Highlights of the 2017 Revisions to the AIA-A101, A102, and A103

Highlights of the 2017 Revisions to the AIA-A101, A102, and A103As discussed in a May blog article, the American Association of Architects (AIA) revise their form agreements between owner and contractor approximately every 10 years, and these form documents were recently revised by the AIA a couple of months ago.

This article focuses on comparing the changes from the 2007 version to the 2017 version of the following documents: AIA-A101 (standard form agreement between owner and contractor where the basis of payment is a stipulated sum); AIA-A102 (standard form agreement between owner and contractor where the basis of payment is the cost of the work plus a fee with a guaranteed maximum price); and AIA-A103 (standard form agreement between owner and contractor where the basis of payment is cost of the work plus a fee without a guaranteed maximum price). These documents (collectively referred to as the “Standard Form Agreement”) should be read in conjunction with the AIA-A201 (general conditions between owner and contractor). The May blog article provides an analysis of the 2017 revisions to the AIA-A201.

In its 2017 revisions, AIA makes many of the same changes across all three of the Standard Form Agreements. Also, similar to the changes to the AIA-A201, many of the changes to the Standard Form Agreements are minor clarifications and improvements or create new “check the box” features. Some of the substantive changes to the Standard Form Agreements are highlighted below:

  • As is the case with the AIA-A201, the most significant change to the Standard Form Agreements is the creation of the insurance and bonds exhibit. The 2007 Standard Form Agreements contained only a cross-reference to the insurance requirements in the AIA-A201. Under the 2017 version, much of the insurance and bonds information has been removed from the AIA-A201 and placed into an exhibit that is attached to the Standard Form Agreements. This change allows for greater flexibility and easier customization of the insurance requirements.
  • The Standard Form Agreements include a new method for calculating the amount that an owner must pay to a contractor for termination for convenience. Specifically, the parties are now prompted to agree upon a fee that the owner must pay to the contractor if it is terminated for the owner’s convenience. This termination fee is in addition to payments that the owner must make to the contractor for (i) work properly performed and (ii) costs incurred by reason of the termination, including costs attributable to termination of subcontracts.
  • The progress payment calculation has been simplified across the Standard Form Agreements and now includes, among other minor adjustments, a provision adding change directive amounts to the progress payment calculation and a provision subtracting amounts that the contractor does not intend to pay to subcontractors. The Standard Form Agreements also include a much more thorough procedure for withholding retainage.
  • The AIA-A102 and AIA-A103 are occasionally executed before the contract documents are finalized and the guaranteed maximum price or control estimate may contain certain assumptions. The AIA has added a paragraph to both form documents allowing for revisions to the contract documents that are consistent with the stated assumptions contained in the guaranteed maximum price or control estimate. The contractor is required to notify the owner and architect about any inconsistencies.
  • AIA-A103 now includes a section regarding procurement of long-lead items. This new section requires the contractor to prepare a list of long-lead items and allows the owner to procure such items on terms acceptable to the contractor. The contract for the long-lead items are later assigned to the contractor and the contractor must accept full responsibility for those contracts.
  • The AIA-A102 and AIA-A103 also include a new section forbidding the contractor from making advance payments to suppliers for materials that have not been delivered to the project site without the prior approval of the owner.

As indicated above, AIA made other minor revisions to the Standard Form Agreements, and the list above is not comprehensive of all revisions. Anyone attempting to use the 2017 form documents should carefully examine and compare the 2017 version with the 2007 form. If you have any other questions about the recent AIA revisions or drafting a contract for your particular project, please do not hesitate to contact us.

Bradley Partner Aron Beezley Named Top Attorney Under 40 by Law360

Aron C. BeezleyBradley is pleased to announce that Washington, D.C. partner Aron Beezley was named by Law360 one of the Top Attorneys Under 40 in the country for the second year in a row. Law360’s annual list of Top Attorneys Under 40 recognizes the nation’s best attorneys under the age of 40 for their outstanding legal accomplishments. Law360 received more than 1,200 submissions for the 2017 list, and only 156 attorneys were selected.  Aron was selected as a Top Attorney Under 40 in the area of Government Contracts Law.

