Acme Sheet Metal opened its doors in 1968. Over the next thirty years, the subcontracting firm grew from a small sheet metal fabricator to a full-service HVAC design/build firm. As the years passed, the firm encountered many subcontract forms, including the AIA and AGC standard contracts and proprietary contracts developed by general contractors. On jobs in its local area, Acme was most often asked to sign modified versions of the AIA subcontract form.
The subcontract forms typically ran to about ten pages and seemed fairly simple and clear-cut. All the forms generally required was a description of the work, the date of completion, and a price. However, incorporated by reference in the contracts were separate "general conditions" that were far more detailed and complex and that governed the rights and obligations of substantially all parties on the job. Even though of great importance, the general conditions were rarely reviewed by the subcontractor. Many jobs were bid, commenced, and completed without the subcontractor ever seeing the general conditions.
On the other hand, every few years, Acme would find itself in a dispute with a general contractor over a change order, delay claim, or other contract issue. More than once, the disputes had ended up in arbitration.
Through the arbitration process (in which the contracts were picked apart with a microscope and attorneys argued over the meaning of a semicolon), Acme’s management got a crash course in the meaning of the "general conditions." Through this school of hard knocks, Acme learned to ask for the general conditions before signing subcontracts.
Like all contract forms, the AIA general conditions have been updated and revised over the years. When Acme started its business, the A-201—1967 was in use. This form was significantly amended three different times (1970, 1976, and 1987). Each time, some of the general contractors continued to use the old forms while others chose the newer versions. As the contractors became more comfortable with the newer forms (and as the courts interpreted their provisions), the updated forms came to be generally used. On jobs using the AIA contract forms, Acme had gotten used to seeing the A-201—1987.
In the spring of 1998, Acme was offered the opportunity to work on a particularly large project: the fabrication and installation of a new HVAC system in a large hotel undergoing renovation. The renovation was already behind schedule and the bid/subcontractor selection process was accelerated and somewhat chaotic. After an expedited review of the project plans, Acme signed a subcontract form containing the agreed-upon bid figure. What Acme did not notice was that the form was an A-401—1997 subcontract which incorporated the new A-201—1997 general conditions.
Acme immediately set to work on the project. Within a matter of weeks, the project had become a major headache. The subcontractor’s employees discovered that the dimensions on the floor plans were unreliable and that some walls shown as removed on the plans had been left in place. In the scramble to complete the bid process, Acme had no opportunity to field check the plans or to otherwise review site conditions. In putting together its bid, the subcontractor had relied solely upon the plans and specifications.
Now, the cutting of additional wall openings would be required. Patching in other areas would be necessary. Significant elements of the system would have to be custom fabricated due to odd jogs, angles, and openings. The subcontractor’s bid had never contemplated these conditions and was far too low. Acme notified both the architect and the general contractor.
After making its best possible assessment of the additional costs to be incurred, Acme submitted a very large change order. The subcontractor hunkered down, prepared for a battle with the general contractor and the architect. Instead, the architect recommended approval of the change order and the general contractor signed off on it. Only then did the subcontractor learn from the architect that the new A-201 language had been helpful in this situation. The new general conditions state: "The Contractor shall be entitled to rely on the accuracy of information furnished by the Owner . . ." (Section 2.2.3). In addition, A-201—1997 provides: "The Contractor shall not be liable to the Owner or Architect for damages resulting from errors, inconsistencies, or omissions in the Contract Documents or for differences between field measurements or conditions and the Contract Documents unless the Contractor recognized such error, inconsistency, omission, or difference and knowingly failed to report it to the Architect." (Section 3.2.3).
After six more months, Acme had completed all of its work on the first phase of the project (one wing of the hotel). The second phase of the renovation would follow and Acme’s bid had covered work on both phases. Acme requested that the architect certify to the substantial completion of its work on Phase I and the architect did so. Acme awaited its payment on the Phase I work, but was surprised to also receive payment of the retainage on that work. Again, the subcontractor found itself benefiting from new language in the A-201—1997 which states: "Upon . . . acceptance (of Work) . . . the Owner shall make payment of retainage applying to such Work or designated proportion thereof. Such payment shall be adjusted for Work that is incomplete or not in accordance with the requirements of the Contract Documents." (Section 9.8.5).
The story of this fictional Acme Sheet Metal job illustrates just a few of the substantive changes contained in the new A-201—1997. More of those changes will be addressed in a subsequent bulletin. While it may take some time for general contractors to develop a sufficient comfort level with the new form, prior experience would suggest that the new form will be in widespread use in the next several years. Overall, the changes in the language represent a step forward for subcontractors and the form is yet another indication of the evolution of the construction industry toward a teamwork approach.