The American Institute of Architects (AIA) publishes a widely used family of template-based construction contract documents, including A201, the General Conditions of the Contract for Construction. Many Wisconsin municipalities adopt these forms assuming they are balanced, neutral, and suitable for public-sector use without significant revision.

In practice, however, several provisions shift critical project risk away from contractors and toward municipal owners – particularly late in the project when system performance, commissioning, scheduling, and public expectations are most important.

The sections that follow highlight five A201 terms municipal owners should consider revising – substantial completion, retainage, construction change directives, price escalation, and dispute resolution. The sections explain the risks these standard terms present and offer clear, practical, owner-favorable alternatives.

Note: The information in this article is provided for general educational purposes and should not be construed as legal advice. Construction projects vary widely, and the AIA provisions discussed here are not the only terms that may warrant negotiation. The sample contract language included in this article is illustrative only and is not intended for cut-and-paste use without careful tailoring. Municipalities and other public owners should consult qualified legal counsel to evaluate their specific project needs, contractual structure, and legal obligations.

Substantial Completion (AIA A201-2017 §9.8)​

The Risk

Under A201, substantial completion is achieved when the Owner can use or occupy the work for its intended purpose.

For municipalities, however, “use” is often tied to immovable public deadlines – school start dates, elections, library openings, and summer programs. That pressure can result in declaring substantial completion before major systems are fully functional.

When that happens, warranties begin too early, system performance issues shift from the contractor to the Owner prematurely, and commissioning spills into the post-occupancy period, when municipal staff cannot easily accommodate shutdowns, corrective work, or intrusive testing.

Municipal Example

A city opens its new community center in time for summer programming, even though the air-handling systems have not been fully tested. Weeks later, condensation appears on ceilings because the system wasn’t balanced correctly. The contractor argues that substantial completion occurred when the city moved in. The city disagrees, believing the project wasn’t complete because the systems were not functioning. This dispute stems from A201’s broad definition of “use,” which can disadvantage public owners.

Sample Supplementary Condition

Substantial Completion shall be achieved only when all building systems (including HVAC, controls, life safety, and specialty systems) are fully installed, tested, commissioned, and demonstrated to operate in accordance with the Contract Documents; all required training, O&M manuals, and As-Built Documents are delivered; and all approvals for permanent occupancy have been issued. Beneficial, partial, or temporary occupancy shall not constitute Substantial Completion. Any such occupancy shall require a written agreement preserving Owner’s rights and Contractor’s obligations.

Why It Matters

This language ensures the building is genuinely ready – not simply available for occupancy – before substantial completion is certified. It aligns contract milestones with real municipal operations and helps avoid the costly and time-consuming disputes that follow premature occupancy.

Retainage (AIA A201-2017 §§9.6, 9.8.5, 9.10)

The Risk

Retainage is often the last meaningful leverage municipal owners have to ensure punch-list completion, system tuning, staff training, O&M delivery, and accurate As-Builts.

Under A201’s default terms, the retainage associated with the substantially complete portion of the work becomes payable at substantial completion, often resulting in most of the project’s retainage being released at that point – precisely when the most detailed fine-tuning begins.

Once released, public owners lose their most effective tool and may be left with formal disputes, often aired in public meetings and with little practical recourse to compel timely completion.

Municipal Example

A Wisconsin village released most of the contractor’s retainage in December to help close out its fiscal year. Once the funds were released, the contractor shifted its crew to other projects, leaving the village with a long list of unfinished punch-list items – doors that did not latch, thermostats that failed to hold temperature, and lights that flickered on and off. Village staff spent the next two months trying to get the contractor back on site, raising the issue at several public board meetings. With minimal retainage left as leverage, the village had limited options, frustrating both staff and elected officials and prolonging closeout well into the next construction season.

Sample Supplementary Condition

Retainage shall not be reduced, partially released, or released in full until: (a) all punch-list items are completed; (b) all closeout deliverables (including O&M manuals, training, warranties, and record drawings) are delivered in full and accepted by the Owner; (c) the commissioning authority has issued written final acceptance for all systems; and (d) the Work has been accepted by the Owner in a written Certificate of Final Completion. The Owner may withhold any amounts the Owner reasonably determines are necessary to protect against incomplete or nonconforming Work, outstanding claims, defective systems, commissioning failures, delay damages, or any other unsatisfied Contractor obligations.

Why It Matters

This language preserves owner leverage through true and complete project closeout, ensuring systems are functioning properly, documentation is complete, and staff are fully trained before final payment is released. It also aligns with what boards, taxpayers, and facility users reasonably expect: a fully operational building, not one that is technically occupiable.

Construction Change Directives (AIA A201-2017 §7.3)

The Risk

Construction Change Directives (CCDs) differ from Change Orders in that work begins immediately, without agreed pricing or time adjustments.

A201 §7.3.4 requires an itemized accounting with supporting data but does not specify the timing or form of such documentation and does not require contemporaneous daily labor, equipment, and material records, nor does it prohibit after-the-fact lump-sum CCD pricing.

For municipalities – whose expenditures must be transparent, auditable, and defensible to boards and taxpayers – this lack of documentation increases exposure. When CCD pricing arrives weeks or months later, owners often receive lump-sum proposals that cannot be verified against actual field conditions, reducing municipal leverage and increasing the risk of disputes.

Municipal Example

During construction of a municipal operations building, the Owner directed the contractor to adjust electrical routing to avoid a conflict with other equipment. Because the work needed to proceed immediately, the contractor performed the work under a CCD, with pricing to be determined later. Months later, the contractor submitted a bill significantly higher than expected.

With no daily time-and-materials records, the municipality could not verify the labor, equipment, or materials used, forcing staff to reconstruct events from memory and creating avoidable disputes, delays, and public scrutiny over undocumented costs.