The Spearin Doctrine Revisited: Penzel Construction v. Jackson R-2 School District

The Spearin Doctrine Revisited: Penzel Construction v. Jackson R-2 School DistrictIn a recent Missouri appellate decision, the court recognized and reaffirmed the Spearin Doctrine which provides that an owner impliedly warrants the adequacy of plans and specifications it provides to a contractor. In Penzel Construction v. Jackson R-2 School District et al., No. ED103878 (Mo. Ct. App. Feb. 14, 2017), a general contractor sued a school district for furnishing deficient and inadequate plans and specifications to the contractor for the construction of an addition to a high school. The contractor alleged that providing the deficient plans was a breach of the owner’s implied warranty of the sufficiency of the design. The owner furnished the plans and specifications to the contractor who, in turn, provided them to the electrical subcontractor. Neither the contractor nor electrical contractor noticed any errors in the plans during the bidding process. At the end of the much-delayed project, the electrical subcontractor claimed the 16 month delay was the result of the design’ defects and inadequacies.

The Spearin case established that when the federal government provides the detailed design for a construction contract, it impliedly warrants the adequacy of the design. If the contractor follows the plans and specifications which then turn out to be defective, the contractor will not be liable for either the additional costs incurred in attempting to follow the defective design or costs to repair or otherwise address the design deficiencies. To be clear, the government has been held to the standard that impliedly warrants that the design plans are “reasonably accurate,” but not that they are necessarily perfect. In determining whether the design is defective, one of the things courts may look at is the cumulative effect of the alleged errors. Since the Spearin case was decided in 1918 by the U.S. Supreme Court, the same or a similar doctrine has been adopted in a majority of states.

In Penzel, the court had to first address whether the contractor’s claim based on the Spearin Doctrine was actionable in Missouri, which had not previously adopted the doctrine. The court found that Spearin claims were acceptable vehicles for bringing claims for a defective design on government construction projects. Spearin aligns with principles established by prior Missouri case law—namely, that if a contractor bids on a job based on the government’s representations of what the project will entail, he should not be punished because the resulting product is defective.

The two issues of concern in this case were (1) whether the government owner actually breached the contract, and (2) whether the contractor suffered damages that it can prove with reasonable certainty. Focusing on the first issue, the plans and specifications must be “defective” or “substantially deficient,” and they are considered “defective” if they are “so faulty as to prevent or unreasonably delay completion of the contract performance.” The court found that the contractor had sufficiently met its burden as to whether the plans were defective. As to the second point, the court found that there was sufficient evidence to determine that damages were suffered and the amount of those damages. Specifically, the court found that the contractor presented an “adequate basis” under the modified total cost method for calculating a rational estimate of damages.

If contractors are careful, diligent and honest, and if design specifications are defective, the Spearin Doctrine may provide a defense to potential claims of defective workmanship.

Florida Statutes of Limitations and Repose Governing Construction Claims Revised to Clarify Accrual Dates Effective July 1

Florida Statutes of Limitations and Repose Governing Construction Claims Revised to Clarify Accrual Dates Effective July 1Florida’s Gov. Rick Scott signed HB 377 providing for revisions to the Florida statutes of limitation and repose governing construction claims. The new law revises Fla. Stat. Sec. 95.11 (Limitations Other Than for the Recovery of Real Property) to clear up some confusion regarding when the statutes of limitations and repose begin to run. Under the new language, Sec. 95.11(3)(c) defines the four-year statute of limitations period for construction and design claims as running from the “date of (a) actual possession by the owner, (b) the date of the issuance of a certificate of occupancy, (c) the date of abandonment of construction if not completed, or (d) the completion or termination date of the contract, whichever date is latest.” However, with respect to latent defects discovered after the dates described above, the four-year limitations period runs from the discovery of the defect.

