§3.3 Private Contract Forms

• Jurisdiction: Washington

§3.3 PRIVATE CONTRACT FORMS

This section summarizes the various forms of agreements that are prevalent in the industry. This is not intended to be an exhaustive summary of what is available; rather, the most commonly used forms from the American Institute of Architects, ConsensusDocs, and the Design Build Institute of America are discussed below. When using industry forms, the considerations discussed below regarding common issues relative to contract formation applicable to any form contract document should be taken into account:

(1)	Are all of the blanks ("fill-ins") addressed, such as provisions regarding interest, insurance, and owner's representative?
(2)	Does the form language contemplate a greater role by the owner's representative than expected by the parties? For example, does it include the architect's review of pay applications and whether final costs are reviewed by the architect or accountant?
(3)	Is there a limitation on liability that is not anticipated, e.g., is the architect protected from liability when reviewing pay applications?
(4)	Are exclusions and/or limitations in a proposal inconsistent with the contract language?
(5)	Have the parties reviewed all contract documents incorporated by reference? What is the order of precedence?
(6)	Have the parties agreed to any revisions, and if so, how is that agreement reflected?
(7)	Do the parties want to add a prevailing party attorney fees clause?
(8)	Do the parties want the architect to be the arbitrator of claims?
(9)	Do the parties want AAA mediation and arbitration as their dispute resolution mechanism?
(10)	Have the parties considered relevant state laws, such as RCW 4.24.115 's requirement of a mutually negotiated express waiver of the contractor's immunity under industrial insurance?
(11)	Have the parties agreed to pay-if-paid versus pay-when-paid provisions and limitations on conditional payment language?

(1) American Institute of Architects

Standard form contracts drafted by the American Institute of Architects are the most prevalent forms in the construction industry.

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The AIA first published a form in 1888 and now has over 200 forms, with revisions to certain forms occurring approximately every 10 years, and issued updates in 2017 to many forms. The contract forms are available from AIA by purchase or subscription, at AIA, Contract documents, https://www.aiacontracts.org/(last visited Mar. 20,2018). The more commonly used AIA forms are described below. When using AIA documents, the form of agreement is dictated by the pricing structure being used by the owner and general contractor. Many of the AIA agreement forms are then used with the AIA A201-2017 General Conditions, which also coordinate with the AIAowner/architect agreement forms.

The AIA controls use and modification of its form documents by selling licenses to use the AIA software. Many construction companies and law firms purchase this license and can access the catalogue of AIA forms to choose the form of contract that best fits the desired project delivery method. When AIA updates a form, the prior version of the form is available for approximately one year, but then no longer can be used for new contracts.

(a) A101-2017

The AIA A101-2017 is the "Standard Form of Agreement Between Owner and Contractor where the basis of payment is a Stipulated Sum." This form is used between the owner and contractor when the basis for payment is a fixed price. This form most typically is used on fully designed, competitively bid projects whereby the owner is seeking the lowest lump-sum price. Some public owners in Washington, such as small school districts, use this form. This form is not typically used when design remains to be completed at the time of contract execution. The A101 form is a fairly simple document that (1) establishes the contract documents; (2) establishes the scope of work; (3) sets the date of commencement and substantial completion; (4) establishes the contract sum and any alternates, allowances, and unit prices; (5) allows for the parties to insert a liquidated damages provision; (6) provides for payments to be made through monthly progress payments based on a schedule of values and "percent complete" basis; (7) allows for the parties to select arbitration, litigation, or some other form of dispute resolution; (8) contains termination language tied to the termination clauses of the AIAA201-2017 General Conditions; (9) allows for the parties to include miscellaneous provisions, including the parties' representatives, bond and insurance language, and any other custom clauses; and (10) provides for a list of the contract documents through exhibits. This form can be accessed for purchase or by subscription from

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AIA, Contract documents, at https://www.aiacontracts.org/contract-documents/69981-standard-form-of-agreement-between-owner-and-contractor(last visited Mar. 20, 2018).

Practice Tip: The AIA A101-2017 form is a simple document that does not require extensive revision particularly for a project that is fully designed at the time of contracting. It primarily provides for the business deal points for the project and is suitable for large or small projects. The mechanics of project administration are coveredbytheAIAA201-2017 General Conditions. Under the stipulated sum pricing format, the contractor takes the risk of costs in excess of the stipulated sum but has the incentive of earning profit if it can perform the project for less than the stipulated sum. Typically, a contractor would not perform on a stipulated sum basis without a complete design in place at the time the contract is executed.

(b) A102-2017

The AIA A102-2017 is the "Standard Form of Agreement between Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee with a Guaranteed Maximum Price." This form of agreement provides for a project to be delivered based on a contractually defined cost of work plus a fee on those costs, but provides for a guaranteed maximum price that the owner will be obligated to pay the contractor. Like the A101 form, this form was updated in 2017. The A102 is coordinated with the AIAA201-2017 General Conditions.

This form of agreement is the most prevalent form of agreement used for large commercial projects such as office towers, hotels, and large multiunit residential projects. The A102 is popular because it does not have the high risk/high reward proposition that comes with a stipulated sum agreement. An owner will pay for verified costs incurred by the contractor but also has top-end price protection through the guaranteed maximum price. An owner has broad audit rights that enable it to verify that the costs incurred by the contractor were in fact incurred and are reimbursable under the agreement. A contractor, in turn, has certainty that it will be paid costs incurred, will be entitled to the agreed fee on those costs, and can control its exposure to costs in excess of the GMP by completing buyout of subcontract and supply scopes in advance of establishing the GMP. For undefined scope, the parties can either provide for an amendment to the GMP or hold undefined scope in allowances until buyout can be completed. Parties can also negotiate for a contingency to be included within the GMP,

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available for the contractor to pay for costs that are not the basis for a change order but rather are risks for which the contractor is responsible, such as buyout, escalation, and costs incurred due to force majeure events. In addition, the GMP format provides the opportunity for the owner and contractor to negotiate a savings clause, whereby savings (from costs incurred that are less than the GMP) are shared by the parties through an agreed savings split. This form can be accessed for purchase or by subscription from AIA, Contract documents, at https://www.aiacontracts.org/contract-documents/25111-owner-contractor-agreement (last visited Mar. 20, 2018).

Drafting Tip: Unlike the A101 form, the A102 form requires extensive drafting consideration. Article 7 defines the reimbursable cost of work and requires the parties to discuss and agree upon what costs are reimbursable under Article 7 and not reimbursable under Article 8. A few key cost issues for negotiation include the following: (1) How general conditions and general requirements are reimbursed and whether these are at cost, are based on a fixed percentage of the cost of work, or are lump sum. (2) How on-site labor costs, salaried personnel, and burden are priced and reimbursed. This can be based on cost (more extensive audit required) or fixed hourly rates that include burden (less audit required) that are set forth in an exhibit. (3) How the contractor will be reimbursed for contractor-owned equipment and small tools as well as self-performed work. (4) Whether costs incurred for excusable delay are compensable or not. Without modification, the contractor likely will be entitled to compensation for costs incurred for force majeure events up to the GMPbut bears the risk of such costs in excess of the GMP.

(c) A103-2017

The AIA A103-2017 is the "Standard Form of Agreement Between the Owner and Contractor where the basis of payment is the Cost of the Work Plus a Fee without a Guaranteed Maximum Price." It provides for the contractor to be paid on a cost basis, plus a fee. The owner does not have top-end price protection. This pricing structure is used when scope and/or costs are not known at the commencement of construction. A large repair project involving unknown scope because of hidden conditions is the type of project appropriate for this form. This form was updated in 2017. The anticipated costs of the project are

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