September 22, 2015
The payment provisions of the A201are set out in Article 9, and are primarily geared for the payments of a lump sum contract. To the extent the Work is being preformed on some form of cost of the work plus a fee, modifications will be appropriate.
The A201 payment provisions follow a fairly standard construction industry method. An initial schedule of values for the entire Work is to be established.6 At least ten days before any scheduled progress payment date, the Contractor will prepare an Application for Payment for all work expected to be completed by the progress payment date.7 The Application for Payment will show the work that has been completed during the period, and may include material delivered to the site, and any applicable portion of any approved change order work.8 The Application for Payment is to be submitted to the Architect for review.9
Once the Architect has received the Application for Payment, the Architect is given seven days to either issue a Certificate for Payment to the Owner, or to provide the Contractor and Owner a written explanation of why the Architect believes some or all of the Application should
be withheld.10 If a Certificate for Payment is issued, the Owner is to pay the Contract within the time set out in the contract.11 Once paid, the Contract is to pay it subcontractors within even days in proportion to the work for which the Contractor has been paid.12
The Architect may determine to withhold some or all of the Application in order to protect the Owner for specific failures by the Contractor, including defective work, Contractor’s failure to pay subcontractors or suppliers, or if there is “reasonable evidence” that the Work cannot be completed on schedule, or for the remaining contract balance.13 If the basis for the withholding are removed, then the Architect is to issue a Certificate for Payment for the withheld funds.14
Once the project reaches the point that the Owner can occupy or use the project for its intended use, the Architect will review the Work, work with the Contractor to prepare a list of items that can be completed prior to final payment.15 Once that is done, the Architect is to issue a Certificate of Substantial Completion.16 Upon issuance of the Certificate of Substantial Completing, the Owner is to make payment of the retention covering the work performed to date.17
Finally, once the Work is fully complete, the Architect is to review the Work, and issue a final Certificate for Payment.18 The final Certificate for Payment requires the Owner to make any remaining payment due to the Contractor.19 The making of final payment by the Owner, and acceptance by the Contractor, includes a waiver by the Owner and Contractor, respectively.20 The exceptions is that the Owner does not waive any claims for liens or other unsettled encumbrances that are the Contractor’s responsibility, the failure of the work to meet the plans and specifications, and the Owner does not waive any warranties.21
When entering into a contract including the A201, the Owner must consider whether it truly wants to give the Architect the responsibility to determine when payment is due. Most Owners will want to take the responsibility for review and approval of the Contractor’s payment
applications, and if so, these terms must be modified. Also, there could be loan covenants that require some other form of review before payment is made.
The contractual payment provisions must also take into account the Prompt Payment provisions of NRS Chapter 624. For example, NRS 624.609(2)(a)(2)(II) only allows the withholding “to the extent that such costs and expenses exceed 50 percent of the retention amount withheld pursuant to subparagraph (1).” Further, NRS 624.610 requires the Owner to respond to change order requests from the Contractor within 30 days, or the Contractor will be allowed to bill and be paid for the change order.
4 George L. Brown Ins. Agency v. Star Ins. Co., 237 Nev.Adv.Op 31, 237 P.3d 92 (2010).
5 Id.
6 A201, §9.2.
7 A201, §9.3.1.
8 A201, §§9.3.1.1, 9.3.1.2 and 9.3.2.
9 A201, §9.3.1.
10 A201, §9.4.1.
11 A201, §9.6.1.
12 A201, §9.6.2.
13 A201, §9.5.1.1 - §9.5.1.7
14 A201, §9.5.2.
15 A201, §9.8.2.
16 A201, §9.8.4.
17 A201, §9.8.5.