By: Kevin Duffy
Although anyone in the restoration industry has seen their fare share of contracts, payment applications and changes orders, most people do not read them closely. If you have ever been involved with a facade restoration or roof replacement project, you know that most architecture and engineering firms require the use of American Institute of Architects (AIA) contracts between the contractor and the owner. These familiar forms come with the red AIA logo in the top left corner.
In 1888, the AIA created the first contract, a precursor to today’s A-201 form. It was an agreement for construction between the architect and the owner. Today the A-201 is the General Conditions that are used in conjunction with the A-101 Form Construction Contract. These two forms make up the majority of the contractor’s owner agreements that we see today. Although the AIA forms are fair for all parties involved, it has been stated by people in the industry that they tend to favor owners over contractors when compared with similar contracts.
The engineer’s or architect’s specifications and drawings are included in the AIA Contract as exhibits, and therefore, the Contractor is legally bound to perform the work on the drawings. The A-201 form also calls for the Contractor to submit change orders (G-701 forms) to the architect or engineer for approval before being submitted to the owner. This protects the owner from unfair change orders because engineers and architects are usually well versed in the costs associated with most change orders. They can monitor them in order to ensure that the contractor is offering competitive and fair pricing to the owner.
Additionally, according to the AIA Contract, the contractor is required to send G702 and G703 forms, which constitute the Application and Certificate for Payment, commonly referred to as a payment application, to the architect or engineer on a monthly basis. The architect’s or engineer’s review and approval guarantees that the contractor does not overbill certain line items for that month.
While all this paperwork might seem tedious, the successful completion of a project can be jeopardized when these processes break down. For example, when an owner requests payment applications directly from the Contractor and pays them without the engineer’s review or approval, it can lead to later complications. It is our contractual obligation to review payment applications and ensure the Contractor is not over or under compensated for the work being performed before it is too to rectify the situation.