Construction OberView

August 2009

AIA Publishes Updated Construction Manager Constructor Agreement

By: Paul S. Sugar

On April 30, the American Institute of Architects published new document A133, 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 with a guaranteed maximum price, which replaced the A121 CMc 2003 edition. Unlike the 2003 edition, the new Construction Manager Agreement is compatible with the 2007 version of the A201 General Conditions. It is also compatible with the B103, 2007 edition, Agreement Between Owner and Architect for a Large or Complex Project. If you are licensed to use the AIA software program, you will have to learn to use the A133 because AIA will not support the A121 CMc after May 31, 2010.

For those who dislike change, the A133 is good news. While there have been some modifications, the essence of the A121 CMc remains. There are still the preconstruction and construction phases and the memorialization of the guaranteed maximum price with Amendment A. The twophase process of the Construction Manager Agreement continues to allow the document to be modified to be used on fast track projects. The allocation of risk among the Owner, Construction Manager and Architect remains largely unchanged, so if you don't like the way the risk is allocated, modifications will continue to be necessary.

Termination of Federal Construction Contracts: Boon or Boondoggle?

By: Joseph C. Kovars

In March 2009, President Obama issued a memorandum to the heads of executive departments and agencies concerning government contracting. The President stated that the federal government should consider terminating existing contracts that are "wasteful, inefficient or not otherwise likely to meet the agency's needs." The Office of Management and Budget (OMB) was directed to issue a government-wide guidance by July 1, 2009 to create processes to take corrective actions that may include modifying or canceling such contracts.

The President followed up this memorandum in May 2009 with his proposed 2010 budget. In it, approximately $1.5 billion in existing construction programs are to be eliminated. Cuts are proposed for construction programs with the Army Corps of Engineers, EPA, Department of Transportation, etc.

New Insurance Requirements for Condominiums

By: Raymond Daniel Burke

The law governing condominium insurance requirements, which changed in 2008 as a result of a court decision, has changed again as result of amendments to the Maryland Condominium Act effective June 1, 2009. During the last legislative session, the Maryland General Assembly took action on the issue in direct response to a 2008 Court of Appeals decision concerning the allocation of responsibilities for property damage between a condominium council and the individual unit owners. The new law establishes that the condominium master insurance policy must cover all of the building elements, including the units, except for improvements installed in the unit by the owners after construction. However, where the damage originates in a unit, that unit owner is responsible for any insurance deductable under the council's policy, up to a maximum of $5,000.

Section 11-114 of the Maryland Condominium Act has long imposed a specific duty on a council of unit owners to maintain "[p]roperty insurance on the common elements and units, exclusive of improvements and betterments installed in the units by unit owners," along with general liability insurance. In response to this requirement, it was common practice for councils of unit owners to obtain insurance coverage for all elements of the condominium as originally constructed by the developer, including the units, with individual unit owners insuring improvements to the unit not provided by the developer, along with insuring personal property in the unit.