Change can be difficult. Newly added guidance available from the AGC Contract Documents Forum helps members navigate change in design-build construction contracts and beyond.
While some practitioners are familiar with multiple contract languages, they may fall back on what is easiest for them rather than what is best. Some people “use” standard construction contract documents that they hate but know hundreds of ways to change them because that is what they know. Understanding the substance and becoming familiar with a standard document’s structure and numerical section references is like knowing a language. It becomes the language that many construction attorneys speak when negotiating contracts. Often, standard documents get updated and so heavily modified that they are not recognizable. And now, with generative artificial intelligence (AI), disruption to how contracts are generated and negotiated is inevitable.
Addressing Risk Allocation in Design-Build Contracts
A working group of the AGC Contract Documents Forum created comments from a General Contractor’s perspective that highlight the most important risk allocation issues and potential project-specific modifications that builders should consider in negotiating standard ConsensusDocs language in design-build contracts. While ConsensusDocs’ section numbering orders the comments, the risk allocation issues addressed in these comments apply to AIA, EJCDC, and bespoke or non-standard contracts as well. At 24 pages, this new design-build section is by far the greatest in length compared to the other commentary sections. Risk allocation issues used in design-build have been a hot topic of concern over the past few years and continue. The design-build section adds to AGC Member-Only Guidebook Comments to ConsensusDocs addressing prime and subcontract agreements in the ConsensusDocs 200-series addressing design-bid-build and subcontracts in the 700-series. The almost 70 pages of commentary will significantly help Constructors navigate essential risk allocation issues in any construction contract, and ConsensusDocs modifications specifically.
Example Commentary: Retainage Modification
An example of the AGC commentary for modifications to the ConsensusDocs 410 is as follows:
Retainage (§ 10.2): The Design-Builder may wish to provide that no retainage be held on General Conditions Costs, Design-Builders Fee, or insurance. § 10.2.1: Retainage is important to ensure payment flows in a fair and equitable manner. The Owner may release retainage applying to work of early finishing subcontractors upon acceptance of such work. Once the work is 50% complete, the Owner shall not withhold any additional retainage. § 10.2.3: The Design-Builder may wish to change “may release” to “shall release” to mandate retainage release for completed subcontractor work. Further, some jurisdictions have laws that control retention release and timing, requiring additional revisions to this section.
Fair and Balanced Approach
It is important to note that while AGC actively participates and endorses the ConsensusDocs standard language, they are very fair and balanced to all parties. Generally, Contractors try to negotiate subcontracts that favor them. General Contractors often confront difficult contract negotiations at the prime level with owners. ConsensusDocs aims to create a fair foundation to build without needing many modifications. The AGC Member-Only comments help prioritize the most important contract provisions for builders and offer alternative solutions.
The AGC Member-Only comments are available to AGC members who log into their account, go to www.agc.org/contract, and then download “ConsensusDocs Guidebook AGC Member-Only Comments” on the bottom right-hand side of the webpage. Information on the AGC Contract Documents Forum can also be found on that page.
Other Resources
One of the primary challenges in transitioning to a new and different standard contract like ConsensusDocs is effectively tailoring standard language. There are thick legal treatises written on such modifications, such as Alternative Clauses to Standard Construction Contracts edited by Eugene Heady of Smith, Currie, and Oles. This treatise includes a few chapters on ConsensusDocs and even the Engineers Joint Contract Documents Committee (EJCDC) standard forms.
Questions about the document may be directed to AGC’s Senior Counsel on Construction Law, Brian Perlberg, at brian.perlberg@agc.org.