Compare and Contrast: The AIA A-401 and the ConsensusDOCS 750 Forms of Subcontract
ASA Subcontract Addendum 2011 • ASA Short Form Subcontract Addendum 2011
In 2011-2012, the ASA of Arizona Contract Study Group undertook an in-depth look at the AIA A401-2007 Subcontract. The AIA provisions are compared and contrasted to more restrictive and troubling language sometimes used by general contractors. Differences between the AIA A401-2007 and the ASA-endorsed ConsensusDOCS 750 Subcontract are being examined.
Following is an overview of Articles 10, 11 and 12 of the AIA A401 (2007) and the Consensus DOCS 750 Articles 6 and 8 co-presented March 28, 2012, by Sacks Tierney attorney Sharon Shively. It should be noted that all sections of the standard form contracts must be drafted in accordance with Arizona statutory and case law, as not all of the standard provisions comply with Arizona law.
AIA A-401 Article 10.1
The General Contractor (GC) shall pay the Subcontractor (Sub) in current funds for performance of the Subcontract the Subcontract Sum of $_________, subject to additions and deductions as provided in the Subcontract Documents.
AIA A401 – Article 10.2, 10.3, 10.4
The Subcontract Sum is based upon the following alternates, if any, which are described in the Subcontract Documents and have been accepted by the Owner and the Contractor.
Unit prices, if any:
Allowances included in the Subcontract Sum, if any:
ConsensusDOCS 750 Article 6
As full compensation for performance of this agreement, the General Contractor (GC) agrees to pay the Subcontractor (Sub) in current funds for the satisfactory performance of the Subcontract Work subject to all applicable provisions of this Agreement:
The fixed-price, unit prices or time and material rates and prices are referred to as the Subcontract Amount.
AIA A401: Article 11 Progress Payments
Based on pay apps from Sub to GC, corresponding to pay apps from GC to Architect, and certificates of payment issued by the Architect.
GC makes progress payments on account of the Subcontract Sum to Sub.
If no payment bond, payments received by GC/Sub for work performed by others, shall be held by them for those who performed the work/supplied materials.
Money not required to be in separate account.
Does not create any fiduciary or tort liability for breach of trust.
Does not entitle an award of punitive damages for breach of the requirements of this provision.
The period covered by each pay app shall be one calendar month ending on the last day of the month or as follows:
Provided pay app is received by GC not later than the __ day of a month, the GC shall include the Sub’s Work covered by that app in the next pay app the GC is entitled to submit.
The GC shall pay the Sub each progress payment no later than 7 working days after the GC receives payment from the Owner.
If Architect doesn’t issue Certificate of Payment or GC does not receive payment for any cause which is not the fault of the Sub, the GC shall pay the Sub, on demand, a progress payment as computed in 11.7, 11.8 and 11.9.
Sub shall submit to GC a schedule of values prior to submitting the Sub’s first pay app.
Each pay app shall be based upon the most recent schedule of values.
The schedule of values shall allocate the entire Subcontract Sum among the various portions of the Sub’s Work. To be used as a basis for reviewing the Sub’s pay apps.
Pay apps shall indicate the percentage of completion of each portion of the Sub’s Work as of the end of the period covered by the pay app.
Each progress payment shall be computed as follows:
If the GC disapproves Sub’s pay app, in part or whole, the GC shall provide written notice to the Sub. When basis for disapproval has been remedied, the Sub shall be paid the amounts withheld.
ConsensusDOCS 750: Article 8 Payment
As a condition precedent to payment, a Schedule of Values satisfactory to GC to be provided not more than 15 days from the execution of the Agreement. 8.1
Subs pay apps are to be itemized and supported by substantiating data as required by the Subcontract Docs. 8.2.1
If Sub provides design services (3.8), pay app must show its design professional’s fee and expenses as a separate cost item. 8.2.1
Pay app shall be notarized if required; and if allowed may include properly authorized Subcontract Construction Change Directives or Interim Directed Changes. 8.2.1
Subs pay app for Work performed in the preceding pay period shall be submitted for approval by the GC in accordance with the schedule of values, if required, and subsections 8.2.2 through 8.2.4.