The new statute also provides that, regardless of when a construction or design defect claim is determined to accrue for purposes of the limitations period, the claim must be brought within “ten years after the date of (a) actual possession by the owner, (b) the date of the issuance of a certificate of occupancy, (c) the date of abandonment of construction if not completed, or (d) the completion or termination date of the contract.” All construction claims must be brought within this 10-year statute of repose period.

The prior version of the statute did not define “completion date,” which created some ambiguity as to when the limitation and repose periods began to run for claims arising out of improvements to real property. The recently revised statute defines “completion date” as “the later of the date of final performance of all the contracted services or the date that final payment for such services becomes due without regard to the date final payment is made.” The revisions are intended to provide more clarity on the triggers for the applicable limitation or repose period. The added certainty should, hopefully, benefit all industry participants. The updated statute applies to all claims that accrue on or after July 1, 2017.

All Small Mentor-Protégé Program Mid-Year Report: Fast Figures Small and Large Businesses Need to Know

All Small Mentor-Protégé Program Mid-Year Report: Fast Figures Small and Large Businesses Need to Know

The Small Business Administration (SBA) started accepting applications for the new All Small Mentor-Protégé Program (ASMPP) in October 2016, but SBA has seen a surge in applications in the first six months of 2017.

Under the ASMPP, any small business – including Historically Underutilized Business Zone (or HUBZone) small businesses, 8(a) small businesses, veteran-owned and service-disabled veteran-owned small businesses (VOSBs/SDVOSBs), woman-owned and economically disadvantaged woman-owned small businesses (WOSBs/EDWOSBs) – may enter into an agreement with a large business under which the large business will provide mentorship and assistance. In return, the large and small businesses are permitted to joint venture to perform federal small business set-aside contracts.

As a mid-year report, here are some fast figures about the ASMPP that both large and small businesses need to know:

229 SBA reports that, as of June 27, 2017, it has approved 229 different ASMPP agreements.
3900 SBA reports that, as of June 27, 2017, there have been more than 3,900 views of SBA’s online ASMPP tutorial.
9 SBA reports that, as of June 27, 2017, 9 8(a) Mentor-Protégé Program participants transferred to the new ASMPP.
11 SBA reports that at least 11 of the 229 SBA-approved ASMPP agreements were approved under the protégé’s secondary – rather than primary – North American Industry Classification System (or NAICS) code.
28 SBA reports that, as of June 27, 2017, 28 ASMPP applications were declined by SBA. SBA also reports that at least 28 of the ASMPP participants are 8(a) firms.
35 SBA reports that at least 35 of the ASMPP participants are SDVOSBs.
17 SBA reports that at least 17 of the ASMPP participants are HUBZone companies.
6 SBA reports that at least 6 of the ASMPP participants are EDWOSBs.
9 SBA reports that at least 9 of the ASMPP participants are WOSBs.
27 SBA reports that ASMPP participants are based or incorporated in 27 different U.S. states/territories/districts.

If you have any questions about the ASMPP, please feel free to contact Aron Beezley or Frederic Smith.

Alabama Supreme Court Confirms that Mutual Consent Is Not Required to Enforce an Arbitration Clause

Contract InterpretationMandatory arbitration clauses have become commonplace in construction contracts.  Various groups have formulated generic arbitration language to insert into disputes clauses of contracts. A good example of such language comes from the AIA suite of forms and reads, in part:

Any Claim arising out of or related to the Contract…shall…be subject to arbitration. Prior to arbitration, the parties shall endeavor to resolve disputes by mediation…

Claims not resolved by mediation shall be decided by arbitration which, unless the parties mutually agree otherwise, shall be in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect. The demand for arbitration shall be filed in writing with the other party to the Contract and with the American Arbitration Association…

Despite their widespread use, parties continue to argue about the enforceability of such provisions. These arguments often arise when parties modify the generic language found in standard form documents like the AIA text above. Even when altered, most courts have determined that such provisions make arbitration mandatory and subject to compulsion by either party to the contract. In such case, arbitration may only be avoided if both parties to the contract mutually agree to resolve their disputes in court.

