Changes to Contractor/Subcontractor Agreement Can Have Profound Effect on Roofers

Whether they like them or not, most subcontractors and contractors have used American Institute of Architects (AIA) standard form contract documents at some point in their careers. Several options exist for those wanting to utilize standard form documents, like ConsensusDocs, Design-Build Institute of America, and the Engineers Joint Contract Documents Committee forms. However, the AIA, being founded in 1857 and having published standard form construction contracts for more than 100 years, is the most established of these organizations, and its form contracts are still the most prevalent and most commonly used forms for commercial construction projects in the United States.

The AIA updates its forms every 10 years and completed its most recent revision in late April 2017. The updates included revisions to several forms in its A-Series (Owner/Contractor Agreements), including its widely used General Conditions (AIA Form A201) and its standard Contractor/Subcontractor Agreement, AIA A401. While these are only a few of the AIA’s updates, these changes may be particularly pertinent to subcontractors and those working in the roofing construction industry. Some highlights of the 2017 updates to A401 follow here.

Designated Representatives and Notices

Both the Contractor and Subcontractor are now required to designate (in the space provided in Section 14.2) an individual who will serve as each party’s “representative” for the project. This requirement is set forth in Section 3 for the Contractor and Section 4 for the Subcontractor. Parties are permitted to change their designated representative only if they provide 10 days’ notice. This is significant for both parties because the updated form requires that notices — for example, notices of a party’s potential claim arising from the subcontract — must be made in writing and are valid only if served upon the designated representative. The new form allows notices to be made via e-email or other electronic means only if an electronic method is set forth in Section 14.4.3. Parties should remember not only to designate a point person who is prepared to serve as a project representative and an email address for notices, but they should also ensure that the other party has done the same. Failure to do so could result in notices not being made by the proper means and to the proper individual — which in turn could result in parties waiving potential claims.

New Contractor Responsibilities — With Limitations

Although it has long been a standard practice (both on AIA projects and elsewhere) for the Contractor to include the prime contract as an exhibit to the subcontract, the updated form takes this a step further and requires the prime contract to be attached to the subcontract as “Exhibit A.” If Subcontractors hold Contractors to this requirement, Subcontractors will be able to review all of the contract documents with greater ease before signing.

Furthermore, Section 3 requires Contractors to “render decisions in a timely manner and in accordance with the Contractor’s construction schedule” and to “promptly notify the Subcontractor of any fault or defect in the Work under this Subcontract or nonconformity with the Subcontract documents.” However, in Sections 3.4.4 and 3.4.5, the phrase “written notice” has been changed simply to “notice” with respect to the Contractor’s requirement to notify the Subcontractor of defective work as a prerequisite of finding the Subcontractor to be in default. Section 14 still clearly states that all “notices” must be made in writing to the designated representative. This change could result in debate over what Contractors must do in order to notify Subcontractors of defective work before they avail themselves of remedies for breach, such as withholding subcontract payments.

Contractors also now have additional duties to provide Subcontractors information they may need in order to preserve their lien rights. Section 3.3.6 previously required Contractors to provide Subcontractors “a correct statement of the record legal title to the property … and the Owner’s interest therein.” The revised A401 now requires the Contractor to request this information from the Owner if the Contractor does not have it and give the Subcontractor the information upon receipt; a corresponding section in AIA A201 requires the Owner to provide it to the Contractor.

New Subcontractor Duties and Concerns

The above requirement to submit lien information is perhaps balanced by revised Section 11.1.10, which provides Contractors additional rights to indemnification from certain lien claims. “If Contractor has paid Subcontractor in accordance with the Agreement, Subcontractor must defend and indemnify the Contractor and Owner from liens and claims from lower tier subcontractors and suppliers, including being required to bond off liens,” the new form states.

