Instructions: A134™–2019, Standard Form of Agreement Between Owner and Construction Manager as Constructor where the basis of payment is the Cost of the Work Plus a Fee without a Guarantee Maximum Price

Synopsis. 

Similar to AIA Document A133™–2019, AIA Document A134–2019 is intended for use where a construction manager, in addition to serving as adviser to the owner during the preconstruction phase, also provides construction of the project. However, in AIA Document A134–2019 the construction manager does not provide a guaranteed maximum price (GMP). A134–2019 employs the cost-plus-a-fee method, wherein the owner can monitor cost through periodic review of a control estimate that is revised as the project proceeds.

The document divides the construction manager’s services into two phases: the preconstruction phase and the construction phase, portions of which may proceed concurrently in order to fast track the process. A134-2019 is drafted to be used in conjunction with a new Insurance and Bonds Exhibit (Exhibit A) which is a critical part of the agreement and should be discussed with legal and insurance counsel.

A134–2019 is coordinated for use with AIA Documents A201®–2017, General Conditions of the Contract for Construction, and B133™–2019, Standard Form of Agreement Between Owner and Architect, Construction Manager as Constructor Edition. For all document details and a record of changes, see the summary » 

 

Using A134–2019.

Cover Page

Date. The date represents the date the Agreement becomes effective. It may be the date that an oral agreement was reached, the date the Agreement was originally submitted to the other party, the date authorizing action was taken or the date of actual execution.

Parties. Parties to this Agreement should be identified using the full address and legal name under which the Agreement is to be executed, including a designation of the legal status of both parties (sole proprietorship, partnership, joint venture, unincorporated association, limited partnership or corporation [general, limited liability, closed or professional], etc.). Where appropriate, a copy of the resolution authorizing the individual to act on behalf of the firm or entity should be attached. Other information may be added, such as telephone numbers and electronic addresses.

Project. The proposed Project should be described in sufficient detail to identify (1) the official name or title of the facility; (2) the location of the site, if known; (3) the proposed building usage; and (4) the size, capacity or scope of the Project, if known.

Architect. As in the other AIA Contract Documents, the Architect’s full legal or corporate title should be used.

Article 1 – Initial Information

§ 1.1 Initial Information is provided in Section 1.1. The parties should take care to be as explicit and detailed as possible with respect to the relevant Initial Information.

§ 1.1.4 The parties must set forth the Owner’s anticipated design and construction milestone dates, as those dates are to be incorporated into the Construction Manager’s initial schedule.

§ 1.1.6 If the Owner has a Sustainable Objective for the Project, provide a description in the fill point.

§ 1.1.8 Identify the Owner’s representative and indicate how that person may be contacted.

§ 1.1.10 The AIA publishes standard form Owner-Consultant Agreements, including C103™–2015, Standard Form of Agreement Between Owner and Consultant without a Predefined Scope of Consultant’s Services, which sets the terms and conditions governing the relationship between the Owner and its Consultant. C103–2015 does not include a scope of services and must be paired with another document providing a description of the required services. The AIA publishes several consultant’s scope of services documents, including AIA Documents C201™–2015, Standard Form of Consultant’s Services: Land Survey, C202™–2015, Standard Form of Consultant’s Services: Geotechnical Engineering, and C203™-2017, Standard Form of Consultant’s Services: Commissioning.

§ 1.1.12 Identify the Construction Manager’s representative and indicate how that person may be contacted.

§ 1.1.13 Any Owner-specific requirements for the Construction Manager’s staffing plan for Preconstruction Services should be provided here.

§ 1.1.14 Owner-specific requirements for subcontractor procurement should be listed here.

Article 2 – General Provisions

§ 2.2 Relationship of the Parties. In a contract using a stipulated sum for the Construction Manager’s compensation, the Owner has agreed to pay a specific amount regardless of the cost incurred by the Construction Manager in the performance of the Work. However, when the Construction Manager’s compensation is based on Cost of the Work, as in this Agreement, the amount expended by the Construction Manager as a “Cost of the Work” has a direct economic consequence to the Owner. Therefore, the Owner has a heightened interest in the efficient and economical performance by the Construction Manager, and the Construction Manager has a consequent responsibility to manage expenditures on the Project in keeping with the Owner’s interests. This provision addresses those particular interests of the Owner in a cost-plus contract and the corollary obligations of the Construction Manager.