The GC shall incorporate the approved amount of the Sub’s pay app into the GC’s pay app to the Owner for the same period and submit it to the Owner in a timely fashion. 8.2.1
GC shall notify the Sub of any changes in the amount requested on behalf of the Sub. 8.2.1
Rate of retainage shall be __%, which is equal to the percent of retainage held from the GC by the Owner. 8.2.2
If Sub’s work is satisfactory and the prime agreement provides for reduction of retainage, the Sub’s retainage shall also be reduced. 8.2.2
Sub shall submit progress pay apps to the GC no later than the __ day of each payment period for the Sub’s Work performed up to and including the __ day of the payment period indicating work completed and, if allowed, materials suitably stored during the preceding pay period. 8.2.3
Unless otherwise provided, pay apps may include materials and equipment not yet incorporated in the Work but delivered to and suitably stored on or off the Worksite, including applicable insurance, storage, and costs incurred transporting to off-site storage. Approval of pay for stored items (on or off site) shall be conditioned on the Sub providing bills of sale and required insurance satisfactory to Owner and GC to establish Owner’s title or protected interest. 8.2.4
Progress payments shall be made to Sub for satisfactory performance of the Work no later than 7 days after receipt by the GC of payment by the Owner for the Sub’s Work. 8.2.5
If payment is not received for the Sub’s work, through no fault of the Sub, the GC will make payment to the Sub within a reasonable time. 8.2.5
If GC receives payment and if the Sub does not receive payment though no fault of its own within 7 days of the due date, or if not paid in reasonable time, upon 7 days written notice, the Sub may stop work until full amount received. Amount and Time shall be adjusted for reasonable and verified cost of shutdown, delay and startup, by Sub Change Order. 8.2.6
The GC may Sub’s pay app, in whole or part, or withhold amounts from a previously approved pay app, as may reasonably be necessary to protect the GC from loss or damage for which the GC may be liable and without incurring late interest penalty if based upon: 8.2.7
No later than 7 days after receiving pay app, the GC shall give written notice to Sub of disapproval or nullification, stating specific reasons for such, and the remedial actions to be taken by Sub in order to receive payment. When the reasons are removed, payment will be promptly made for the amount withheld. 8.2.7
AIA A401-2007: Article 11.9 Substantial Completion
When Sub’s Work is substantially complete and in accord with Prime Contract, the GC shall, upon application by Sub, make prompt application for payment of such Work.
Within 30 days of Architect issuing certificate of payment covering such Work, the GC, to the full extent allowed in the Prime Contract, shall make payment to the Sub, deducting any portion in accord with the certificate to cover costs of items to be corrected/completed.
ConsensusDOCS 750: Article 8
Upon substantial completion of Sub’s Work, in part or whole, the GC assumes responsibility for security and protection of the Work pending the achievement of Substantial Completion of the Project. Acceptance of the Work for purpose of allowing succeeding Work to proceed shall not start warranty period of the Sub’s Work, unless otherwise provided.
Partial Owner occupancy or use of completed portions of the Sub’s Work shall constitute Substantial Completion of that portion of the Sub’s Work and the warranty shall commence upon the achievement of Substantial Completion of the Project and acceptance by the Owner under the terms of the prime agreement.
AIA A-401 Article 12: Final Payment
Entire unpaid balance of the Subcontract Sum, shall be made by the GC when Sub’s Work is fully performed in accord with the requirements of the Subcontract Docs, the Architect has issued a certificate of payment and the GC has received payment from the Owner.
If Sub not at fault and Architect doesn’t issue certificate of payment, or GC doesn’t receive payment from the Owner or GC does not pay the Sub within 7 days of receipt of payment from the Owner, final payment shall be made upon demand.
If required, Sub shall submit evidence satisfactory to the GC that all payrolls, materials bills, and all other known indebtedness connected with the Sub’s Work have been satisfied.
Acceptance of final payment constitutes a waiver of claims by the Sub, except for those previously made in writing and identified as unsettled at the time of final pay app.
ConsensusDOCS 750 Article 8.3 Final Payment
Upon acceptance of the Work by Owner and GC and receipt of evidence of Sub’s fulfillment of requirements, the GC shall incorporate the Sub’s final pay app into the GC’s next pay app to the Owner without delay, or notify the Sub if and why there is delay. 8.3.1
The Sub shall submit to the GC:
Final payment of the balance due shall be made within 7 days of receipt by GC from Owner. 8.3.3
If Owner/agent does not issue a certificate of final payment or the GC does not receive payment for any cause which is not the Sub’s fault, the GC shall promptly inform the Sub in writing. 8.3.4
If final payment from the Owner is not received by the GC through no fault of the Sub, the GC shall make payment to the Sub within a reasonable time. 8.3.4
Final payment shall constitute a waiver of all Sub’s claims, but does not relieve Sub of liability under 3.21 or 3.22, or for faulty/defective work or services discovered after final payment, nor for Sub’s claims made in writing by Sub prior to final pay app.