Alabama courts have followed a similar approach. The Supreme Court of Alabama made that clear in a recent 2016 ruling. In that case, the parties altered the AIA language above by replacing “shall” in the first line of each paragraph with “may at the election of either party.” After a lawsuit was filed, one of the parties moved to compel arbitration. The other party opposed that motion on the basis that the removal of the word “shall” changed the arbitration requirement from mandatory to one that required mutual consent of the parties.

The Alabama Supreme Court disagreed and granted the motion to compel. The Court reasoned that:

A plain reading of the arbitration provision as modified…indicates that either party has the option to pursue resolution of a dispute in arbitration. The paragraphs that constitute the arbitration provision say nothing about mutual consent being required to invoke arbitration…The changes in the addendum retain more meaning if it is assumed that they stemmed from the parties’ desire to provide that arbitration is not the only initial avenue available to the parties for resolution of disputes in contrast to the language in the form contract in which ‘the parties committed…dispute[s] to resolution only in an arbitral forum. Hanover Insurance Co. v. Kiva Lodge Condominiums, 2016 WL 6135201 (Ala. 2016).

The Alabama Supreme Court’s approach to such language is not unique. Other courts are likely to view arbitration provisions similarly. Nevertheless, parties desiring arbitration should think carefully before modifying disputes clause language to avoid: (1) expensive and time-consuming court motions challenging enforceability; and (2) the risk of having an arbitration clause voided by a court which interprets the modified contract language differently from what appears to be the trend.

In contrast, parties who wish to avoid arbitration because they believe their legal defenses will fare better in a court setting, they dislike the arbitration clause’s choice of forum, or for some other reason, should recognize the slim chances of avoiding arbitration requirements in contracts.

Regardless, all contracting parties should pay particular attention to disputes clauses in their contracts. While no contractor wants or plans for a claim to arise, when one does, you want to have a disputes provision in your contract that accounts for and addresses your concerns and matches your expectations for resolving claims when you entered into that contract.

Postal Service Contractor? Would-be Contractor? A Look inside the U.S. Postal Service Bid Protest Process

Mail TrucksMost sophisticated government contractors know that the Government Accountability Office (GAO) does not have jurisdiction over bid protests challenging procurements or proposed procurements by the U.S. Postal Service (USPS). However, few government contractors are aware that the USPS has its own bid protest (or “disagreement”) process, and even fewer government contractors know the details of the USPS’s protest process. This article provides a user-friendly overview of the USPS’s bid protest process.

General Overview

The GAO’s Bid Protest Regulations state, in relevant part: “Protests of procurements or proposed procurements by agencies such as the U.S. Postal Service . . . are beyond GAO’s bid protest jurisdiction as established in 31 U.S.C 3551-3556” (see 4 C.F.R. § 21.5(g)). The reason that the GAO does not have jurisdiction over protests challenging USPS procurements was articulated by the U.S. Court of Appeals for the Federal Circuit in a 2001 decision:

The GAO’s protest jurisdiction is defined by the Competition in Contracting Act (“CICA”) of 1984, 31 U.S.C. § 3551 et seq. The USPS is exempted from all federal procurement laws not specifically enumerated in 39 U.S.C. § 410(a). [] Because the [CICA] is not specifically enumerated in 39 U.S.C. § 410(a), the CICA does not apply to the USPS and therefore the USPS is not subject to GAO review.

Emery Worldwide Airlines, Inc. v. United States, 264 F.3d 1071, 1079 n. 7 (Fed. Cir. 2001).

Despite the fact that the GAO cannot decide protests involving USPS procurements, the USPS has its own unique bid protest process, and the U.S. Court of Federal Claims (COFC) has consistently held that it has jurisdiction over protests involving USPS procurements. The USPS’s disagreement resolution procedures are set out in 39 C.F.R. Part 601. These regulations establish a process by which a contractor can file a protest concerning the USPS’s acquisition of services or property. The USPS “disagreement” process is essentially a two-step process that usually should be exhausted before a contractor files a bid protest action at the COFC.