Article 3 – Construction Manager’s Responsibilities

§ 3.1.14 Other Preconstruction Services. Insert a description of any other Preconstruction Services to be provided by the Construction Manager, such as providing cash flow projections, development of a project information management system, early selection or procurement of subcontractors, etc., or reference an attached exhibit that provides a description.

§ 3.3.1.3. Substantial Completion

§ 3.3.1.3.1 Select the appropriate box and insert the date or number of days as appropriate.

Article 5 – Compensation and Payments for Preconstruction Phase Services

§ 5.1.1 Sample language is provided below for describing three methods of computing compensation.

 Stipulated Sum:

Compensation shall be the stipulated sum of ________ ($__), plus the following reimbursable cost items:

Multiple of Direct Personnel Expense:

Compensation shall based on a multiple of ______ (__) times Direct Personnel Expense of Construction Manager’s personnel, plus the following reimbursable cost items:

Actual Cost:

Compensation shall be based on actual costs incurred in the performance of the Preconstruction Phase services. (A maximum cost may be established.)

§ 5.1.3 Insert the number of months beyond which the Construction Manager’s Preconstruction Phase compensation shall be adjusted.

§ 5.2.2 Insert the number of days within which payment is due after the receipt of the Construction Manager’s invoice by the Owner. If the rate of interest on late payments is to be different from the legal rate, insert the agreed-upon rate of interest.

Article 6 – Compensation for Construction Phase Services

§ 6.1.2 Enter the method used for determining the Construction Manager’s Fee (lump sum, percentage of Cost of the Work or another method).

§ 6.1.3 Explain how the Construction Manager’s Fee will be adjusted for changes in the Work.

§ 6.1.4 If there will be a limitation placed on Subcontractors’ overhead and profit, enter the amount or explain how the limitation will be calculated.

§ 6.1.5 Enter the percentage cap that will be used to determine the rental rates for Construction Manager-owned equipment.

§ 6.1.6 Identify unit prices and state quantity limitations, if any, to which the unit price will be applicable.

§ 6.1.7 Insert the amount and any conditions for liquidated damages relating to failure to achieve Substantial Completion of the Work, or designated portion of the Work, on time. Liquidated damages are not a penalty to be inflicted on the Construction Manager but must bear an actual and reasonably estimable relationship to the Owner’s loss if construction is not completed on time. If a provision for liquidated damages is included, it should be carefully drafted by the Owner’s attorney and acceptable to the Construction Manager’s attorney. For further information on liquidated damages see AIA Document A503™, Guide for Supplementary Conditions.

§ 6.1.8 Insert terms and conditions for any bonuses or other incentives that might result in a change to the Contract Sum. For further information on bonus, incentive and savings provisions, see AIA Document A503, Guide for Supplementary Conditions.

Article 7 – Cost of the Work for Construction Phase

§ 7.2.2.1 Identify supervisory and administrative personnel that will perform Work related to the Project at a location other than the Project site. Also, identify the type of activity the personnel will perform and what percentage of their time will be required for the Work.

Article 11 – Payments for Construction Phase Services

§ 11.1.2 Insert the time period covered by each Application for Payment if it differs from the one given.

§ 11.1.3 Insert the time schedule for presenting Applications for Payment and indicate due dates for making progress payments.

The last day upon which Work may be included in an Application should normally be no less than 14 days prior to the payment date, in consideration of the seven days required for the Architect’s evaluation of an application and issuance of a Certificate for Payment and the time subsequently accorded the Owner to make Payment in Article 9 of A201–2017. The Construction Manager may prefer a few additional days to prepare the Application.

