Firm management

What contractors need to know: Master agreements and work orders for construction projects

By AIA Contract Documents

A121™-2018, Standard Form of Master Agreement Between Owner and Contractor where Work is provided under multiple Work Orders is sometimes referred to as an “MSA,” or the Master Service Agreement in the construction industry. In a general sense, the A121 is used by a single owner who expects to execute repeat projects with the same contractor. It’s an efficient process where the owner and the contractor can negotiate a standard set of terms and conditions, which will then be applied across multiple projects or multiple phases.

There are various ways in which parties can utilize master agreements and work orders.

  • The parties could use the MSA if the contractor is expected to build out various portions of an office tower recently completed for a single client. In this situation, the owner could enter into a master agreement with the contractor and then issue work orders to build out the individual office space as various tenants sign the leases for their office space.
  • An owner could hire a contractor to construct a single project, such as a hospital project. The owner might use a master agreement to build the project in phases, which could include as different phases patient rooms, the emergency center and ICU, patient intake, and amenities.
  • An MSA can also be used with national owners who have multiple projects such as  regional offices and branches undergoing construction or renovation. In this case, it may make sense to negotiate a master agreement and issue work orders for various branches and offices.

Of course, these are just some of the different ways that the A121 can be used to make the contract negotiation and execution process more efficient.


Learn more about how using a master agreement and task order on your next project can help you save time and manage risk. Watch the on-demand webinar “Streamline the Contract Process when Juggling Multiple Projects.”  Watch Now >


A balancing act: master agreement’s framework

A master agreement contract is the combination of A121–2018, Owner/Contractor-Master Agreement and A221™–2018, Work Order for use with Master Agreement Between Owner and Contractor. The master agreement’s substance is somewhat similar to A101®-2017, Standard Form of Agreement Between Owner and Contractor where the basis of payment is a Stipulated Sum or A201®-2017, General Conditions of the Contract for Construction. It contains general conditions similar to A104™-2017, Standard Abbreviated Form of Agreement Between Owner and Contractor to help parties establish common terms and conditions that will apply over multiple work orders. The common terms and conditions include agreements as to:

  • the parties’ general responsibilities,
  • how disputes will be resolved,
  • how termination will be handled,
  • how payments will be made, and
  • general insurance terms.

A221, Owner Contractor-Work Order, on the other hand, completes each contract, and requires the contractor to perform the work. The owner and contractor will determine the following items within each work order on a project basis:

  • Contract time,
  • Contract sum,
  • Scope of work or services,
  • Commencement and substantial completion,
  • Additional insurance and bond requirements,
  • Party representatives for the work order, and
  • Enumeration of the contract documents.

This contract structure provides unique uniformity and flexibility for the owner and contractor to negotiate certain terms based on each project’s circumstance, while also adhering to the standard set of general terms and conditions upon which the parties previously agreed.

The image above shows the master agreement framework. On the right hand side is the A121, Owner/Contractor-Master Agreement. Then, with each project, the parties can execute an A221, Owner Contractor-Work Order that incorporates by reference and includes the terms of the A121.

Important issues when negotiating a master agreement

Master agreement effective timeline and renewal

There are some unique terms in the master agreement to which parties should pay careful attention. Section 1.1 of the master agreement says that the agreement “shall be effective for one year after the date first written above.” Therefore, it’s important to make sure that the master agreement is effective when a work order is issued. The A121 addresses this issue in Section 1.3, which provides for the automatic renewal of the master agreement on an annual basis. The renewal is effective unless either party provides notice 60 days before the renewal date.

No work orders?

From an owner’s perspective, it is not a requirement to issue any work orders. It’s entirely possible to negotiate a master agreement, but to issue no work orders. It’s rare, but it certainly is possible.

Can contractors decline a work order?

Under the A121, the contractor can decline to accept the work. This is an important clause because it provides the contractor with a critical right to decline work, if it so chooses.

Clause examples of work orders

Commencement and substantial completion

To set the time for performance, select the date of commencement of work starting from either the date of the work order, a date issued in a subsequent notice to proceed, or by some alternative means. If no box is checked, the default is the date of the work order.

Contract time clause

The parties select their substantial completion date by choosing either a number of calendar days following the commencement of work, or by choosing a specific date identified in the work order.

One thing of which parties should be aware of is the potential inclusion of liquidated damages. A221 Sections 2.3.3, and 3.6 provide terms related to liquidated damages that can be applied to the project. Because the liquidated damages terms are found in the A221, Owner Contractor-Work Order, liquidated damages can be applied to some projects but not others.

Contract sum

The parties can set the contract sum by selecting either a stipulated sum, cost of the work plus a fee without a guaranteed maximum price, cost of the work plus a fee with a guaranteed maximum price, or some other method. If the parties select a contract sum that includes a determination as to the cost of the work, they will need to complete A121-2018, Exhibit A, which includes those terms related to determination of the cost of the work.

While the master agreement might set an amount for retainage over multiple work orders, there might be some circumstance that requires an adjustment to retainage, such as a local statutory requirement. In these situations, the parties can modify the retainage in Section 4.2 of the work order.

Party representatives for the work order

The master agreement also identifies party representatives, but it might be that the party representatives for each work order are different. Therefore, the work order provides options for having different individuals identified as party representatives for that particular project.

Insurance and bonds

Insurance and bond requirements are contained in both the master agreement and work order. Both owners and contractors should understand the differences between these two documents and the requirements contained in each. The insurance and bonds requirements in the master agreement are the general requirements that will remain fixed across the projects, including general liability, auto liability, and employer liability. On the other hand, the work order’s insurance and bonds requirements are designed to accommodate for the project-specific requirements that might include anything particularly unique or risky about that project, such as professional liability, pollution, or performance and payment bonds.

Master agreement risk management and more

Parties can utilize the master agreement structure to manage risk, especially if the project includes a phased approach. For example, the master agreement contains a one-year period for correction of work and a general warranty, with a 10-year limitation on claims from the date of substantial completion. For work that includes various phases or projects, this could mean that the time limit to file claims or give other types of notices might be different for each phase or project.

Learn more about how using a master agreement and task order on your next project can help you save time and manage risk.  Watch the on-demand webinar “Streamline the Contract Process when Juggling Multiple Projects.”  Watch Now >