Another noteworthy change concerns alternates — alternatives to a base bid that provide for a change in the level of quality, or scope of the work specified in the base bid. Alternates provide the owner with the option to modify the project by accepting or rejecting the alternate. The newly revised A401 contains a new section, 10.2.2, which allows the parties to list alternates that the Contractor can accept after execution of the agreement. Subcontractors should consider carefully whether it is wise to include alternates under this section.

Payment and Retainage

Finally, subcontractors and contractors alike should familiarize themselves with the newly revised Section 11, which concerns progress payments. Sections 11.1.7.1 and 11.1.7.2 break down the calculation of progress payments into separate subsections for additions, deletions, and retainage. This includes additions for construction change directives and deletions to allow for defective work remaining uncorrected (assuming that Contractor has duly notified the Subcontractor of the issue). Other portions of A401 allow for additions and deletions in these scenarios, but they are often conditioned on the owner’s approval and other factors. It remains to be seen whether this section could change normal progress billing procedures.

Section 11.7.2 opens the door to retainage options other than the typical arrangement (where the Contractor simply withholds the amount the Owner is withholding). Newly added subsections allow the parties to designate items that are not subject to retainage, as well as set forth an arrangement for reduced or limited retainage. This new section (11.1.8.2) could be a helpful avenue for early finishing trades to propose release of retainage upon 50 percent completion of the project as opposed to substantial completion — or even a way for parties to negotiate the retainage percentage down.

The above are just a few highlights of changes to AIA Form A401. For additional information or questions, visit www.aiacontracts.org or email Caroline Trautman at ctrautman@andersonandjones.com.

 

This article is not intended to give, and should not be relied upon for, legal advice. No action should be taken in reliance upon the information contained in this article without obtaining the advice of an attorney.

Registration Is Open for Construct 2017

Registration is now open for CONSTRUCT, a national event designed to provide the commercial building team with products and education solutions. This year’s event is taking place Sept. 13-15, 2017, at the Rhode Island Convention Center in Providence, R.I.  Online registration is available here.
 
CONSTRUCT Education Advisory Council Member, Nina Giglio, FCSI, CCS of Perkins and Eastman says, “This is an event that you won’t want to miss.  What an opportunity to visit and explore Providence, R.I., a city with architectural interest, restaurants and charm.  At the same time, CONSTRUCT also will feature a revamped education program with presentations that you can’t get just anywhere, not to mention the ability to achieve learning units for AIA, CSI, GBCI, and this year BOMI and ICC, and of course live product demonstrations in the Learning Pavilion, and networking events like the Newcomer Reception and the CSI Honor and Awards.”
 
Covering everything from air barriers to fire protection systems, coatings to architectural hardware, and much more, the Exhibit Hall will be packed with 200+ exhibitors spanning over 28,000+ net square feet. Exhibiting companies will showcase products, services and technologies for commercial building industry professionals who design, build, renovate or operate in the built environment.  
 
In addition to the manufacturer and supplier booths, participants can earn over a year’s worth of CEUs, including 18.5 AIA LUs/HSW, 17 BOMI CPDs, and .18 ICC CEUs.  GBCI credits are also available and all sessions qualify for CSI continuing education.  CONSTRUCT offers a solutions-based education program featuring 40+ new sessions, led by over 55 speakers.  Defined into tracks for architects/designers, specifiers, contractors, building owners/managers, project managers, engineers, product reps, young professionals and students.
 
A few notable sessions:

     