Due dates for payment should be acceptable to both the Owner and Construction Manager. They should allow sufficient time for the Construction Manager to prepare an Application for Payment, for the Architect to certify payment, and for the Owner to make payment. They should also be in accordance with time limits established by this Article and Article 9 of A201–2017.

§ 11.1.7.1 Indicate the percent retainage, if any, to be withheld when computing the amount of each progress payment.

The Owner frequently pays the Construction Manager the bulk of the earned sum when payments fall due, retaining a percentage to ensure faithful performance. These percentages may vary with circumstances and localities.

§ 11.1.7.1.1 Certain items included in the Contract Sum may be excluded from the calculation of retainage. Where there are any limitations or exclusions from retainage, list those items.

§ 11.1.7.2 The AIA endorses the practice of reducing retainage as rapidly as possible, consistent with the continued protection of all affected parties. A provision for reducing retainage should provide that the reduction will be made only if the Architect judges that the Work is progressing satisfactorily. If the Construction Manager has furnished a bond, demonstration of the surety’s consent to reduction in or partial release of retainage must be provided before such reduction is put into effect. Use of AIA Document G707A™ is recommended. Insert terms for reduction or limitation of retainage.

§ 11.1.7.3 Often, the majority of retainage is released upon Substantial Completion of the Work. However, the Owner may continue to retain some portion of retainage to cover the remaining Work to be completed. Insert any conditions for release of retainage upon Substantial Completion. Where bonds have been provided by the Construction Manager, consent of surety should be obtained as outlined in Section 11.1.7.2 above.

§ 11.2.3 Insert the date by which the Owner shall make final payment, if it differs from the one stated.

When final payment is requested, the Architect should ascertain that all claims have been settled or should define those which remain unsettled. The Architect should obtain the Construction Manager’s certification required by Article 9 of A201–2017 and must determine that, to the best of the Architect’s knowledge and belief and according to the Architect’s final inspection, the requirements of the Contract have been fulfilled.

§ 11.3 Payments due and unpaid under the Contract bear interest from the date payment is due at the legal rate prevailing from time to time at the place where the Project is located. If a different interest rate is to be paid, insert the amount here.

Article 12 – Dispute Resolution

§ 12.1.2 In this section, the Owner and Construction Manager may identify an Initial Decision Maker to render initial decisions on claims arising from or relating to the Construction Manager’s Construction Phase services. If the parties do not identify an Initial Decision Maker, then the Architect will provide initial decisions. For claims arising from or relating to the Construction Manager’s Preconstruction Phase services, no decision by the Initial Decision Maker shall be required as a condition precedent to mediation and binding dispute resolution.

§ 12.2 Select from three choices of binding dispute resolution: (1) arbitration, (2) litigation or (3) another method that the parties must identify. Other types of dispute resolution include a dispute resolution board or a mini-trial. For additional information about other methods of dispute resolution, refer to The Construction Industry’s Guide to Dispute Avoidance and Resolution or visit adr.org for more information.

Article 13 – Termination or Suspension

Terminations under AIA Document A134–2019 are treated similarly to terminations under a stipulated sum agreement and so follow the provisions of AIA Document A201–2017, except that detailed instructions are provided for calculating the amount due to the Contractor in the event the Owner terminates the contract for cause or the Owner terminates the contract for convenience. Note that in the case where the Owner terminates the Contractor for cause, the amount of the Contractor’s Fee is calculated on a pro-rata basis. If the Contractor terminates for cause, A201–2017 provisions govern. A134 Section 13.2.2.2 provides (1) for the Owner to pay the Contractor fair compensation for any Contractor-owned equipment that the Owner chooses to use in completing the Work that is not included in the Cost of the Work, and (2) for the Contractor to facilitate assignment of subcontracts and other contracts to the Owner, should the Owner elect to assume the rights and responsibilities associated with those contracts.

