What Are AIA Contracts and How to Manage Them
The American Institute of Architects (AIA) creates over 200 contract templates used throughout the construction and architectural industries. These contracts are popular because they reflect the industry consensus on terms and procedures. The AIA contracts are also easy to read and understand, giving them another benefit over other types.
When a construction project starts, a construction contract that lays out the crucial details governs everything. Under that come a variety of construction sub-contracts. Most people in the industry use AIA contracts.
If you have built or renovated a house, you have likely signed an AIA contract. If you talked to your architect about what you want in your house, that’s a G612-2017 Owner’s Instructions to the Architect contract. If you bought new furniture as part of a remodel, that’s an A151–2019 Standard Form of Agreement Between Owner and Vendor for Furniture, Furnishings, and Equipment.
A different AIA contract governs every step of a construction project: the bigger the project, the more contracts.
The purpose of AIA contracts
The AIA produces an extensive set of contract templates covering all stages of the design and building process. Each form is fully customizable but uses industry defaults for many terms. For example, these contracts standardly call for process billing (billing as the project unfolds) and make retainage negotiable (the amount held back until they complete the contract).
These contracts benefit from their well-known status. Experienced professionals will already know much about the contract when someone says, “I’m using an AIA contract.” The most-used contract is the A401 Standard Form of Agreement Between Contractor and Subcontractor. The homeowner is likely to sign an A101 Owner-Contractor Agreement. These contracts are familiar ground for everyone and provide certainty in an uncertain process.
When do I need an AIA contract?
With any construction, home, or commercial, you need an AIA contract or something similar. Once you have a project going, those contracts will multiply. Using AIA contracts creates a benefit for small businesses and sole proprietors, who can rely on standardized parts they know already.
Parts of an AIA contract
A typical AIA subcontract contains:
- Description of work to be done
- Amount to be paid
- How payment is made
- Whether part of the payment is held until the work is completed
- Terms and procedures for payment
- Handling disputes
As AIA contracts cover nearly all parts of the building process, contracts vary. Some are 90-page humdingers. Others are less complex.
Limitations of an AIA contract
Using a standard contract increases reliability but decreases flexibility. ConsensusDocs, the National Association of Homebuilders, and others have made alternative documents. But the AIA contract is the standard.
These contracts can become expensive when all the minor charges for buying and amending contracts add up. They also give the architect more power in resolving disputes, and you may want someone else in that role.
Some of the standard clauses are current topics of debate. The retainage clause, allowing the contractor to hold back money from the subcontractors until the entire job is complete, is illegal in several states.
How to create an AIA contract
You can purchase contracts directly from the AIA, buying them singly or through a yearly license. Their website is searchable, and you can see the documents before purchase. Once you have filled in the document and made any necessary modifications, it is good to run that contract by a construction lawyer.
Managing AIA contracts
Managing the multiple contracts on a site can be like following breadcrumbs. With amendments, new projects, and new contractors, more contracts enter the scene. These new contracts reference the older contracts, perhaps multiple older contracts. To understand the contract, you must find all the contracts referenced and then dig for the ones they referenced.
Why AIA contracts can be time-consuming and hard to track
AIA contracts start as a bit of a tangle with contracts referencing other contracts. Place that in your business, which may have several sets of contracts for varying projects, and your starting point is five tangled, complex sets of contracts.
Take the tangle you started with and disperse it over five departments in your office. It goes into five different systems. And each department is making notes and marking parts they dislike. Finance uses it to make forecasts with their proprietary software. Supply Chain Management uses it to plan around disruptions in the manufacturing process and produces a pile of PDFs. Accounting puts it in their payments database. Legal is using it in DOCX format.
Bringing these documents back together will be a pain. It will take hours of labor. It might even require manual retyping or scanning.
Once each department has copies of the AIA contract, they do their own thing with it. Each department’s work is hidden from other departments until someone does an audit. Then they get a crash course on how Finance treats its documents. Working in isolation, different departments may develop conflicting ideas of what the contract means.
Lack of transparency into the contract process
Across a large or medium organization, separate offices often work in bubbles. They take care of their own work and ignore what others are doing. When a contract is being created, people who Legal thinks should be notified are contacted. But those people are not the only ones affected.
Other affected departments may not even know a new contract is pending until it gets dropped in their lap as a fait accompli. Good advice based on experience doesn’t get incorporated because it never had the chance. Concerned parties cannot even know if the contract covered their concerns within the opaque process. This lack of transparency into other areas of the business can hurt the business and its bottom line.
Automating workflows for AIA contracts
You can solve these problems by using contract lifecycle management and automating workflows for AIA contracts. Everything goes into one system that works and plays well with others. Everyone can see what is happening and take part when they need to.
How templatable workflows can help simplify the process
Templatable workflows are a key feature of this process. When the AIA contract enters the system, you fill names and dates into the contract’s blank spaces. The program automatically notifies these people if they need to provide information or sign the contract.
After a few contracts go through the system, its AI learns and replicates the workflows you need. It will generate new workflow templates for you that show where and when the AIA contract needs to be checked or signed.
Using a contract lifecycle management solution for AIA contracts
Contract lifecycle management is an approach that follows the contract from being a new idea through its creation and fulfillment. When the actual contract work is over, the contract earns its keep by becoming reference material for new contracts. At every stage, interested parties can read it and use it for planning in their own departments.
Ironclad’s program is a single piece of software. It uses DOCX for all its documents so they can export into the most used word processing programs. We’ve integrated some of the most used programs into it. These programs include DropBox, DocuSign, Google Cloud Storage, and more. We also have a feature that lets you incorporate your own favorites if we have not connected them already.
One source of truth
Once, you had five departments with five final documents that were not the same anymore. Now you have one central AIA contract set for everyone to see and use. The program funnels contract changes into the right processes and notifies everyone affected. Anyone with questions can access the contract in Ironclad and find what it says.
Full transparency into the process.
Meanwhile, anyone with access can look in on the contract. They can check their past work and see who is currently working on the contract. They can correct errors and automatically notify all the people who need to know. Everyone’s wisdom can enter the contracting process and create a better contract.
Ironclad product features that help
We packed Ironclad with features that can help your business better manage its AIA and other contracts. While one system for all departments is a major draw, let’s look at some other important features.
The workflow on the contract starts immediately. You begin with a drag-and-drop system where you design the workflow. You populate the contract with the terms you need and link all the involved people into the system. You create a workflow, a picture of where this contract needs to go and who needs to work on it. Then, you simply follow your plan.
A central document repository holds all the contracts. People can access any contracts they need from there. The repository, however, does much more. It allows you to ask questions about current and past contracts.
When is the delivery due to Business G? How many deliveries have we made to them on this contract? On all contracts? Has the price changed over time? Does this price match those of other vendors? Can we estimate future business? The repository is not a box holding contracts; it’s a contractual analysis system that can boost your business.
Why use digital contract management for AIA contracts?
Keeping track of your documents is the first reason to use digital contract management. The smooth flow of contract work throughout your business is another. Digital contract management puts your contracts to use analyzing business processes and to create better contracts in the future.
Table of contents
- The purpose of AIA contracts
- When do I need an AIA contract?
- Parts of an AIA contract
- Limitations of an AIA contract
- How to create an AIA contract
- Managing AIA contracts
- Why AIA contracts can be time-consuming and hard to track
- Automating workflows for AIA contracts
- Using a contract lifecycle management solution for AIA contracts
- Ironclad product features that help
- Why use digital contract management for AIA contracts?