A Brief History of Construction Law
In the United States – and internationally – construction law as a distinct body of law comprised of regulatory, statutory, contract, property, tort, insurance and surety law is a relatively recent phenomenon. Arkansas is no different. Construction law in Arkansas has followed the same trajectory as other states. Since the 1850s, a number of historical and legal developments have shaped this young area of law into a legal practice area for construction lawyers.
This post briefly discusses the evolution of construction law in the United States from 1850 to the present day. This article is relevant to the US generally and to Arkansas specifically, concerning the development of construction contracts, construction liens, construction arbitration, and construction attorneys in a construction law practice area. The discussion below moves from mechanic’s liens and materialman’s liens statutes to the first building code ordinances and then from the first AIA form contract to competitive bidding or design-bid-build contracts. The post concludes with a summary of construction law’s development and the role of the construction attorney in Arkansas and other states.
Mechanic’s Liens and Materialman’s Liens. Beginning in the 1850s, states began enacting statutes to ensure payment of subcontractors (mechanics) and vendors & suppliers (materialmen) on residential construction and commercial construction projects.
Decline of the Master Builder. In Europe from ancient times to the eighteenth century, one person occupied the office of master builder. The master builder was the architect, structural engineer, materials engineer, planner, manager, and contractor for projects. However, by the nineteenth century (1800s) architects, engineers, and contractors increasingly were separate parties who were responsible for separate parts of the project. Architects designed along with engineers and contractors built along with subcontractors. The contract arrangement continues to evolve, but this was the starting point and beginning contract structure for construction projects.
American Institute of Architects (“AIA”) and AIA Form Contracts. The AIA began in 1857 when 13 architects established the organization. Later, in response the decline of the master builder model of project design and construction, the AIA and the National Association of Builders collaborated on the first construction form contract – the Uniform Contract of 1887. Form contracts streamlined the procurement process and established language on which contracting parties could rely. Throughout the US and in Arkansas, the AIA form design contracts and construction contracts are the most widely used form contracts in the construction industry.
General Contractor. As a result of the design professionals and contractors increasingly specializing in certain building disciplines and trades, such as civil engineers and site contractors or electrical engineers and electrical contractors, there was a need for a contractor that managed the trade contractors and project in general – the general contractor. General contractors brought order to the increasingly complex construction process, which was previously managed by the master builder (for earlier, non-complex projects). The general contractor became a fixture in most construction contracts, occupying the space between the owner and the contractors actually building the project. General contractors in Arkansas or any other state thus became responsible and liable for ensuring the completion of the entire project. The owner’s was a party to the construction contract with the GC, and the GC had numerous subcontracts with trade contractors and suppliers.
Public Projects, Competitive Bidding, and Design-Bid-Build. Throughout the 1900s, the United States experienced explosive growth in infrastructure construction, residential construction, and commercial construction. Local, state, and federal governments contracting for design and construction projects frequently uncovered fraud, price-fixing, and cronyism in the procurement of these public projects. To increase cost competition and to increase the number of companies that participate in bidding on public projects, the federal government enacted competitive bidding statutes with accompanying regulations for public projects. States followed suit. However, to compare apples to apples when reviewing bids, the construction bid had to be based on the same detailed design. The government owner hired architects and engineers to produce a complete design for the project that would serve as the basis for the contractors’ bids. Thus was born the design-bid-build project delivery method. An example of a state statutory requirement of competitive bidding for Arkansas public projects is located at A.C.A. 22-9-203 through 204.
Arbitration. In 1925, Congress enacted the Federal Arbitration Act. States, such as Arkansas, soon followed with state arbitration acts. In short, rather than submitting a complex project dispute (design defect, construction defect, or breach of construction contract) to a judge and jury with no experience with such complicated matters, the AIA and other construction organizations advocated for construction arbitration. When there are claims related to a construction contract breach or construction defect, which arise from the construction agreement, owners, contractors, subcontractors, and suppliers continue to prefer construction arbitration.
Construction Law Today
Because of the design professionals and contractors increasingly specializing in certain building disciplines and trades – and as the use of competitive bidding grew exponentially for public and private projects – a typical owner-design-construction contract structure arose in Arkansas and other states. This design-bid-build contract arrangement or project delivery method contained: (1) An owner that had a contract with an architect and with the general contractor; (2) An architect that had design services agreements with a HVAC engineer, electrical engineer, civil engineer, etc.; (3) A general contractor that had subcontract agreements with subcontractors; and (4) Subcontractors that had supply contracts with suppliers and that had 2nd tier subcontract agreements with subcontractors.
Furthermore, as this construction contract structure grew in complexity, so did lien filings, payment disputes, and negligence involving all parties: owner, architect, engineer, contractor, subcontractor, and supplier. Inevitably, these disputes made their way into court rooms and construction arbitration hearings. The end result was the judicial and statutory creation of construction law as a distinct practice area and construction attorneys as the specialized practitioners.