An Owner, General Contractor, and Subcontractor Walk into a Contract Negotiation Room and Agree on One Thing: ConsensusDocs is Extremely Helpful
Builders assess their risk and set their prices accordingly. Don Gregory, legal counsel for subcontractors and other industry practitioners for more than 40 years, recommends that Subcontractors condition their bids on an unmodified ConsensusDocs subcontract. This was one of the nuggets from a recent Strafford webinar on which three seasoned construction attorneys presented on Understanding ConsensusDocs Construction Contracts: What Lawyers Need to Know. Each presenter focused on one perspective: the owner’s (David Scotti), the general contractor’s (Phil Beck), and the subcontractor’s (Don Gregory). Their conclusions on which documents and provisions to focus upon differed. But each concluded that ConsensusDocs is an extremely helpful tool for better project outcomes. The documents offer several advantages over heavily modifying an American Institute of Architects (AIA) standard contract documents, which may not fit your project needs or processes. For instance, not all projects place an architect as the lead decider and funnel for project communications. In addition, bespoke or manuscript construction agreements commonly used in construction were characterized as less fair and more labor-intensive to review than standard contract documents.
There is now a track record that establishes ConsensusDocs as a nimble leader. The terms and conditions incorporated into the agreement compare favorably with the AIA A201. The presenters highlighted certain aspects of ConsensusDocs’ contract language, such as:
- Retention is eliminated at 50% of project completion
- Retention is released at substantial completion, except for 150% of the estimated costs to reach final completion
- Directed change orders require 50% payment of committed costs while each party still retains their rights in the dispute process (this preserves payment flow which is the lifeblood for builders)
- Unconditional lien waivers are explicitly barred (no AIA A201 comparable provision)
- No insertion of a mysterious initial decision maker (IDM) to serve in a quasi-judicial role
- More limited form of additional insured coverage, which is optional (the AIA A401 requires broader coverage and requires the architect and owner to be covered by subcontractors)
Moreover, ConsensusDocs has published several "industry firsts" that help guide the design and construction industry on emerging issues such as prefabrication, price escalation, and building information modeling (BIM). ConsensusDocs is still the only publisher of a standard price escalation/de-escalation clause. The presenters applauded recently published standard prefabrication agreements. Over the past few years, projects utilizing prefabrication have increased dramatically. Since prefabrication blurs the line between building and manufacturing, it raises some important and complicated legal issues. For instance, design delegation is common in prefabrication. The new standard prefabrication agreements provide standard contract language that addresses this issue.
The webinar concluded that there needs to be more education on basic contract fairness. However, using ConsensusDocs contracts as a starting point is a major step in the right direction. The presentation ended with referring those interested in getting more information, samples, or a demo to visit www.consensusDocs.org.
Questions or comments for this article can be directed to Brian Perlberg, ConsensusDocs Executive Director & Senior Counsel, at bperlberg@ConsensusDocs.org.