ASA Webinar Highlights New AIA Subcontractor Document

The latest subcontractor document from the American Institute of Architects (AIA), A401-2007, the "Standard Form of Agreement Between Contractor and Subcontractor," stipulates that the subcontractor must name the owner, architect, contractor and others as "additional insureds" in its commercial general liability insurance policy. This was one of the main points attorney James P. Laurie III focused on during a webinar on December 11 about the latest changes.

The American Subcontractors Association (ASA) hosted Laurie's webinar, "Straight Talk: Bidding and Negotiating the AIA A401-2007 Terms and Conditions."

According to Laurie, the new stipulation makes Article 13 on insurance and bonds "one of the most talked about issues and the deal breaker for AIA." According to ASA, which has chosen not to endorse the updated document, the change will increase subcontractors' insurance costs due to claims made by additional insureds, shift more risk to contractors and subcontractors and result in more exposure to claims and loss.

However, Laurie noted, "Just because it's in the standard form doesn't mean you have to live with it."

Among other points, Laurie said that A401 relies heavily on additional documentation, most notably, AIA A201-2007, "General Conditions of the Contract for Construction." He pointed out that the first page of the agreement says that contract documents have already been made available to the subcontractor, meaning, "If you're not careful, you're swearing on the first page that you got it." He stressed that subcontractors should be aware of any additional documentation or modifications to existing documentation and should ask to be provided with all of the materials.

"When someone hands you the 401 and someone hands you a copy of the 201 and someone hands you the prime contract, write to them and say 'Are there any modifications? Are there any other documents?'" Laurie said. "If you don't ask for it, you're not going to get it."

Laurie also told his audience that A401 clause 1.1 "is one of the most important clauses in the contract," as it calls into the subcontract the agreement between the contractor and subcontractor; the prime contract, which includes the agreement between the owner and general contractor and any documents noted there; any modifications issued to the prime contract; documents listed in Article 16 of A401 (which includes any additional documents added by the parties, as well as A201-2007); and any modifications to the subcontract. Among the additional documents that should be added, Laurie said, is the subcontractor's scope of work.

Overall, Laurie said, "The new document here provides a lot of protections for subcontractors that were not included in earlier versions." However, he added, "They're written out in the 201 not the 401."

Other areas highlighted during the webinar include:

· According to Laurie, the gist of the "pass down" clause in article 2 is, "You're obligated to the contractor as the contractor is obligated to the owner." He stressed that the terms incorporated must be reviewed and understood. One in particular he pointed out was the contractor's Notice of Claims deadline in A201 15.1.2, "21 days after occurrence," and subcontractor's deadline for making a claim being "not less than two days before contractor's deadline for making a claim." As Laurie pointed out, A401 doesn't mention claims or the deadline for the contractors; for that, subcontractors must be familiar with A201. He added, "Now deadlines are actually a reasonable period of time to make a discovery and get something out."

· Laurie called Article 3.1 on the services provided by the contractor "a significant improvement because it specifies what your expectations will be." Clause 3.1.2 entitles subcontractors to certain expectations about their working conditions, but doesn't spell out what those might be. "In your scope of work you should refer back to 3.1.2-whatever conditions that you need, you should go ahead and write those into your scope of work letter and refer to that clause."

· Mediation, as discussed in articles 6, using American Arbitration Association (AAA) is mandatory prior to any claim proceeding - unless otherwise specified, Laurie explained. "AAA isn't necessary if you don't want it to be that way," he said, however, "if you don't write it in then you do have to do the mediation with AAA."

· Laurie noted that the clause on binding dispute resolution now offers a choice of arbitration, litigation or other. It no box is checked, litigation is the default. "I like other," Laurie said. "I like other a lot." Other could be a hybrid of arbitration and litigation or simply mean that it isn't necessary to use AAA for arbitration.

· Laurie stressed the importance of verifying the subcontract sum noted in article 10. "I am shocked every time I get something that has an amount from an old draft," he said.

For more information on AIA A201, look for the February issue of USGlass magazine.

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