Sample Supplementary Condition

Work performed under any Construction Change Directive (CCD) shall be documented on a daily time-and-materials basis, including labor classifications and hours, equipment types and usage hours, material quantities supported by invoices, and subcontractor costs. The Contractor shall submit such documentation on a weekly basis. CCD Work shall be compensated based on actual, contemporaneously documented costs plus the agreed markups. Lump-sum pricing is prohibited unless supported by daily, contemporaneous documentation.

Why It Matters

This language turns CCDs from an area of uncertainty into a transparent, verifiable process consistent with municipal accountability. It allows public owners to confirm costs, clearly explain expenditures, and better protect project budgets.

Material Price Escalation (Not Addressed in AIA A201-2017)

The Risk

A201 contains no price escalation clause. When material costs rise sharply between bid day and procurement (including increases caused by tariffs, import duties, or other government actions affecting supply chains), municipalities have no contractual mechanism to address the increase. This forces owners and contractors to improvise in public meetings, creating budget uncertainty, delaying procurement, and sometimes requiring a full rebid that pushes the project into the next construction season.

Municipal Example

After bidding a simple park shelter, the contractor learned that the cost of steel had jumped more than 20% because of unexpected mill surcharges, tariffs, and longer lead times. With no escalation clause, the municipality must either (1) rebid the project and lose the construction season, or (2) publicly seek additional funds, raising budgeting and oversight concerns. The resulting delay pushes work into winter, increasing overall costs.

Sample Supplementary Condition

If the cost of designated materials (including, without limitation, structural steel, reinforcing steel, lumber, roofing materials, electrical switchgear, and HVAC equipment) increases by more than __% between the bid date and the date of binding supplier commitment (including increases caused by tariffs, import duties, government surcharges, or similar governmental actions), the Contractor may request an equitable adjustment limited to the documented actual increase, and no overhead or profit shall be applied to the escalated portion. Any request shall include supplier quotes from the bid date and the procurement date demonstrating the difference. No adjustment will be granted for increases caused by Contractor delay or failure to timely procure. Decreases in cost greater than __% shall result in a credit to the Owner.

Why It Matters

This clause establishes a predictable, auditable process for handling real market volatility, protects municipalities from paying markups on increased material costs, and prevents contractors from recovering escalation that results from their own delays.

Dispute Resolution (AIA A201-2017 §§15.1-15.4)

The Risk

Under A201, the dispute resolution sequence creates several challenges for municipal owners. Because binding dispute resolution is not selected in A201 itself but rather in the companion A101 Owner-Contractor Agreement, many municipalities unknowingly adopt the contractor’s preferred method – often arbitration – when signing the A101 without revising the default boxes.

The Architect serves as the default Initial Decision Maker (IDM) and receives contractual immunity for decisions made “in good faith,” even when the dispute involves design issues – creating an inherent conflict of interest.

Owners must also implement the IDM’s decisions immediately, including adjustments to the Contract Sum or Contract Time, while the dispute remains unresolved. A201 further imposes rigid post-mediation deadlines: within 30 days after unsuccessful mediation – or 60 days after mediation is demanded – either party may demand that the other initiate binding dispute resolution, and failure to file within 60 days results in a waiver.

Municipal Example

During a dispute over structural framing modifications, the Architect – serving as the default IDM – issued a preliminary decision favoring the contractor, despite the Architect having designed the very details in dispute. Under A201, the municipality was required to implement the IDM’s payment adjustments immediately, even though the claim remained unresolved. At the same time, the contractor had pre-selected arbitration, a change the municipality did not initially notice.

When mediation failed, the 30/60-day deadlines pressured the municipality to initiate arbitration before its governing body could meet in open session, creating unnecessary urgency and pulling the dispute into a private, expensive process that offered limited transparency for elected officials and taxpayers.

Sample Supplementary Condition

The Architect shall not serve as the Initial Decision Maker (IDM); instead, the parties shall appoint an independent third-party neutral agreed upon at contract execution. No IDM decision shall require implementation until the dispute is formally resolved. Mediation shall occur only by mutual written agreement, and no automatic deadlines for initiating binding dispute resolution shall apply unless agreed upon in writing after the dispute arises. Litigation in the circuit court where the Project is located shall serve as the binding dispute resolution method.

Why It Matters

These revisions remove the Architect from a conflicted quasi-judicial role, prevent premature implementation of disputed payment or time adjustments, and eliminate rigid post-mediation deadlines that do not align with municipal governance. They also ensure municipalities do not inadvertently agree to private arbitration. The result is a transparent, predictable dispute resolution process that preserves board oversight, protects taxpayer dollars, and keeps final decision-making in a public forum rather than behind closed doors.

Conclusion

These revisions to the standard A201 help ensure that buildings perform as designed, closeout deliverables are complete, and project records remain transparent.

Tying substantial completion to full commissioning, holding retainage until true final completion, requiring contemporaneous CCD documentation, and addressing material price escalation and unpredictable governmental action​ all strengthen closeout and budget certainty.

Equally important, updating the dispute resolution provisions – by using a neutral IDM, preventing IDM decisions from taking effect while disputes remain unresolved, relaxing A201’s rigid post-mediation deadlines, and selecting litigation rather than defaulting into private arbitration – creates a clearer and more accessible process for municipal boards and taxpayers.

Setting these terms correctly protects public dollars, keeps schedules on track, and strengthens public trust, while giving contractors the predictability needed to deliver successful projects. Ultimately, it reframes the AIA documents for what they are: a starting point, not a standard.

This article was originally published on the State Bar of Wisconsin’s Business Law Blog. Visit the State Bar sections or the Business Law Section webpages to learn more about the benefits of section membership.