Every ten years, the American Institute of Architects (the “AIA”) revises the standard AIA Contract Documents to account for developments in the construction industry and changes in the law. 2017 marks the latest AIA Contract document update, with the most recent revisions released this past April. Though the AIA has made significant changes in the past, the latest round seemingly brings no industry-shifting change. Nevertheless, in a business driven by contracts, it is imperative that contractors and subcontractors consistently review their agreements (whether new or old), as they should conform and change on a job-by-job basis. You can expect to see these changes in the new AIA documents, along with a number of others:
- Addressing Sustainability. The 2017 Contract Documents come with a new, 6-page Sustainable Project Exhibit, which addresses sustainability goals in construction and design, and which can be added to almost any AIA contract. The Exhibit requires the Contractor to follow a “Sustainability Plan” for the Project, intended to achieve the Project’s “Sustainable Goal.” This is monitored through certain “Sustainability Measures” determined in advance and through third-party certifications. Because of the simplicity of this new Exhibit and the ease of implementation, this Sustainable Project Exhibit should see significant use and contractors should expect to encounter it. These new exhibits, however, also create additional paths of liability.
- Streamlining Insurance. While the old AIA contracts dealt with insurance and bonds in the General Conditions, the revised versions address the topic in a separate exhibit (Exhibit A). This perhaps is the most significant formatting change from the 2007 Contract Documents. Exhibit A allows the Owner and the Contractor to customize the amount of insurance in addition to the types of coverage (such as delayed completion coverage). Despite this customization feature, Exhibit A imposes on the Owner by default the burden to maintain property insurance in an amount sufficient to cover the value of the entire Project.
- Requiring Indemnity for Lien Claims. A201 has been revised to include a new section—§ 9.6.8—which requires the Contractor to indemnify the Owner for all losses and expenses (including attorneys’ fees) for any lien claim by a lower-tiered contractor after the Owner has fulfilled its payment obligations. While owners often amended the previous A201 (or A101) to impose similar obligations on contractors, this indemnity now automatically applies by virtue of the update. Contractors should acknowledge this provision and recognize the importance of preserving their subcontractors’ pass-through claims, as well as ensuring that their subcontractors provide that same indemnity up the chain. This provision also must be examined in conjunction with the law of the jurisdiction that applies to the contract, as it may have to be changed.
- Allowing for Early Retainage Release / Excluding Items from Retainage. The revisions include a full section (§5.1.7 in A101 and §11.1.8 in A401) dedicated to retainage, which the old versions previously did not. This section contains room for the parties to add their own terms regarding the reduction and limitation of retainage, as well as the opportunity to carve out certain items not subject to retainage. Though contractors may find certain use for this section, the section is likely to be of most value to an early-project subcontractor who has the foresight to negotiate an early release of retainage.
These highlights above are just a few of the changes in the new AIA Contract Documents, and, as attorneys, we could not close this article without emphasizing the need to review the new documents (and the need to thoroughly review any and all of the contracts that you plan to enter). As the 2017 Contract Documents begin getting used, we will soon see their impact, how they are handled in practice, and how the courts or arbitrators interpret them.
Watch out for these new 2017 Contract Documents and be sure to read your contracts.