  • Keynote: Multiple Agendas with Thom Mayne, FAIA
  • Specifications in the Age of Smart Cities – How Specs Are Changing the World with Paul Doherty, AIA
  • What is a Building Enclosure? with Joseph Lstiburek, Ph.D., P.Eng., ASHRAE Fellow
  • Hands-On Demo of Detailing for a Continuous Air, Water, & Thermal Assembly with Tiffany Coppock, AIA, NCARB, CSI, CDT, LEED AP, ASTM, RCI, EDAC
  • Let’s Fix Construction: An Interactive Luncheon with Cherise Lakeside, CSI, CDT & Eric D. Lussier CSI, CDT
  • Specifying Target Value Delivery with Beth Stroshane, CSI, CCS, LEED AP
  • Understanding & Ending Moisture-Related Flooring Problems with Peter Craig, FACI, FICRI, CCSMTT and Scott Tarr, PE, FACI, CCSMTT
  • TCNA & ANSI: Specifying Successful Tile & Stone Systems by the Book with Jim Whitfield, FCSI, CCPR, LEED AP
  • AIA Contract Documents 2017 with Lane J. Beougher, FAIA, FCSI, NCARB, Assoc. DBIA, LEED BD+C, GGP and Salvatore Verrastro, CSI, CCS, CCCA
  • Selling with Guide Specifications with Michael Chambers, FAIA, FCSI

 
Attendees can also earn credits in the learning lounges and learning pavilion on the expo floor and via off-site technical tours.  
 
CONSTRUCT also offers a variety of options for young professionals (35 and younger) and students who are looking to learn more about the industry, network, and have fun with their peers.  
 
In addition, CONSTRUCT 2017 is the place to get connected with old friends and make new ones with available networking options including: Newcomer Reception, CSI Welcome Reception, CSI Young Professionals Mixer, and CSI Night Out.
 
Those interested in attending can register online to save time and money.
 
The Full Education Package includes access to the education program, the Exhibit Hall, Show Floor Happy Hours, the General Session/Keynote, $28 in Concession Cash and CSI Night Out. 
 
The Exhibit Hall Only option includes access to the Exhibit Hall, Show Floor Happy Hours and the General Session/Keynote.  
 
Individual session pricing and options for students and young professionals are also available.
 
To register or for more information, visit the website or call (866) 475-6707. 

Design Billings Increasing Entering Height of Construction Season

After beginning the year with a marginal decline, the Architecture Billings Index (ABI) has posted three consecutive months of growth in design revenue at architecture firms. As a leading economic indicator of construction activity, the ABI reflects the approximate nine- to 12-month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the April ABI score was 50.9, down from a score of 54.3 in the previous month. This score still reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 60.2, up from a reading of 59.8 the previous month, while the new design contracts index increased from 52.3 to 53.2.

“Probably even better news for the construction outlook is that new project work coming into architecture firms has seen exceptionally strong growth so far this year,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “In fact, new project activity has pushed up project backlogs at architecture firm to their highest level since the design
 market began its recovery earlier this decade.”  

Key April ABI highlights include:

  • Regional averages: South (55.3), Midwest (53.3), West (50.9), Northeast (50.7)
  • Sector index breakdown: institutional (54.0), mixed practice (53.4), commercial/industrial (52.4), multi-family residential (49.9)
  • Project inquiries index: 60.2
  • Design contracts index: 53.2
  •  
    The regional and sector categories are calculated as a 3-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.
     

     

    AIA Releases 2017 Edition of Contract Documents

    The American Institute of Architects (AIA) has announced, at AIA ’17 Conference on Architecture, the release of the 2017 edition of the A201 family of contract documents. This release includes updated versions of the AIA’s flagship documents, developed for the design-bid-build delivery model. Working with architects, contractors, subcontractors and owners, the AIA Documents Committee updates this core set of documents every 10 years. This helps ensure that the AIA legal form and agreements reflect changes and trends in the industry, and that the AIA Contract Documents remain the Industry Standard.

    “It is important that industry professionals learn about the 2017 revisions,” says Kenneth Cobleigh, Esq., managing director and counsel of AIA Contract Documents. “The changes impact the roles and responsibilities of each of the parties directly, and understanding the changes will help everyone to review and finalize project contracts. We hope that all industry participants take advantage of the written resources and education programming opportunities available to learn about, and understand, the 2017 revisions and the full portfolio of AIA Contract Documents.”

