Masonry Magazine December 1997 Page. 10
dozen helpful provisions have been incorporated into the A401 since ASA and ASC began in 1973 to show AIA the urgent need to safeguard subcontractors better in standard industry documents. The A401 is now an ideal subcontract form to substitute for unfair subcontracts. ASA's publication, Fundamentals of Fair Subcontracts shows how quick and easy it is to mark up an A401 form. ASA expects to have its updated version of this publication available in late 1997.
Throughout discussions with AIA, our special stress has been on payment terms. I am pleased that the many prior A201 and A401 payment protections remain in place in spite of major attacks. Equally encouraging is that AIA has a new Trust provision requiring that owner payments to contractors for subcontract work be held for payment to the subcontractors. This is aimed at discouraging diversion of those funds. The Trust language should also help shield subcontractors against demand for return of moneys received shortly before a general contractor's bankruptcy. The two documents now make it easier for subcontractors to get line item release of retainage upon substantial completion. It will also be easier for subcontractors to bill for contractor- authorized extra work prior to issuance of a change order and to bill for the value of material stored off site. New A401 language should help to stem the abusive use of backcharges by some contractors. The documents put much sharper teeth into A201 language about adequate owner project financing. AIA recognized that owner funds are often inadequate by the end of a project to pay for all base contract and extra work. Contractors and subcontractors are now entitled to stop work anytime the owner fails to furnish evidence of sufficient financing. Another new provision requires the owner to advise the contractor in writing before materially changing its financial arrangements. The A401 entitles subcontractors to be furnished promptly with owner information such the status of project financing.
Another sea change in the A201 and A401 is the inclusion of a mutual waivers of consequential damages. Some recent cases involving staggering awards for owner claims of lost profits due to delay and owner unhappiness with performance convinced AIA that it was time to curtail lawsuits for alleged indirect damages. Similarly, AIA has specified further owner insurance coverage in hopes of discouraging the practice of owners requiring others to name them as additional insured or for owners to establish high all risk property insurance deductibles which eroded protection for contractors and subcontractors.
Another change aimed at lowering legal costs is a new requirement that mediation must be tried before a dispute can go to arbitration or trail. Mediation is a non-binding, relatively quick and inexpensive process that has an 80 percent success rate in resolving construction disputes. It is usually less adversarial than arbitration and thus offers a better chance of maintaining good customer relations.
A major improvement to A401 is the inclusion by reference of A201 as the General Conditions for the subcontract agreement except when A201 terms are in conflict with some other specific subcontract provision. This facilitates the flow through of A201 benefits to subcontractors which is especially helpful when the A401 subcontract is used in situations where the General Conditions are sketchy or non existent.
New design delegation language has been added to A201 to address the growing use of performance specifications that require design and engineering by professional hired by contractors and subcontractors. Many architects are reluctant design specialized systems such as curtain walls and elevators in detail. They also wish to benefit from the expertise of trade contractors in areas such as steel connections and value engineering. At our urging, the provision requires that architects must furnish applicable performance and design criteria as a precondition for the architect relying on the accuracy, adequacy and completeness of submittals by hired professionals. Design delegation must be specifically required in the contract documents and cannot be required in violation of any law. Finally, the architect remains responsible for the adequacy of the performance and design criteria that apply, and the architect must review, approve or take other appropriate action on the work of engineers hired by the contractor or subcontractor. Overall, this A201 provision is reasonably balanced and is more protective for subcontractors than parallel language in the 1987 edition.
There are many other improvements in both A201 and A401. These range from (1) no duty for contractors and subcontractors to discover design faults, (2) clearer indemnity wording, (3) broader protections if hazardous materials are encountered, (4) better warranty language and (5) expanded subcontractor rights in case of suspension or termination for the convenience of the owner or contractor.
Subcontractors are encouraged to read both of the new AIA documents carefully and note those provisions of most interest or helpfulness to them. Now, more than ever, subcontractors can gain enormously by substituting the new A401 form for an unfair subcontract. Even if a few modifications have to be negotiated, the remaining language is fair.
While AIA expects to begin sale of the 1997 A201 later this year, it usually takes about two years to fully transition from the old version. During this transition, ASA members are cautioned to watch closely to determine which edition of A201 applies to each job choice for contracts covered by the A201.
10 MASONRY-NOVEMBER/DECEMBER, 1997
AIA
Contract Documents