Step One: Lodging the Disagreement with the Contracting Officer

The first step in the USPS process is to “lodge” (i.e., file) the disagreement with the contracting officer. The protester must lodge its disagreement within 10 days from when it first became aware of the grounds for disagreement. If, on the other hand, a protester is challenging the terms of a solicitation, then it must lodge – and “the contracting officer must receive” – the disagreement before offers are due. The USPS’s regulations do not provide for an automatic stay of the contract award upon the receipt of a timely filed protest. However, the USPS’s current Supplying Principles and Practices state that “[w]hile a disagreement is pending an award will not be made unless compelling circumstances so require” (see SP&Ps, § 7-4.4). Once a protester lodges its disagreement, the contracting officer has up to 10 days to review the challenge and issue a response. In addition, an alternative dispute resolution mechanism may be used if the parties so desire. If the protester is satisfied with the resolution of the matter, then the process ends. If, however, the contractor is not satisfied with the contracting officer’s resolution of the disagreement, or if the contracting officer has not responded within 10 days after the disagreement was lodged, then the contractor may proceed to the second step of the process.

Step Two: Lodging the Disagreement with the SDRO

The second step in the process is for the protester to lodge the disagreement with the Supplier Disagreement Resolution Official (SDRO) at USPS Headquarters in Washington, D.C. Contractors must lodge the disagreement with the SDRO within 10 days after the contracting officer issues a decision on the protest, or within 10 days of when the contracting officer should have issued a decision. The SDRO may grant an extension of time to lodge a disagreement, but any request for an extension must set forth the reasons for the request, be made in writing, and be delivered to the SDRO on or before the time for lodging a disagreement lapses.

Upon receipt of a disagreement, the SDRO will provide a copy of the disagreement to the contracting officer, who, in turn, will notify other interested parties. The SDRO will then review the disagreement and, if necessary, obtain further information from the protester and the contracting officer. Notably, the USPS’s regulations state that the SDRO “may also meet individually or jointly with the person or organization lodging the disagreement, other interested parties, and/or Postal Service officials, and may undertake other activities in order to obtain materials, information, or advice that may help to resolve the disagreement” (see 39 C.F.R. § 601.108(e)). Next, the SDRO will issue a written decision – which typically happens within 30 days after the SDRO’s receipt of the disagreement.

The SDRO may grant various remedies, such as: (a) directing the USPS to terminate the contract award; (b) directing the USPS to issue a new solicitation; (c) directing the USPS to conduct a re-competition of the USPS’s requirements; and (d) directing the USPS to conduct a reevaluation of proposals.

If a protester is not satisfied with the SDRO’s decision, the decision “may be appealed to a Federal court with jurisdiction based only upon an alleged violation of the regulations contained in [39 C.F.R. Part 601] or an applicable public law enacted by Congress” (see 39 C.F.R. § 601.108(h)). Although this particular regulatory provision seems to limit the issues that may be “appealed” to a federal court, the COFC takes jurisdiction over issues that do not fall neatly under this provision. The COFC reasons that it, not the USPS, decides the extent of its jurisdiction over bid protest actions.

Furthermore, the regulations governing the USPS disagreement process seek to require contractors to “exhaust” their administrative remedies before bringing a challenge in federal court. While some commentators have suggested that this regulatory provision is, in effect, unenforceable since the COFC determines the extent of its bid protest jurisdiction, many practitioners opt to exhaust the USPS disagreement process out of an abundance of caution and also because they potentially can save their clients money if they achieve a satisfactory result at the less-expensive USPS level.

Although the USPS disagreement process generally is a cheaper route than pursuing a protest at the COFC, there are drawbacks to the USPS process. For example, as mentioned above, the USPS’s regulations do not provide for an automatic stay of the contract award upon the receipt of a timely filed protest. Additionally, protesters oftentimes are afforded little access to the procurement record during the USPS disagreement process.

