Early Procurement: Storage Strategy and How to Do it Right

Price escalation and supply chain disruptions continue as top issues in construction. Getting a price escalation clause that adjusts prices and payments up or down based on an objective index like the ConsensusDocs 200.1 standard price escalation clause is the fairest and best way to combat this problematic issue.  However, there is not a magic bullet or one-size-fits-all approach on this issue – it is an all-of-the-above approach. The early procurement of supplies is a common-sense approach that subcontractors, general contractors, and even owners employ to keep projects running on budget and on time.  However, early procurement of supplies raises another issue: how do we account for storing these materials?

Fortunately, ConsensusDocs publishes the only standard contract document that addresses stored materials – the ConsensusDocs 750.1, Rider Between Contractor and Subcontractor for Storage of Materials (“The Rider”). The Rider is a two-page standard agreement for storing materials and equipment at a Subcontractor’s yard.  It covers issues when storing materials, including:

  • Indicating ownership
  • Insurance
  • Quality of storage
  • Delivery
  • Cost of storage
  • Payment process
  • Inspection
  • Acceptance

In the first section, the Rider clarifies a complete transfer of right and title occurs for identified materials and equipment upon Rider’s execution date. The Subcontractor shall request payment for stored materials on the Subcontractor’s subsequent application for payment. Delivery is done at no additional cost. The cost is stated in the ConsensusDocs 750 Subcontract or whatever subcontract is used by the parties. While being stored, materials are subject to inspection. During storage, the Rider specifies that material should be protected, segregated, and marked. 

The Rider clarifies that storing materials does not alter a Constructor’s right to reject materials upon delivery. The Constructor has a full opportunity to inspect the materials when they are delivered, as certain materials may deteriorate during storage.

Regarding insurance, it is assumed that the Builder’s Risk Policy covers the materials. However, if the Builder’s Risk Policy does not cover stored materials, article 3 specifies that the Subcontractor must name the Constructor and Owner as additional insureds and loss payees, as appropriate, to cover storage and transit of the materials.

Access for subscribers to use the ConsensusDocs 750.1 is included in the ConsensusDocs full package and subcontracting subscription packages.

Additional Resources

Access the ConsensusDocs Price Escalation Resource Center here.

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