    Some of the owner/architect changes:

    • Single Sustainable Projects Exhibit that can be used on any project and added to most AIA contracts to address the risks and responsibilities associated with sustainable design and construction services.
    • Agreements contain a fill point to prompt the parties to discuss and insert an appropriate Termination Fee for terminations for the owner’s convenience.
    • Architect is no longer required to re-design for no additional compensation if he or she could not have reasonably anticipated the market conditions that caused the bids or proposals to exceed the owner’s budget.
    • Services beyond Basic Services and identified at the time of agreement are now categorized as Supplemental Services, to avoid confusing them with Additional Services that arise during the course of the project.
    • Agreements clarify how the Architect’s progress payments will be calculated if compensation is based on a percentage of the owner’s budget for the work.

    Some of the major owner/contractor changes are:

    • New exhibit with comprehensive insurance and bonds provisions that can be attached to many of the AIA owner/contractor agreements.
    • Provisions relating to direct communications between the owner and contractor.
    • Revised provisions pertaining to the owner’s obligation to provide proof that it has made financial arrangements to pay for the project.
    • Simplified provisions for the contractor to apply for, and receive, payments.
    • Sustainable Projects Exhibit, as noted above under the owner/architect changes

    The documents included in this April release are:

    • “A101–2017, Standard Form of Agreement Between Owner and Contractor where the basis of payment is a Stipulated Sum”
    • “A102–2017, Standard Form of Agreement Between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee with a Guaranteed Maximum Price”
    • “A103–2017, Standard Form of Agreement Between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee without a Guaranteed Maximum Price”
    • “A104–2017(formerly A107-2007), Standard Abbreviated Form of Agreement Between Owner and Contractor”
    • “A105–2017, Standard Short Form of Agreement Between Owner and Contractor”
    • “A201–2017, General Conditions of the Contract for Construction”
    • “A401–2017, Standard Form of Agreement Between Contractor and Subcontractor”
    • “B101–2017, Standard Form of Agreement Between Owner and Architect”
    • “B102–2017, Standard Form of Agreement Between Owner and Architect without a Predefined Scope of Architect’s Services”
    • “B103–2017, Standard Form of Agreement Between Owner and Architect for a Complex Project”
    • “B104–2017, Standard Abbreviated Form of Agreement Between Owner and Architect”
    • “B105–2017, Standard Short Form of Agreement Between Owner and Architect”
    • “C401–2017, Standard Form of Agreement Between Architect and Consultant”
    • “E204–2017, Sustainable Projects Exhibit”

    The 2017 documents are available through an unlimited license or as a single customizable document on ACD5, the online platform. The documents are also available as single, non-editable documents on AIA Documents on Demand and as paper version through some AIA Chapters. Visit here for more information. Comparative versions showing the differences between the 2017 and 2007 editions are also available.

    Architecture Billings Index Moves Into Negative Territory

    The Architecture Billings Index (ABI) dipped slightly into negative territory in January, after a strong showing in December. As an economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the January ABI score was 49.5, down from a score of 55.6 in the previous month. This score reflects a minor decrease in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 60, up from a reading of 57.6 the previous month.

    “This decrease in activity, taking into consideration strong readings in project inquiries and new design contracts, isn’t exactly a cause for concern,” says AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “The fundamentals of a sound nonresidential design and construction market persist.”

    Key January ABI highlights:

    • Regional averages: South (54.2), Northeast (53), Midwest (52.4), West (48.8)
    • Sector index breakdown: institutional (54.6), commercial / industrial (53.4), mixed practice (48.1), multi-family residential (48.1)
    • Project inquiries index: 60
    • Design contracts index: 52.1

    MCA Recognizes Eight Building Projects at Awards Show

    Selected by a panel of professional architects, eight building projects from across the country have been recognized by the Metal Construction Association (MCA) at the 2017 Chairman’s Awards show.