The FAR Does Not Apply to the USPS

In prosecuting a disagreement before the USPS, remember that the Federal Acquisition Regulation (FAR) – which is the government-wide regulation that governs the federal contracting process for most agencies – does not apply to the USPS. Instead, the USPS’s Supplying Principles and Practices govern most of the contracting process.

The USPS has taken the position that because the Supplying Principles and Practices have not been formally issued as regulations, they are not binding on the USPS. The fact that the USPS’s Supplying Principles and Practices may be viewed as non-binding can present some difficulty for protesters challenging the USPS’s conduct at the COFC, because the USPS can argue that any violation of the Supplying Principles and Practices is not “arbitrary and capricious” conduct. Nevertheless, protesters can argue that actions by the USPS that are contrary to the USPS’s Supplying Principles and Practices are evidence of “arbitrary and capricious” conduct.

Conclusion

If you are a contractor for, or want to be a contractor for, the USPS, you need to be aware of how to protect yourself from a defective solicitation or from an unreasonable evaluation and award. You and your lawyer must know the USPS protest process and the time limitations to protect yourself against what you may perceive is unreasonable procurement conduct by the USPS. If you have any questions about the USPS bid protest process, please feel free to contact Aron C. Beezley.

Highlights of the 2017 Revisions to the AIA-A201

construction contractFor almost 130 years, the American Association of Architects (AIA) has published form construction documents. The AIA family of documents is among the most popular and commonly used form construction documents in the construction industry. The last time that AIA issued major changes to the contract family of documents was 2007. Historically, AIA has issued revisions to their standard form contracts every 10 years. Consistent with its custom, AIA recently released revisions to 11 different forms and plans to release revisions to additional forms in the fall of 2017.

This article focuses on the changes to the AIA-A201. The AIA-A201 is the general conditions form that is used in conjunction with certain other contract forms, such as the AIA-A101 “Standard Form of Agreement Between an Owner and Contractor Where the Basis of Payment is a Stipulated Sum.” Most of the changes are relatively minor clarifications or improvements. For instance, the revised AIA-A201 now defines the term “Separate Contractor(s).” AIA also added provisions that some may consider boilerplate, such as the addition of a “survival” clause. But, AIA also made substantive changes, some of which are discussed below:

  • The most significant change to the AIA-A201 is the creation of an insurance and bonds exhibit. In the 2007 version, the insurance and bond requirements were primarily set forth in the agreement itself. Now, the majority of the insurance and bond terms are included in an exhibit, which must be read in conjunction with the remaining insurance terms in Section 11 of the agreement. The new AIA insurance exhibit allows for much greater flexibility in choosing insurance coverage and permits the parties to tailor their insurance coverage to the specific needs of their project. For instance, the exhibit distinguishes between insurance coverages that are required (such as workers’ compensation or automobile liability insurance) versus optional (such as asbestos liability or loss of use insurance). The AIA-A201 also makes some modifications to general insurance terms, such as establishing specific owner liability to contractor for the owner’s failure to procure insurance and requiring waivers of subrogation under insurance policies separate from those policies insuring the project.
  • In a response to the financial crisis that followed the issuance of the 2007 edition, AIA developed more comprehensive language regarding the owner’s duty to provide the contractor with information concerning its ability to pay. For instance, the revised AIA-A201 creates a detailed procedure outlining when a contractor can refuse to proceed with the work, or even suspend work in certain instances, if the owner does not provide timely information concerning its financial arrangements. The form does, however, require the contractor to keep the owner’s financial information confidential.
  • Recognizing recent changes in communication, AIA now allows for notices to be sent through “electronic transmission” where provided. It is important to note, however, that notice of “Claims” must still be sent by personal delivery, certified/registered mail, or courier. This suggests that a notice of a “Claim” deserves greater attention than other more routine notices throughout the contract performance period.
  • AIA now requires all warranties be issued in the name of the owner or transferrable to the owner. Considering that contractors generally install equipment or use materials manufactured or provided by other parties, this requirement simplifies the warranty process. The revised AIA-A201 also clarifies that some of the contractor’s warranty obligations occurring before substantial completion are different from its obligations occurring after substantial completion.
  • In instances where an owner has terminated a contractor for convenience, AIA has substituted the owner’s obligation to reimburse contractor “for reasonable overhead and profit on the work not executed” with terms requiring the owner to pay “costs attributable to termination of subcontracts” and a “termination fee.”
  • There is a new timing mechanism that appears to bar a party’s ability to file a claim in arbitration or litigation. Specifically, after the initial decision and mediation, either party may demand that the other party file its claim in either arbitration or litigation. If the other party does not file a claim within 60 days of the demand, then both parties waive their rights to arbitration or litigation with respect to the initial decision. The revised AIA form also provides additional clarification about the role of the initial decision maker.
  • The 2017 revisions specify, in greater detail, the information to be included in schedule submittals, including specification of the schedule milestone dates and an apportionment of the work by construction activity.
  • Contractors are now explicitly required to submit releases and waivers of liens along with their applications for progress payment. In addition, a new provision has been inserted to require contractors to indemnify the owner from all damages it suffers as a result of a lien or claim filed by a subcontractor where the owner has fully complied with its payment obligations.
  • The change order provision has been revised to outline the contractor’s rights when it disagrees upon whether a proposed change is a “minor change” (or a change that does not affect the contract sum or contract time). Specifically, if the contractor is asked to perform a “minor change” but the contractor believes that such change will affect the contract sum or contract time, the contractor can now refuse to perform the proposed change until the matter is resolved or a change directive is issued.
  • The document requires greater use of Building Information Modeling (BIM) and digital data. In fact, by default, the parties are required to use an AIA BIM and digital data exhibit to establish the protocols for the development, use, transmission, and exchange of digital data.
  • The revised AIA-A201 form also allows for more direct communication between owner and contractor, as opposed to communicating through the architect.

