The American Institute of Architects (AIA) recently released the 2017 edition of its key agreements in the A201 family of documents. These design-bid-build agreements, updated every ten years to reflect the evolving construction industry, are universally seen as an industry standard and have crucial implications for surety bond professionals.
“The 2017 release included several revisions to AIA’s flagship document, the A201 General Conditions to the Contract For Construction,” Kenneth Cobleigh, Esq., Managing Director and Counsel of AIA Contract Documents, said. “In addition, there were a number of revisions made to the A201-related owner-contractor agreements, including a multi-page Insurance and Bonds Exhibit, and the A401 Subcontract Agreement.”
The Insurance and Bonds Exhibit
Cobleigh described the new Insurance and Bonds Exhibit—intended to accompany owner-contractor agreements—as the “single most significant revision.”
Overall, it allows flexibility in developing project insurance requirements by differentiating between required and optional coverages, and prompts more communication between parties. The new exhibit can be updated to address changes in the insurance market without the need to edit A201.
“Each of the key owner-contractor agreements now have a separate multi-page insurance exhibit, which allows the parties, in conjunction with their attorneys and insurance advisors, to craft project-specific insurance requirements,” Cobleigh said. “The parties also set forth the requirements for any surety bonds that will be required for the project.”
Most of the insurance and bonds requirements between owners and contractors provided in A201-2007’s Article 11 now reside in the exhibit, and Article 11 itself has been rewritten in the 2017 edition.
“In the past, the requirements for property, liability, auto, workers’ compensation, and other insurance coverages were described in a very generalized way in Article 11 of the A201,” Cobleigh said. “Article 11 still contains a number of provisions related to insurance and bonds, including standards for insurance claims resolution procedures.”
While previous provisions required insurers to notify owners 30 days prior to a coverage cancellation, Article 11 now outlines a mutual obligation between the owner and the contractor to provide notice of such lapses. The 2017 edition mandates that if either party becomes aware of an impending or actual cancellation or expiration of coverage, the owner or contractor must notify the other party within three business days of the date it is discovered.
The party receiving notice has the right to stop work until the lapse is resolved, though the notice does not remove the obligation to provide coverage. Additional provisions protect the interests of the contractor and subcontractor in the case that the owner fails to purchase required coverage.
At the suggestion of NASBP, Cobleigh said, another key revision was made: “The 2017 documents now require that all insurance and bonds be procured from companies lawfully authorized to issue insurance or bonds in the jurisdiction where the project is located.”
“We appreciate AIA’s consideration of our revision request,” stated NASBP CEO Mark H. McCallum. “The addition of such language hopefully will avoid acceptance of policies and bonds from unauthorized insurers,” McCallum added.
As in the past, a standard set of principals and objectives* guided the 2017 edition of documents, including recognition of current trends.
“Certainly technological advancements, such as Building Information Modeling (BIM) and the evolution of certain social expectations, such as sustainable design and construction, along with changes in the construction insurance market, also influenced revisions in the 2017 documents,” Cobleigh said.
Taking into account the digitization of the industry, the 2017 documents include provisions associated with the use of BIM on projects and requirements for the use of AIA document E203–2013 when working with digital data.
To address expectations on the environmental front, AIA introduced a new Sustainable Projects Exhibit, which can be added to most contracts to establish each project participant’s roles and responsibilities, while also addressing risks, in sustainable design/construction projects.
The Sustainable Projects Exhibit, Cobleigh said, “contains provisions that directly impact the obligations of contractors and subcontractors on projects with any significant sustainable design and construction elements.”
The 2017 documents are available at https://www.aiacontracts.org/purchase in a variety of formats. “To best meet our customers’ varied needs, we developed three ways to purchase our documents online,” Cobleigh said.
The Basic Single Document allows fill-point inputs without the need for text changes.
“The obvious advantage is that it saves time, since the documents can be printed and used immediately,” Cobleigh said.
The Custom Single Document and Unlimited Access licenses options offer the same full software functionality, as well as full-document editing capability. Users should make their selection based on the number of projects targeted for completion within a year.
“For firms with only a few projects per year, purchasing documents one-at-a-time might be the right choice,” Cobleigh said. “For firms with many projects per year, an Unlimited Access license that allows full access to every one of our documents for a full-year makes more sense.”
For more information about the AIA documents, read the article by Ken Cobleigh in the NASBP Surety Bond Quarterly.
*According to Cobleigh, “the AIA has been publishing standard form agreements since 1888. Over those years, several drafting principles and objectives have been adopted, including the following:
1. To establish and maintain, for nationwide application, standardized legal forms that enhance the stability and order of design and construction legal transactions;
2. To strive for balanced and fair documents by:
(a) conforming to common law and statutory precepts adopted in the majority of jurisdictions;
(b) allocating risks and responsibilities to the party best able to control them, to the party best able to protect against unexpected cost, or to the owner when no other party can control the risk or prevent the loss; and
(c) seeking industry feedback from parties whose interests may be significantly impacted by individual documents;
3. To publish documents that are subject to uniform legal interpretations so as to be predictably enforceable and thus reliable;
4. To express unambiguous intentions in language comprehensible to the users and interpreters (courts and lawyers) of the standard documents; and
5. Where practices are consistent among regions, to reflect industry customs and practices, rather than to impose new ones; and where practices are inconsistent or no guidelines for practice exist, to provide leadership and guidance for practitioners to follow.”