    Announced at the MCA’s winter meeting held in Weston, Fla., the Chairman’s Awards are given to the year’s most exceptional building projects involving MCA member companies. Awards are based on overall appearance, significance of metal in the project, innovative use of metal, and the role of metal in achieving project objectives.

    The MCA Chairman’s Awards were given in eight categories: overall excellence; residential; metal roofing; education, primary and secondary schools; education, colleges and universities; institutional; municipal; and commercial/industrial.

    The 2016 Chairman’s Award winners in each category were:

    Recipients for these awards are selected each year from projects submitted by MCA members to “Metal Architecture Magazine’s” annual Design Awards Program. The honorees were chosen by a panel of professional architects, which included Mark Dewalt, AIA, principal, Valerio Dewalt Train Associates, Chicago; Mark Horton, FAIA, principal, Mark Horton/Architecture, San Francisco; Brent Schipper, AIA, LEED AP, principal, ASK Studio, Des Moines, Iowa.

    Architecture Billings Index Concludes Year With Positive Growth

    The Architecture Billings Index (ABI) concluded the year in positive terrain, with the December reading capping off three straight months of growth in design billings. As an economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the December ABI score was 55.9, up sharply from 50.6 in the previous month. This score reflects the largest increase in design services in 2016 (any score above 50 indicates an increase in billings). The new projects inquiry index was 57.2, down from a reading of 59.5 the previous month.

    “The sharp upturn in design activity as we wind down the year is certainly encouraging. This bodes well for the design and construction sector as we enter the new year”,” says AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “However, December is an atypical month for interpreting trends, so the coming months will tell us a lot more about conditions that the industry is likely to see in 2017.”
     
    Key December ABI highlights:

    • Regional averages: Midwest (54.4), Northeast (54.0), South (53.8), West (48.8)
    • Sector index breakdown: commercial / industrial (54.3), institutional (53.3), mixed practice (51.9), multi-family residential (50.6)
    • Project inquiries index: 57.2
    • Design contracts index: 51.2

     
    The regional and sector categories are calculated as a 3-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.

    AIA Supports Legislation for Energy Efficiency Tax Incentive

    The American Institute of Architects (AIA) has voiced its support of bipartisan legislation that makes designers of hospitals, schools, tribal community facilities and other non-profits eligible for an energy efficiency tax incentive that is already saving tax-payers money across the country.

    H.R. 6376, introduced by Rep. Dave Reichert (R-WA) and co-sponsored by Rep. Tom Reed (R-NY), Rep. Earl Blumenauer (D-OR), and Rep. Chris Van Hollen (D-MD), also modifies Section 179D of the tax code, the Energy-Efficient Commercial Building Deduction, to make small to midsized architect firms organized as subchapter S corporations eligible for the deduction.

    “H.R. 6376 gives non-profits the ability to allocate this energy savings tax incentive to designers,” said AIA President Russell Davidson, FAIA. “It also provides an opportunity for schools and hospitals to save money when architects deploy technologies that make buildings more energy efficient.” 

    The section 179D tax deduction was originally passed by Congress as part of the Energy Policy Act of 2005 in direct response to broader energy usage and independence concerns. According to data released by the U.S. Department of Energy, buildings are responsible for 73 percent of all electricity consumption in the U.S., with about half of that coming from commercial buildings.

    In an effort to curb this trend and encourage broader energy efficiency, section 179D allows qualifying building owners and businesses to receive an up to $1.80 per square foot tax deduction for their energy efficient buildings placed into service during all open tax years.

    Architects can also qualify for 179D under a special rule for public property, if they’ve enhanced the energy efficiency of a new government-owned building or made energy-saving renovations and retrofits to existing government-owned buildings. As government entities do not traditionally pay tax, the owners of these buildings can allocate the accrued tax savings to architects who have designed the energy-saving improvements.

