What is AIA in Construction?
The American Institute of Architecture is an organization that provides architects with resources such as education, government advocacy, community redevelopment and public outreach to better the architecture industry. In addition to this, the organization has created a set of contract documents ranging from Owner/Contractor Agreements to Contract Administration and Project Management Forms. The AIA G702 and G703 documents are the ones specifically tailored to construction payments.
Pertaining to the construction industry, general contractors and project managers, by contract, are often forced to use these documents in the billing process.
Or are they? The industry is transitioning and there are alternatives out there. Right now, it may seem that the AIA billing system is the only option, but the construction industry is starting to go in a different direction. General contractors have sought the need for a billing system that speaks their language, so documents and construction payment software have been created to meet these needs.
What is AIA Billing?
The AIA G-Series are a set of documents which track the billing process for both architects and contractors throughout a project. There are certain forms used in this process and a couple of important ones include the G702 and G703, a subset of documents.
This process is in no means simple and takes understanding. Any minor error could result in a disapproval from the architect and cause the general contractor to start all over.
There are multiple steps in this process, but here’s a breakdown of the keywords:
This is the first step in the process of AIA billing. The G702 Application essentially is an application in which the architect reviews the contractor’s application for payment for approval.
Imagine this as you pick up a major catering order that you paid in full. You get home, start setting out the food and realize a quarter of your order is missing. You’ve already paid expecting everything to be there and now have to go through a hassle of getting this fixed. The chefs are less motivated to complete this as they’ve already been paid, and it is more time on your hands.
Likewise, with a construction project, the project may seem complete, but parts could be missing. To avoid this, there is a percentage of the contract, around 5 -10 percent that is not paid out until the project is completed. Typically, a punch list is created so the contractor can check that each detail is completed.
Retainage is essential for projects because it motivates workers to perfect the job before they can fully get paid.
- Schedule of Values
This is essentially a breakdown of work needed to be done for a project. The schedule of values also has a dollar amount associated with each line item, which is the cost that has been set in the contract.
- Stored Materials
Stored materials are purchased early in the construction project process, but not needed for use just yet. The reason this is done is to make for a smooth and undisturbed project. There is great risk for stored materials and often times, they require insurance, in the case that they could be physically damaged, stolen or lost.
Now, let’s connect the dots. Once a general contractor fills out the document, the architect reviews it. If the architect does not agree with the documentation, he or she will red line it, meaning he or she will make adjustments and return it back to the general contractor to be re-completed.
This entire process requires high attention to detail; if the general contractor makes a minor mistake in filling out the documentation, it will result in a delayed payment and work completed on the project. The client could also face issues if his or her project is pushed back due to incorrect documentation.
Defining the Relationship between AIA and Construction Companies
This relationship is not one that is necessarily desired, but it works. Think of it as one of those “If we’re both not married at 30” situations: there seems to be no other option, but there is already an existing bond, so you go for it. While this might not seem a problem, there are some kickers in this relationship.
1. The documentation comes with a cost.
The result can be fairly expensive. Since this is the AIA’s property, they have the right to charge for their documentation and these downloads can quickly add up. For example, to obtain an annual license which gives you access to all AIA documents can cost your company over $8,000 for just 10 users. I don’t know about you, but that seems like a pretty penny for some paper.
2. There’s not an even amount of control.
That’s right. The AIA is the dominant one in this relationship. Architects are given the upper hand because it is their documentation. Contractors unknowingly accept the biased language of these documents which reduces risk for the architect and owner. In turn, most of the liability is given to the contractor.
3. As a contractor, you have to scrutinize the documents.
These documents are not necessarily contractor friendly. The terminology between architects and contractors contrasts; since these forms are written in the architect’s voice, the contractor has to make absolute sure what is written is correct for his or her project.
4. The bias is real.
These documents have the architect’s interest as top priority. Therefore, because the architect has the advantage, general contractors do not get the fair end of the stick. It is actually a suggestion that construction companies hire a lawyer to review the AIA billing contract to make sure there is no disadvantage toward any party involved.
So, this relationship obviously has some rough parts to it, but the premise is it works. For general contractors, it takes a level of learning to properly fill out these documents. But if there are other simpler options out there, why not test them out?
What are the Alternate Options?
Many construction-based associations, including the Associated General Contractors of America and The American Subcontractors Association helped to develop a set of industry-accepted contracts. These contracts are meant to be fair and speak the language for the construction industry.
For pricing, you have the option to buy access to all 107 documents or choose suggested packages that include documents for certain professions. For example, there are packages designated for design builders, subcontractors and consultants.
2. Construction Payment Software
Think how simple it would be to bypass this treacherous process and have it laid out for you completely online. Well, lucky for you, there is contractor billing software that will assist you every step of the way in the construction payment process.
Construction payment software eliminates unnecessary steps in the payment process, as well as speeds up the overall billing process. Rather than putting a high amount of focus on billing, construction companies can take that weight off their shoulders with the use of construction invoice software.
In one space, completely digitalized, construction payment management will assist construction companies throughout the entire billing process. It is important to note what you are looking for in a construction payment software system, but once you identify those key factors, the process will run smoothly.
The Value of Construction Payment Software for Your Company
It’s no question that the world is advancing technologically, so why not embark on that?
1. Construction payment management software speaks your language.
And they’re there to help you. They provide a detailed breakdown for you and answer any additional questions you may have. Construction payment software companies make their documentation readable to you. This is to make it simple for you to walk through the process and better communicate the payment progress to your team.
2. Keep everything in one space.
Contractor billing software is designed to help you stay organized. Rather than having to carry around a set of physical documents, all of this information is in one space, at the click of a button. It is so easy to lose track of paper, and in your case, keeping everything together is crucial for you and your team. By having it stored in a cloud-based software, you will always have control of where your documents are.
3. Construction payment software uses software integration.
Many construction payment software companies integrate with other complimentary software as well as AIA integration. This allows contractors to easily review and approve work. All of this information can be passed along to your accounting systems or exported onto AIA billing forms. This takes away extra, tedious steps for you to do and allows you to focus your work elsewhere.
4. You can focus on building, not billing.
After all, that is your profession. With the process being more accessible and simplified, you can take the focus off those extra steps. In turn, you will be paid quicker and do not have to worry about taking money from savings to pay your team. Contractor billing software can revolutionize the way you do business.
How Flashtract Can Help
Flashtract was created to streamline the process of your construction billing. We want your company to focus on building, not billing. Each year, an average of $40 million is lost due to the lengthy construction payment process. By digitalizing the process, we can ensure that you will be paid in a timely manner, have everything organized in one space and we will be there to speak your language every step of the way.