The list above is not a comprehensive list of the changes to the AIA-A201; rather, it is intended to set forth some “highlights.” Anyone attempting to use the new 2017 form should carefully compare the entire 2017 form with the 2007 form. The AIA publishes a helpful comparison of the two documents on its website.

In future blog posts, we will analyze some of the changes to the other form agreements between owner and contractor that were recently revised by the AIA, including AIA-A101 (where basis of payment is a stipulated sum), AIA-A102 (where basis of payment is cost of the work plus a fee with a GMP), and AIA-A103 (where basis of payment is cost of the work plus a fee without a GMP). Please check back to this blog for those updates.

In the meantime, if you have any other questions about the recent AIA revisions or drafting a contract for your particular project, please do not hesitate to contact us.

Buy American and Hire American: What It Means for the Construction Industry

USA construction siteOn April 18, 2017, President Donald Trump signed into law the “Buy American and Hire American” Executive Order (No. 13788). The Order requires agencies to do a wholesale evaluation of their compliance with “Buy American” laws and to develop additional policies and procedures to maximize the use of American materials and manufactured products.  As part of this review, the Order also instructs agencies to limit their use of waivers under “Buy American” laws going forward.  The Order also includes instructions to various relevant departments to step up enforcement of H-1B visas requirements to prevent fraud and abuse, protect the interests of American workers, and ensure that H-1B visas are awarded to the most-skilled or highest-paid laborers (Note: Increased H-1B enforcement should not significantly impact the construction industry, which does not appear, at present, to rely heavily on immigrant workers who meet the H-1B qualifications, but the move is in line with other steps by the administration to tighten immigration controls that may worsen the ongoing labor shortage in the industry.).

The Executive Order is as broad as it is vague, so, at this stage, it is somewhat difficult to predict how it will shape federal construction projects in the future.  All laws which require or provide a preference for the purchase of goods, products, or materials produced in the United States are subject to a review, and the Order requires agencies to complete the assessment of their “Buy American” practices within 150 days with a report to be submitted to the President 70 days after that, which will include recommendations on how to strengthen implementation of “Buy American” laws.  Given the breadth of laws subject to wholesale review, these agencies have a challenging task ahead of them.  If the Order’s timeline holds up, the President will likely receive a report sometime in November of this year, and you can likely expect additional actions once that report is received and evaluated.