§ 13.2.3 AIA Document A201–2017, Section 14.4.3, requires payment of a termination fee to the Construction Manager in the event that the Owner terminates the Construction Manager for convenience. Insert here, the amount of the termination fee or the method for calculating the termination fee. For example, the Owner and Construction Manager may agree to progressively increase the termination fee up to fifty percent completion and then agree to progressively reduce the Construction Manager’s termination fee until final completion. The parties may also agree to begin with a large termination fee that is progressively reduced as the project progresses.

Article 14 – Miscellaneous Provisions

§ 14.3.1 Preconstruction Phase Insurance and Bonds. Insert the policy limits for the types of coverages the Construction Manager will be required to maintain for the duration of its Preconstruction Phase Services.

§ 14.4 Section 1.6 of AIA Document A201–2017 allows the Owner and the Construction Manager to provide notice in electronic format. It is recommended that the parties use AIA Document E203™–2013, Building Information Modeling and Digital Data Exhibit, to establish the protocols for electronic communication. If E203–2013 is not used, insert the requirements for delivering notice in electronic form such as the name, title, and email address of the recipient and whether the system will be required to generate a read receipt (recommended). While notice in electronic form may be provided as set forth in this provision, other protocols for the use or transmission of digital data and BIM are established through the use of E203-2013, pursuant to A201-2017 section 1.7.

§ 14.5 Insert other contract provisions here.

Article 15 – Scope of the Agreement

A detailed enumeration of all Contract Documents must be made in this article. Where optional documents are listed in Section 15.2.5 that will be incorporated as Contract Documents, check the appropriate box and insert an appropriate description of the document. List additional documents in Section 15.2.6 that are intended to form part of the Contract Documents.

 

Exhibit A – Insurance and Bonds

AIA Document A134–2019 Exhibit A is the insurance and bonds exhibit for AIA Document A134–2019. AIA Document A134–2019 Exhibit A provides the general requirements relating to insurance and bonds in the Construction Phase, as well as the specific policy limits and bond amounts for the Project. Insurance requirements under the exhibit are separated into those coverages that would typically be provided by the Owner and Construction Manager on all projects (required coverages) and other (optional) coverages that may be selected by the parties based on their specific needs and the needs of the Project.

A134 Exhibit A, as a stand-alone document, can be readily discussed with your insurance advisors and legal counsel. Additionally, Exhibit A provides an easy reference for the insurance and bonding requirements related to your Project. However, it is important to note that additional terms related to insurance are found in Article 11 of AIA Document A201–2017. Users are strongly encouraged to review their insurance needs with legal and insurance counsel to determine the appropriate insurance requirements for their particular project. When forwarding AIA Document A134–2019 Exhibit A to your insurance broker or legal counsel, be sure to include, at a minimum, Article 11 of AIA Document A201–2017 as these terms will be important to reviewing Exhibit A and advising you of appropriate coverage.

Date. Identify the date of the Agreement to which AIA Document A134–2019 Exhibit A is attached just as it appears on the cover page of the Agreement.

Project and Parties (Cover Page). Identify the Project and the parties just as they appear on the cover page of the Agreement.

Article A.2 – Owner’s Insurance

§ A.2.3.1.1 Insert the cause of loss and any applicable sub-limits.

§ A.2.3.1.2 Insert the type of coverage and any applicable sub-limits.

§ A.2.4 Section A.2.4 allows the Owner to select extended property insurance coverage that will be purchased and applicable to the Project. For each of the extended property insurance coverages applicable to the Project, check the appropriate box and indicate any limits of coverage or any other applicable conditions in the space below the selected coverage.

§ A.2.5 Section A.2.5 allows the Owner to select whether it will provide cybersecurity insurance or any other types of coverage for the Project. If cybersecurity insurance will be provided, check the box for Section A.2.5.1 and indicate any applicable limits of coverage or other conditions in the space provided. Where other insurance coverage will be provided by the Owner, check the box for Section A.2.5.2 and indicate the type of coverage and any applicable limits.

Article A.3 – Construction Manager’s Insurance and Bonds

§ A.3.2.1 Where the Construction Manager is required to maintain required insurance for a duration other than the period for correction of the Work, indicate the duration of required coverages in the fill point provided.

