2017 AIA Modifications, Insurance and Bond Exhibits Recap

On June 24th, 2020, Long Island Construction Attorney, John Caravella, Esq, co-presented Strafford’s AIA virtual webinar. Along with Steven Nudelman and Warren F. Jacoby, Mr. Caravella and his other co-presenters discussed the fine details of AIA Contract Documents: 2017 Modifications, Insurance and Bond Exhibit, Owner – Contractor Documents and Owner – Architect Agreements. Within this article, you will have a better understanding of the changes to an AIA Contract Document and what you, as a construction professional should know.

Introductory Sections:

  • Section 1.1 eliminates Exhibit A and incorporates key information concerning the parties and project, including physical characteristics of the project and budget, prominently at the beginning of the contract. Also provides for Owner and Architect to agree on multiple milestone contract dates rather than just commencement and completion.
  • Section 1.3 urges parties to incorporate Building Information Modeling (BIM) in developing, transmitting, and using instruments of service and other documentation.

Note: Section numbers reference B101-2017 as examples unless otherwise indicated.

Licensing Requirement Clarification:

  • Section 2.1 now provides for Architects to specifically represent that they are licensed in the project’s jurisdiction or will use the services of architects licensed in that jurisdiction.
  • Rather than assuming, the new provision expressly provides for appropriate licensing as necessary for sealing plans to be submitted to local authorities.
  • Also ensures that Architect is not subject to liability for inadvertently agreeing to practice architecture in an jurisdiction where architect is not licensed.

Insurance Requirements:

  • Section 2.5 et seq. go into greater detail concerning types of insurance coverages and limits.
  • When read with section 11.9, requires Owner to pay Architect up front (rather than reimbursing later) for additional insurance costs to the extent Owner requires more insurance than Architect already maintains, thus protecting Architect from risk of later nonpayment.
  • Requires Owner to be named as additional insured (recognizing that most practitioners would require this during contract negotiation).
  • Items not included: requirements for Architect to maintain cyber insurance and/or crime coverage; requirement for Owner to be notified by Architect of non-renewal, cancellation, or reduction of coverage.

Additional Protections to Architect:

  • Section 3.1.2 – the 2007 form provided that Architects were entitled to rely upon information furnished by Owner, but the 2017 form uses the more concrete language “shall not be responsible” for issues arising from the accuracy, completeness, and timeliness of services and information from Owner and its consultants.
  • Revised section 3.1.4 provides that Architects are not responsible for Owners’ acceptance of non-confirming work if Architects do not approve. This section also specifies that written approval by Architects is required to trigger responsibility, clearing up any claims as to oral approvals.
  • Old section 3.5.2.2.2, requiring Architects to procure and distribute reproductions of bid documents, has been omitted.
  • Section 3.5.2.3 makes the consideration of requests for substitutions from the Bidding Documents an Additional Service rather than a required service.
  • New section 7.5 provides that provisions relating to copyright licenses—including Owners’ responsibility to indemnify Architects for unauthorized use of Instruments of Service—now survive termination of the agreement.

Architect’s Certification of Payments:

  • Section 3.6.3.1 now specifies that Architects’ certifications constitute representations that the Contractors are entitled to payment in the amount certified.
  • While certification under section 3.6.3.1 has always been “to the best of the Architect’s knowledge”, this language has been carried over into section 3.6.6.1 that final certification for payment is “to the best of the Architect’s knowledge, information, and belief”.

Architect’s Certification of Payments:

  • Section 3.6.3.1 now specifies that Architects’ certifications constitute representations that the Contractors are entitled to payment in the amount certified.
  • While certification under section 3.6.3.1 has always been “to the best of the Architect’s knowledge”, this language has been carried over into section 3.6.6.1 that final certification for payment is “to the best of the Architect’s knowledge, information, and belief”.

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Supplemental and Additional Services:

  • Forms now separate “Supplemental Services” (essentially those agreed to at contract formation) from “Additional Services” (those requested after execution of the contract for additional compensation).
  • Supplemental Services are listed in the table following section 4.1.1 (which were Additional Services in the 2007 form).
  • Additional Services listed in former section 4.3.1 (new section 4.2.1) are defined as Additional Services under the new definition. Language has also been changed to provide that services necessitated by enactment or revisions of applicable laws and services necessitated by official interpretations of applicable laws are Additional Services.
    • Services relating to Owners’ requests for environmentally responsible design services are omitted from Additional Services on the new form, as sustainability objectives are Supplemental Services and are addressed in Article 1.
  • Section 4.2.4 expressly provides for Construction Phase Services which are provided more than 60 days after the date of Substantial Completion as Additional Services.

Communications:

  • Previous section 5.10 required Owners to direct communications with Contractors and Architects’ consultants through Architects. New section 5.12 requires Owners to include Architects in communications with Contractors relating to Architects’ scope of services and to relate to Architects the substance of other communications. (Communications with Architects’ consultants should continue to be directed through Architects in the new form.)