In the long term, the more heightened enforcement of “Buy American” provisions likely means increased costs of procuring materials domestically and heightened risk of material shortages on federal projects.  Higher costs and potential shortages may tempt more fraud and abuse on federal procurement and construction projects.  In this setting, contractors should be cautious as even inadvertent procurement of falsely certified “Buy American” materials may have severe implications under the False Claims Act and could result in suspension, debarment, and penalties.   For contractors who operate overseas, you may also anticipate reactionary legislation or laws from countries you do business in as those countries seek to protect their national economic interests.  Additionally, when bidding future federal work, contractors may not be able to rely on past practices with respect to the granting of waivers, as the Order instructs agencies to be more judicious in the use of waivers of “Buy American” requirements.

Revisions to ConsensusDocs® Design-Bid-Build Standard Forms

Business contract detailsEvery construction project has a contract (written, preferably), and they often vary in size and scope depending on the nature and complexity of a project. Many construction industry participants have developed their own contract forms, and others rely on industry standard contract forms such as the AIA and ConsensusDocs standard forms. ConsensusDocs forms evolved from the prior AGC forms.

Recently, the ConsensusDocs Coalition published revisions to its prime and subcontractor Design-Bid-Build standard contracts. Many of the changes are attempts to clarify provisions, create consistency across forms and are generally editorial in nature. However, several of the revisions have a substantive impact and should be reviewed closely prior to using the new forms. Below is a high-level overview of some of the substantive changes:

  • Termination for Convenience: Improper terminations for default/cause are no longer automatically converted into terminations for convenience. Accordingly, an improper default termination may result in substantial damages.
  • Schedule of Work: Incorporates Critical Path Method Scheduling concepts and specifically requires the identification of critical dates and a graphic representation of all activities, including float values that will affect the critical path.
  • Indemnification: Expanded to include “intentionally wrongful” acts or omissions and also provides some clarity to the definition of “Others” who or which are indemnified.
  • Insurance: Contractor, rather than the owner, is now the default party responsible for obtaining the builder’s risk insurance policy. The party who procures the builder’s risk insurance policy bears the risk of loss from damage to the work until Final Completion.
  • Bonds: No longer requires that the bond penal sum increase automatically in accordance with the contract price when the price increase exceeds 10 percent.
  • Changes and Directives: Revisions clarify and account for changes with no time or cost impact and expand changes to encompass “Interim Directives.”
  • Payment: Adds an additional category of “losses, expenses, or damages … not compensated by insurance” and “cost of corrective work” as recoverable costs on a cost reimbursable basis.
  • Dispute Resolution: Adds a “check-the-box” option for the mediation procedures and administrator. If no box is selected, mediation will be conducted pursuant to the American Arbitration Association rules.
  • Fiduciary Relationship: Removed language from the ConsensusDocs 240 Design Professional Standard Agreement that may imply that a fiduciary duty existed between the owner and its design professional.

These revisions affect numerous ConsensusDocs standard agreements, including: ConsensusDocs 200 Owner & Constructor Agreement, ConsensusDocs 205 Owner & Constructor Short Form Agreement, ConsensusDocs 240 Owner & Design Professional Agreement, ConsensusDocs 750 Constructor & Subcontractor Agreement and ConsensusDocs 751 Constructor & Subcontractor Short Form Agreement. Although this blog focuses on changes to the Design-Bid-Build forms, revisions to other ConsensusDocs forms including the Design-Build and construction management at-risk forms (ConsensusDocs 410; 415; 420; 450; 560 and 500) were released in March 2017 and address changes in the industry impacting insurance, legal, technology and terminology.

Disputes often arise because a party is unfamiliar with its contract. This blog should serve as a reminder to review each contract you are presented with; update any forms you may have for use in your company; read your contract (we hope before you sign it); and, if you have questions, consult with a seasoned construction lawyer to increase the likelihood that your project is governed according to what you think you bargained for.

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