§ A.3.2.2.1 Indicate the applicable coverage limits for the Construction Manager’s commercial general liability coverage.

§ A.3.2.3 Indicate the applicable coverage limits for the Construction Manager’s automobile liability coverage.

§ A.3.2.4 Some insurers have written excess policies that expressly state that they apply only in the event the underlying policies are exhausted through payments made by the underlying insurers (sometimes referred to as “actual exhaustion”). Policies that do not expressly require actual exhaustion are interpreted to permit exhaustion of the underlying policies through payments or contributions made by any combination of underlying insurers, insureds or third parties (sometimes referred to “functional exhaustion”.) Policies that only permit actual exhaustion are counterproductive to settlement whereas policies that permit functional exhaustion encourage settlement. The intent of this section is to facilitate settlement by requiring that any excess policies allow for functional exhaustion.

§ A.3.2.6 Indicate the applicable coverage limits for the Construction Manager’s employer’s liability coverage.

§ A.3.2.8 Indicate the applicable coverage limits for the Construction Manager’s professional liability coverage, if applicable.

§ A.3.2.9 Indicate the applicable coverage limits for the Construction Manager’s pollution liability coverage, if applicable.

§ A.3.2.10 Where the Construction Manager will provide professional liability and pollution liability coverage under a combined policy, indicate the applicable coverage limits.

§ A.3.2.11 Indicate the applicable coverage limits for Construction Manager’s insurance for maritime liability risks associated with the operation of a vessel, if the Work requires such activities.

§ A.3.2.12 Indicate the applicable coverage limits for Construction Manager’s insurance for use or operation of manned or unmanned aircraft, if the Work requires such activities.

§ A.3.3.1 Where the Construction Manager is required to maintain required insurance for a duration other than the period for correction of the Work, indicate the duration of required coverages in the fill point provided.

§ A.3.3.2 Section A.3.3.2 allows the Construction Manager to select whether it will provide other insurance coverage in addition to that required under Section A.3.2. If other insurance will be provided, check the appropriate box for each selected coverage under Section A.3.3.2, and indicate any applicable limits of coverage or other conditions in the space provided.

§ A.3.3.2.1 Section A.3.3.2.1 requires the Construction Manager, instead of the Owner, to provide builder’s risk insurance, of the same type and scope satisfying the requirements identified in Section A.2.3. Where this requirement has been selected, the Owner is relieved of the obligation to provide builder’s risk insurance except for those coverages required by Section A.2.3.1.3 and A.2.3.3. Where the Construction Manager’s obligation to provide builder’s risk insurance differs from Section A.2.3, the differences should be described in the fill point following A.3.3.2.1. Additionally, Article 11 of AIA Document A201­–2017 requires that the Owner adjust and settle losses under the builder’s risk insurance. If a party other than the Owner assumes this responsibility, that information should also be provided in the fill point.

§ A.3.4 Where the Construction Manager is required to provide payment and performance bonds, indicate the penal sum of each bond in the space provided.

Article A.4 – Special Terms and Conditions

Indicate any special terms and conditions that modify the insurance and bonds exhibit in the space provided.

 

Executing the agreement.

The persons executing AIA Document A134–2019 should indicate the capacity in which they are acting (i.e., president, secretary, partner, etc.) and the authority under which they are executing the Agreement. Where appropriate, a copy of the resolution authorizing the individual to act on behalf of the firm or entity should be attached.

 

Important.

Modifications. Particularly with respect to professional or contractor licensing laws, building codes, taxes, monetary and interest charges, arbitration, indemnification, format and font size, AIA Contract Documents may require modification to comply with state or local laws. Users are encouraged to consult an attorney before completing or modifying a document.

Reproductions. This document is a copyrighted work and may not be reproduced or excerpted from without the express written permission of the AIA. There is no implied permission to reproduce this document, nor does membership in The American Institute of Architects confer any further rights to reproduce this document. For more information, see the document footer and the AIA Contract Documents® Terms of Service.

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