Construction projects are complex undertakings that require input from several stakeholders. Inevitably, there will be conflicts among those participants who are under pressure to provide a quality, finished product under budget and on time. Given their respective leading roles on construction projects, architects and contractors tend to find themselves on the opposite side of these disputes, but the conflict is manageable when participants are mindful of how and when disagreements emerge, understand the contractual roles and responsibilities of the parties and work together to avoid or defuse potentially troublesome situations.
Written Contracts & Project Delivery
As construction law has developed over the past century or so, the utility of a written contract in construction projects has become universally recognized. A written contract vastly reduces the risk exposures of the various participants involved in a project by establishing a mutual understanding of the agreement in place and procedures for addressing gaps in that understanding when they arise. Typically, these contracts will cover most of the important potential sources of conflict, including:
- Payment procedures
- Change order procedures
- Subcontract or consultant requirements
- Insurance requirements
- Dispute resolution
While effective at reducing risk, contracts do not eliminate risk altogether, and the various risks can depend greatly on the chosen project delivery model. The traditional model (often referred to as design-bid-build (DBB)) has the project owner separately contracting with both an architect/engineer and a contractor. While this enables the owner a great deal of flexibility from one project phase to another, it does position the owner as the middleman in the necessary collaboration between phases and participants; inherently, it also highlights the different priorities, aims and motivations among the project participants.
Utilizing a design-build (DB) model addresses some of these risks. Instead of the traditional model’s dual contracting, DB consolidates the design and build roles into one team and requires just one contract with a single point of responsibility. This model holds out the promise of reducing an adversarial relationship between participants and promotes early involvement by the contractor, allows for more expert input in initial stages, and should allow for faster project delivery with the added potential to reduce costs.
DB has other notable, significant differences from the traditional model. On contractor-led DB projects, the architect/engineer serves as a service provider to the design-builder, rather than as a limited agent of the owner. Design and construction services can overlap, and centralized management of the design and construction phases should result in a faster delivery method. Also, the owner has responsibility for construction administrative services. DB is not a cure-all, as there is still risk around mishaps like design errors, delays and defective work; however, the model definitely provides for the alignment of interests among participants that the traditional model does not.
When the DB project delivery is in place, there is still a need to develop thoughtful contracts that anticipate issues and bind participants in a way that is fair. In the case of the traditional model for project delivery, the urgency around contract language is heightened, and the contract agreement should be carefully considered.
Top 10 General Conditions Clauses in Construction Contracts
Contracts for large or complex construction projects are hugely important, and there is a good deal of wisdom that has been collected over the years on which participants can rely. The American Institute of Architects (AIA) Document A201–2017, General Conditions of the Contract for Construction, is the most commonly used construction contract form. It serves as AIA’s keystone document and sets forth the rights and responsibilities of all parties, and its language flows into the separate agreements necessary for the traditional model.
The following explores the top 10 general conditions clauses in construction contracts, which address areas of potential dispute between contractors and architects.
1. The contract documents
The contract documents consist of the Agreement, Conditions of the Contract (General, Supplementary and other Conditions), Drawings, Specifications, Addenda, and other documents listed in the Agreement and Modifications issued after execution of the Contract. The scope in bid drawings and Contract Documents must be the same or with changes clearly acknowledged. Contract document changes must be timely and accurately memorialized, and proper identification of each document should be confirmed at time of commencement. Otherwise, the parties will be forced to handle contentious change order disputes during the project or at close out.
2. Visit the site
Per the A201™, the contract is “a representation that the contractor has visited the site, become familiar with local conditions and correlated personal observations with the requirements of the contract documents.” If the contractor notices “errors, inconsistencies or omissions” between field conditions and contract language, they should be reported immediately. This overlap of contractor and architectural responsibilities is a fertile ground for disputes.
3. Who is the owner’s representative?
The project owner’s representative is the person in whom the owner has vested the authority to provide approvals and authorizations on the owner’s behalf. In this case the architect must make sure its role and compensation in contract administration is properly described in the contract language. Broadly, participants should always demand the proper individual’s signature on approvals, notices and changes.
4. Owner information furnished upon written request
When contractors make written requests for “information or services under the Owner’s control” relevant to the project, owners are contractually bound to provide it promptly. The architect may be designated to fulfill this role for the owner. Whether it is a formal Request For Information or an informal question, the request and the response should always be documented.
5. Owner’s 10-day notice
This clause seeks to address the owner’s right to remedy a contractors’ failure to perform per the contract after having received a written notice to commence. After 10-days the owner is allowed to “correct such deficiencies.” For contractors the key is to act immediately to clarify the owner’s concern and then plan the response appropriately. In these instances, it is important to document any effort to cure. For architects, the standard to uphold in any investigation of the circumstance is to be reasonable.
6. Contractor shall inspect work
This clause puts the onus on contractors to review work completed prior to advancing the project to subsequent phases of construction. It is important to review schedules and have accurate minutes of meetings. The superintendent must know when a new party commences work and have a record of acceptance of substrate.
7. Substitutions need written approval
Executing a change order is always potentially contentious, and this clause seeks to clarify obligations when substitutions are called for; that is, only with the owner’s consent and after evaluation by the architect.
8. Architect approves payment & work
Because the architect is given the “authority to reject Work that does not conform to the Contract Documents,” it is vital that contractors approach the payment phases of a project with open lines of communication with the architect. In particular, contractors need to ensure that all lien waivers are assembled and provided to the architect so that Applications for Payment are reviewed and certified in a timely fashion and with a minimum of friction.
9. Claims in writing in 21 days to architect and owner
When events transpire that potentially trigger claims, it is important for the movant to act quickly to document the event in order to present claims in a timely and thorough fashion. The A201™ sets forth that “Claims must be initiated within 21 days after the event giving rise to such Claim or within 21 days after the claimant first recognizes the condition giving rise to the Claim.”
10. Contractor calls for closeouts
The architect is contractually obligated to carry out a final inspection in a timely manner after the contractor has provided the required written notice, and once the work is deemed acceptable, to issue a certificate for payment. That date then becomes the starting point for when warranties begin to run and impacts subcontractor lien or bond deadlines. It also establishes payment deadlines.
By understanding and anticipating issues of potential dispute, parties are better positioned to collaborate on a project. An essential piece of avoiding conflict is creating a contract which delegates roles and responsibilities in a fair and reasonable manner. Equally important is having the parties understand the contractual roles and responsibilities before the dispute arises. While a contract cannot safeguard entirely from conflict, it is a necessary tool to navigate turbulent waters.