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AIA Contracts
This thread has 8 replies. Displaying all posts.
Post 1 made on Sunday December 3, 2017 at 02:08
crosen
Advanced Member
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April 2009
989
I have a resi job where the owner wants me to be a subcontactor of the GC. The GC wants to use an AIA contract instead of my standard contract.

What's confusing me about the AIA contract is that there does not seem to be a provision to get paid for equipment before you order it - you get paid shortly after equipment is brought to the site (or stored somewhere.)

This seems counter to the basic tenant that we don't finance equipment for our clients. Anyone familiar with these contracts who can shed some light on this?
If it's not simple, it's not sufficiently advanced.
Post 2 made on Sunday December 3, 2017 at 02:26
Ernie Gilman
Yes, That Ernie!
Joined:
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December 2001
28,273
Back up one step.
Simply stated, you want to work directly for the client. Period.
Explain to the client that you are there to satisfy his needs and wishes, and to work around his schedule. The GC cannot have both sides of the conversation between you and the client that guarantees the client gets what he wants. And if you work under the GC, the client will be paying the GC some 10% of what you'll charge... and for what? The GC is not qualified to be involved (unless you're clueless about construction or non-cooperative with other subs).

Back to your subject:
It is to our advantage to have clients pay for equipment in advance. There's nothing written anywhere that says it has to be that way. The AIA approach is simply putting the client at an advantage.

The only condition that I'm aware of where any kind of policy concerning equipment comes into play is that you can only ask for a certain percentage of a contracting job in advance. In CA where I live, it's 10%. That means that if your proposal is for equipment and contracting, you can only collect 10% of the total... obviously not enough to pay for the equipment.

My explanation to the client is straightforward: we are a custom house. We determine what equipment to buy for YOUR installation. We don't have a back room full of stuff we've bought that we have to force down your throat just to stay in business. Instead, we determine your exact needs, then order and supply that to you as a purchase. We then do the installation.

This keeps us from financing the client's purchase, and there is always some profit in equipment, so this helps us pay for our own and our hired labor while we do the job.
A good answer is easier with a clear question giving the make and model of everything.
"The biggest problem in communication is the illusion that it has taken place." -- G. “Bernie” Shaw
Post 3 made on Sunday December 3, 2017 at 02:45
AZCS
Long Time Member
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Posts:
February 2008
187
The client wants to pay the GC markup on top of your gear? What phase of the project are you on? I have a GC I work with where we will do prewire and trim through him and then final gear is billed directly to client
OP | Post 4 made on Sunday December 3, 2017 at 02:57
crosen
Advanced Member
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989
OK, here's a little more background. I have an existing client. This client is in the real estate business, and he is now building a spec house with some investment partners.

When it came time to decide on an integrator for the spec house, my client championed my shop, but it was decided by the investment group that the GC would be the one awarding and managing the job. We were awarded the job, and are now in the contract signing stage.

Yes, I know this is a potential minefield, but I've made the decision to accept the risk.

I've been reading through the standard AIA Contractor-to-Subcontractor contract ([Link: aiad8.prod.acquia-sites.com]), and it actually seems pretty fair.
If it's not simple, it's not sufficiently advanced.
Post 5 made on Sunday December 3, 2017 at 03:36
ErikU
Regular Member
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Posts:
January 2015
95
Just amend the AIA contract as needed. It should be that simple.

This applies any time you are faced with a contract. Cross out what you do not agree to, and and language if needed.

I've found that the vast majority of times I do this it goes through without issues, or perhaps with a minor modification.
Post 6 made on Sunday December 3, 2017 at 08:33
buzz
Super Member
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Posts:
May 2003
2,705
Unless the contract is amended, the bid must be amended upward to reflect your increased financing costs. Further, it becomes more difficult to discuss equipment price with the customer unless the GC includes his cut as some sort of management fee, rather than directly reflected in numbers presented to the customer.
Post 7 made on Sunday December 3, 2017 at 10:00
highfigh
Loyal Member
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Posts:
September 2004
6,425
On December 3, 2017 at 02:57, crosen said...
OK, here's a little more background. I have an existing client. This client is in the real estate business, and he is now building a spec house with some investment partners.