    AIA Survey Findings About American Attitudes Toward Public Buildings

    A survey by the American Institute of Architects (AIA) finds that a majority of Americans (83 percent) consider public buildings—schools, libraries, community centers, and parks—part of their community’s infrastructure. And, 94 percent of those surveyed say that having well-maintained public buildings are important to the future of their community.

    In a key finding for policy makers, 83 percent of survey respondents agreed that investment in these public buildings is just as important as investment in roads and bridges. The survey also found that seven in 10 Americans want their public buildings renovated, and almost three-quarters of Americans consider public schools in good condition a “must have” in the communities in which they live.

    These are some of the main findings of the first AIA survey of American attitudes toward essential community buildings. The survey results, conducted by The Harris Poll, were made public at the AIA Build America Summit.

    “The survey findings are a clarion call to policy makers at all levels of government that Americans not only want safe roads and bridges, but also desire a serious financial commitment to public buildings that mirror and contribute to the communities in which they live,” says AIA President Russell Davidson, FAIA.

    “The purpose of the Build America Summit is to expand the infrastructure discussion to include funding to repair, restore, and adapt the essential public buildings that give communities character,” states Davidson, who conceived the Summit. Nearly 40 speakers and 350 attendees from design and construction, real-estate, education, development, and government will develop recommendations that will be shared with the incoming Presidential Administration and made available to state and local governments and community leaders.

    Survey findings:

    More than three in four Americans (78 percent) think their local government should take some financial responsibility for supporting the investment in their public buildings. Just under two-thirds (61 percent) think state government should take some financial responsibility. A majority (53 percent) think that community members should support it, and almost half (46 percent) believe private entities should also invest.

    A majority of Americans believe that the condition of community buildings can lead to notable benefits, particularly higher property values (60 percent) and improved quality of education (62 percent).
    Sixty-nine percent of Americans believe schools are one of the most important buildings to receive a consistent level of public funding.

    On average, Americans feel about one third (34 percent) of public funds budgeted for community features should be allocated to public buildings and/or spaces. Of the remaining, they would allocate 37 percent to transportation and 29 percent to public housing.

    Gender differences exist in attitudes toward public buildings and spaces. For example, women are more inclined than men (44 percent to 34 percent) to consider public housing options a “must have.” Conversely, older men (44 percent) place the most emphasis on funding transportation.

    Almost half those surveyed (48 percent) believe public housing (defined as a combination of senior and affordable housing) is one of the most important community features to receive a consistent level of public funding.

    “It is clear from the survey that Americans consider investment in community buildings and spaces a priority,” says AIA CEO Robert Ivy, FAIA. “Not only do they believe that that investment would lead to improvements in property value, education, and public safety, but also serve to attract new businesses and enhance their overall quality of life.”

    A copy of the survey results can be found here

    ABI Reports Increase in Design Services Demand

    After seeing consecutive months of contracting demand for the first time in four years, the Architecture Billings Index (ABI) saw a modest increase demand for design services.  As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the October ABI score was 50.8, up from the mark of 48.4 in the previous month. This score reflects a slight increase in design services (any score above 50 indicates an increase in billings).  The new projects inquiry index was 55.4, down from a reading of 59.4 the previous month.

    “There was a collective sense of uncertainty throughout the design and construction industry leading up to the presidential election,” says AIA Chief Economist, Kermit Baker, Hon. AIA, PhD.  “Hopefully we’ll get a sense of what direction we will be headed once we get a clearer read on how the new administration’s policies might impact the overall economy as well as the construction industry.”

    October ABI highlights:

    • Regional averages: South (53.7), West (49.7), Northeast (47.3) Midwest (46.8)
    • Sector index breakdown:  multi-family residential (51.2) commercial/industrial (49.8), mixed practice (49.5), institutional (49.1)
    • Project inquiries index: 55.4
    • Design contracts index: 48.7

    The regional and sector categories are calculated as a 3-month moving average, whereas the national index, design contracts and inquiries are monthly numbers.