201, §3.9)

• Scheduling-Requirements /Delays (GC A201, §3.10.1)

• A104-2017 (former A107-2007)

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CONTRACTOR ISSUES

• Means & Methods (GC A201, § 3.3.1)

• Warranties (GC201, § 3.5)

• Subcontractor Relations (GC201, Art. 9)

• Payment Procedures (GC A201, Art. 9, §12.1.7.2.3)

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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. Lewonski

Partner & Real Estate Practice Chair

slewonski@culhanemeadows.com

(770) 578-4933https://www.culhanemeadows.com/attorney/sharon-lewonski/

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III. Advanced Drafting Issues

Maine, Massachusetts, New Hampshire, Washington, D.C.

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The Power of Perspective

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The Two Big Risks

What can you Control?

What can you Quantify?

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Remove The Architect’s Rights §1.1.2

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Change Definition of In Writing §1.6.2

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Responsibility for What is Inferred §1.3

In the first provision of the agreement, the term“work” should be defined as “the work requiredby the contract documents and all work that isreasonably inferable therefrom” and shouldclarify that the work “includes all labor,material, equipment, tools, supplies, scaffoldingand other facilities and services necessary forthe proper execution and completion of theproject. “

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Change in Laws §3.2.3

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Recognition of Errors §3.2.4

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Termination of Warranty §3.5.3

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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.”

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Indemnity §3.18The 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 §15.1.7Arguably waives owner’s right to collect damages other than cost of completing work.

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Review of Submittals

§4.2.7

In the second sentence, after the phrase, “in theArchitect’s professional judgment,” insert “providedthat such duration does not exceed seven (7) days,and does not affect Contractor’s planned schedulefor completion of the Work.”

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Payment for Subcontracted Work §9.3.1.2

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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

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Termination Issues §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)

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Notice of Claims §15.1.3.1

After 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.”

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IV. QUALIFICATIONS AND EXCLUSIONS An assortment of sample provisions

Maine, Massachusetts, New Hampshire, Washington, D.C.

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Commencement

Pricing and Schedule are based upon Owner’sissuance of a notice to proceed on or before [ ],with mobilization to the site on or before [ ], andconstruction activities starting on or before [ ].

Contractor shall be entitled to amend anequitable adjustment to the contract sum andschedule should the start be delayed more than60 days.

• Helps temper expectations for parties if access or delay is a problem

• Avoids problems if delays in negotiations

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Retainage - Two Aspects

FirstOwner will not withholdretainage on any overhead,profit, general conditions, ormaterials purchased with 30day payment terms.

SecondOwner will release all retainageto Contractor for release totrades that complete theirscope early in the schedule(prior to 50% overall projectcompletion), upon presentationof proper documentation.

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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 suchAuthorities shall act with reasonablepromptness and diligence regarding issuanceof permits, approvals, certificates ofoccupancy, and in interpreting applicablecodes and standards. Contractor shall beentitled to a change order adjusting theContract Price and Schedule for any impactresulting from a deviation.

Usually related to inspections - examples:

• Delay

• Disagreements regarding code compliance

4 UnexpectedDelayProvisions

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2. Third Party Approvals

To the extent the ContractDocuments may require Contractorto meet any standard ofperformance to be approved by anythird party (e.g., LEED), Contractorshall be deemed to have achievedsuch obligation upon satisfying therequired construction in accordancewith the standard of constructionspecified, notwithstanding any thirdparty agency’s refusal to grant anysuch required certification.

4 UnexpectedDelayProvisions

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3. Utility Contract Extensions

Contractor shall be entitled toan extension of the ContractSchedule for any delays causedby any utility in connection withthe installation, maintenance,service, and repair of all live(permanent) utility installationsfollowing Contractor’s request.

4UnexpectedDelayProvisions

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4. Materials Pricing

Pricing is based upon reasonablecosts in the industry existing as ofthe date of the contract. Shouldmaterials prices escalate by morethan 10% following execution of thecontract, Contractor shall be entitledto a change order commensuratewith the resulting additional cost.

Think Trump Tariffs

4 UnexpectedDelayProvisions

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ContactInformation

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

_____________________________________

Anthony J. ManhartConstruction Law Group

One City CenterPortland, ME 04901T. 207.791.3251E. amanhart@preti.com

Portland Ι Augusta, ME; Concord, NH; Boston, MA; Washington, D.C. Preti.com

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