May  22, 1998



Bulletin #16: The New A-201 General Conditions - 1997 (Part II)

As you may know, the American Institute of Architects (AIA) has developed an updated form of General Conditions of the Contract for Construction known as AIA Document A201-1997. These general conditions are intended to replace the A201-1987 with which most general contractors and subcontractors had become familiar.

Typically, the same set of general conditions will apply to the owner, general contractor, and all subcontractors on a job. Establishing a uniform set of rules, procedures, and terms for all tiers of participants is intended to make the project easier to administer and manage.

Uniform general conditions also minimize the potential for gaps or conflicts in contracts among the various tiers. Finally, the general conditions allow all parties an identical method of dispute resolution if claims arise.

The A201 general conditions have evolved as the construction industry has changed. The first A201 general conditions were published in 1911 and the A201-1997 is the fourteenth version released since the original A201. The general conditions have shifted over time from establishing strict rules and procedures based upon total control by the higher tiers (with risk-shifting to the subcontractors) toward a more evenhanded approach emphasizing reasonable disclosure, fair notice, claims prevention, and expedited dispute resolution.

The latest by-product of this process, the A201-1997, is the result of years of negotiation and collaboration among representatives of owners, architects, engineers, general and subcontractors, and insurance professionals. Eleven of the 14 articles of the A201 form were materially modified in the update process.

A subcontractor that is asked to operate under the updated general conditions should obviously develop a good working knowledge of each of the provisions and, particularly, the changes from the A201-1987. To aid in that process, the following is a summary of some of the significant changes incorporated in the A201-1997:

1. Rights to Plans. The language concerning control and ownership of the drawings, specifications, and other documents is extended to any such documentation created by the architect’s consultants. The form also extends the protection that had previously applied to drawings and specifications in hard copy to such information in electronic form (Paragraph 1.6.1).

2. Owner Representative. The owner must now designate an authorized representative in writing at the commencement of a project. The architect is specifically excluded from exercising the authority of the owner unless otherwise indicated in the construction documents (Paragraph 2.1.1). The contractor is also permitted to rely on the accuracy and completeness of information from the owner, including information on any surveys showing the physical characteristics of a site and utility locations (Paragraph 2.2.3).

3. Construction Means and Methods. The contractor is now required to review field conditions and take field measurements and to observe any conditions at the site affecting its work. Such field work is intended to facilitate construction and not to impose upon the contractor an obligation to discover errors, omissions, or inconsistencies in the contract documents. However, if the contractor finds errors, it is to promptly report them to the architect (Paragraph 3.2.1).

4. Dispute Resolution. Mediation is now required before the parties resort to arbitration or other legal proceedings. The mediation would follow the initial decision by the architect as to a claim or, if no decision has been made, could be initiated thirty (30) days after submission of a claim to the architect (Paragraph 4.5.1).

5. Payment for Changes in the Work. If the parties have not agreed on the total cost of a Construction Change Directive, amounts not in dispute are to be included in applications for payment accompanied by a change order as to the undisputed amount. The architect is to make an interim determination as to amounts that remain in dispute for purposes of its monthly certification for payment of costs (Paragraph 7.3.8).

6. Retainage. Upon issuance of a certificate of substantial completion by the architect for a designated portion of the contractor’s work, the owner is to make payment of the retainage applying to that work even though other designated portions of the project and contractor’s work may remain incomplete (Paragraph 9.8.5).

7. Hazardous Materials. A lengthy section has been added dealing with hazardous materials, verification of the presence of such materials, and the safety-related issues that arise when hazardous materials are encountered. Unlike the A201-1987, the hazardous materials section goes beyond asbestos and PCBs to include any material or substance that might present a risk of foreseeable bodily injury or death. The owner is required to indemnify the contractor if the contractor is held liable for the cost of remediation of a hazardous substance or material, so long as the contractor was not negligent in the particular circumstance. This portion of the A201 has been very substantially revised (Paragraph 10.3).

8. Defective Work. A one-year period for correction of work is specified, but if the owner fails to notify the contractor and give the contractor an opportunity to subsequently require correction during that period, the owner waives the right to require correction by the contractor or to make a claim for breach of warranty (Paragraph 12.2.2).

9. Termination. A new provision has been added to permit the owner to terminate the contract for the owner’s convenience and without cause. The contractor is to receive payment for work executed and costs incurred by reason of the termination, along with reasonable overhead and profit on the work not executed (Paragraph 14.4).

The items above are only a sampling of the types of changes in the new form. A number of the revisions are potentially significant for subcontractors. Keep in mind that all of the A201 terms referring to the relationship between "owner" and "contractor" will also apply equally to the subcontractor’s relationship with the general contractor.

It may take several years before the A201-1997 is in common use. If it is used, such use should be in conjunction with the most recent construction contract and subcontract forms [i.e. A401 Contractor-Subcontractor Agreement Form (1997)]. In construction contracting, it is very often true that the "devil is in the details" and the details are often contained in the general conditions.

It should also be kept in mind that a subcontractor will rarely be in a position to renegotiate general conditions (since they should apply uniformly across the job), but the terms of the general conditions must be understood in order for the subcontractor to effectively protect itself.

 

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