When it came time to decide on an integrator for the spec house, my client championed my shop, but it was decided by the investment group that the GC would be the one awarding and managing the job. We were awarded the job, and are now in the contract signing stage.

Yes, I know this is a potential minefield, but I've made the decision to accept the risk.

I've been reading through the standard AIA Contractor-to-Subcontractor contract ([Link: aiad8.prod.acquia-sites.com]), and it actually seems pretty fair.

If you already had an existing relationship with the client, the GC could step out of the way- they want their 6% but you were there already (although not with the whole group). I have a client whose GC tried to do the same thing but she, who's an architect by degree if not by practice, told him "I think not". Explain to the GC that you DO NOT buy equipment and wait to be paid for such a long time (you could say something like "I don't allow open accounts") and that you had already worked for your client but if they want to write your contract with language referring to scheduling, doing your part "in a workman-like manner" and specify the equipment and materials used, that might be OK but if the job gets out of hand and takes longer than proposed, you could be on the hook for a long time. If the project runs into legal problems, you could lose everything.

I worked for an integrator in '05 and a few years later, they took over the LV work on a house that was on MKE's "gold coast". It was Prairie-style, large and situated on the bluff overlooking Lake Michigan. It was also taking a really long time to pass the rough-in stage, then different contractor trucks could be seen parked in the area- the original electrician and LV contractors had been replaced by one that did both and they parked their trailer in the yard, so it was easier to just go to the site and work, rather than drag the trailer around at the end of the day to a place that wasn't near the installers' homes. After a while, worked stopped completely and a chain link fence was surrounding the place, with a pad lock. That told me it was in litigation and liens had been filed but it also meant the contractor's equipment and supplies were tied up so it was surprising to see their guys inside the fence, preparing to hook up the trailer so they could take it.

Turns out, the original GC had gone belly up and stopped showing up/taking calls/returning mail. I know people who know the homeowner, but not the fine details other than the homeowner took over as the GC and hired new people. I think the subs filed the liens because they weren't paid.

What do you know about the GC? Have they opened and closed businesses, been sued, filed for bankruptcy, etc? What kind of reputation do they have and, more importantly, what is his reputation among subs?
My mechanic told me, "I couldn't repair your brakes, so I made your horn louder."
Post 8 made on Sunday December 3, 2017 at 10:48
Ernie Gilman
Yes, That Ernie!
Joined:
Posts:
December 2001
28,273
As I see it, this job doesn't have an actual client until someone buys the house. The most that should be done is to wire the house for TVs, with conduits or smurf tube going from system locations to TV locations, and speaker wiring in different rooms.

On December 3, 2017 at 10:00, highfigh said...
Explain to the GC that you DO NOT buy equipment and wait to be paid for such a long time (you could say something like "I don't allow open accounts")

A guy I once worked for made the mistake of loaning a new TV to a client whose TV was in for repair. The client never paid, then one day wanted some work done right away... "we have an account with your company." I had to explain to the "client" that having $400 of unpaid invoices DOES NOT constitute having an 'account' with us! Structure things so you get the payment for components WELL in advance of finishing the work.

If you supply the components and have finished the work, but they haven't paid you, what leverage do you have?

and that you had already worked for your client but if they want to write your contract with language referring to scheduling, doing your part "in a workman-like manner" and specify the equipment and materials used, that might be OK but if the job gets out of hand and takes longer than proposed, you could be on the hook for a long time.

Clearly separate the purchase of product from everything else, and don't pretend to be a bank.
A good answer is easier with a clear question giving the make and model of everything.
"The biggest problem in communication is the illusion that it has taken place." -- G. “Bernie” Shaw
Post 9 made on Monday December 4, 2017 at 13:11
westcojack
Long Time Member
Joined:
Posts:
July 2009
69
+1 ErickU

Just amend the contract, we have done this many times.
Jack Goldberg, PE


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