Communications:

  • Previous section 5.10 required Owners to direct communications with Contractors and Architects’ consultants through Architects. New section 5.12 requires Owners to include Architects in communications with Contractors relating to Architects’ scope of services and to relate to Architects the substance of other communications. (Communications with Architects’ consultants should continue to be directed through Architects in the new form.)

Costs of the Work:

  • Section 6.1 definition of the Cost of the Work has been expanded to include the reasonable value of labor, materials, and equipment provided by Owners (rather than just that provided by the Contractors).
  • Section 6.2 provides that the budget shall be adjusted as required under various provisions of the contract. This word is mandatory, whereas the previous form used the permissive “may”.
  • Section 6.4 still requires an adjustment to the budget for market fluctuation if the Procurement (formerly Bidding or Negotiation) Phase has not commenced within 90 days submission of plans to Owners, but the new section provides that the adjustment is available only where the delay is not due to the Architects’ fault.
  • Revised section 6.7 now provides for additional compensation for Architects modifying the Construction Documents where the lowest bona fide bid or negotiated proposal exceeds the budget due to market fluctuations Architects could not reasonable foresee. (Other modifications to the Construction Documents under this provision remain without additional compensation to Architects.)

Termination:

  • Under revised sections 9.6 and 9.7, if Owner terminates the contract for convenience or Architect terminates it due to a suspension greater than 90 days, Owner is to compensate Architect for services performed to date, reasonable costs and expenses caused by the termination, including costs of terminating agreements with any consultants, a termination fee, and a licensing fee if Owner intends to continue using the Instruments of Service.
  • “Termination expenses” are no longer defined as in the 2007 form, and instead the new form urges the parties to select and specify a termination fee.
  • Renumbered section 9.8 provides a set date of one year from Substantial Completion for the agreement to terminate if not terminated sooner under another provision of the agreement.

Other Substantial Changes:

  • New section 10.8.1 reiterates restrictions on sharing confidential or business proprietary information, but it adds carveouts:
    • Where a law, court order, or arbitrator’s order requires disclosure; or
    • If reasonably necessary for the party who received the information to defend itself in a dispute.
  • Article 11 (Compensation), which previously merely left a space for the parties to describe the basis for compensation, now itemizes alternative forms of payment (stipulated sum, percentage basis, other) from which the parties can select. Note that a percentage basis includes the revised definition of the “Cost of the Work”, so a percentage basis charge is potentially increased under the new form’s wording.
  • Renumbers section 11.6 provides for progress payments under a percentage basis to be calculated in conjunction with the percentages assigned to each portion of the project in section 11.5.
  • Severability clauses have been added (g. section 10.9 of B101-2017).

Both documents are substantially similar with the revisions. Of note:

  • Section 3.3.1 of B102 now agrees with the analogous provision in B101, which provides that Owner’s obligation to indemnify and hold harmless Architect with respect to continued use of Architect’s plans does not survive a termination for cause of the Architect.
  • B102 allows parties to select from among several choices for a termination date: one year from commencement of Architect’s services; one year from Substantial Completion; or “other” (see 5.8). If no choice is selected, termination is automatically one year from Substantial Completion. B101 automatically provides that termination is one year from Substantial Completion.
  • Markup on reimbursable expenses is no longer an “administrative fee” in B102 (bringing B102 into accord with B101; see B102 § 6.2.2).

Name changes to B100 series documents:

  • B103-2017 now bears the name “Standard Form of Agreement Between Owner and Architect for a Complex Project” (rather than a “Large or Complex” project).
  • B104-2017 now bears the name “Standard Abbreviated Form of Agreement Between Owner and Architect”, omitting the words “for a Project of Limited Scope”.
  • B105-2017 now bears the name “Standard Short Form of Agreement Between Owner and Architect”, omitting the words “for a Residential or Small Commercial Project”.

Changes are generally consistent with revisions to B100 series, but note the following:

  • Consultant must perform its services in accordance with the standard of care in the Prime Agreement if that standard is higher than standard of care on Consultant’s agreement (see 2.1).
  • While all claims and disputes were previously subject to the dispute resolution procedure of the Prime Agreement, claims and disputes not related to disputes between Owner and Architect may now be resolved in accordance with a more detailed claim procedure set forth in the revisions (see 8.1 et seq.).
  • Claims procedure requires Architect and Consultant to indemnify each other but does not establish a duty to defend.
John Caravella, Esq

The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: [email protected] or (631) 608-1346.

This is a general information article and should not be construed as legal advice or a legal opinion. The content above has been edited for conciseness and additional relevant points are omitted for space constraints. Readers are encouraged to seek counsel from a construction lawyer who has experience with Long Island construction law for advice on a particular circumstance. To learn more about The Law Offices of John Caravella, visit www.liconstructionlaw.com