Every construction project has a contract (written, preferably), and they often vary in size and scope depending on the nature and complexity of a project. Many construction industry participants have developed their own contract forms, and others rely on industry standard contract forms such as the AIA and ConsensusDocs standard forms. ConsensusDocs forms evolved from the prior AGC forms.
Recently, the ConsensusDocs Coalition published revisions to its prime and subcontractor Design-Bid-Build standard contracts. Many of the changes are attempts to clarify provisions, create consistency across forms and are generally editorial in nature. However, several of the revisions have a substantive impact and should be reviewed closely prior to using the new forms. Below is a high-level overview of some of the substantive changes:
- Termination for Convenience: Improper terminations for default/cause are no longer automatically converted into terminations for convenience. Accordingly, an improper default termination may result in substantial damages.
- Schedule of Work: Incorporates Critical Path Method Scheduling concepts and specifically requires the identification of critical dates and a graphic representation of all activities, including float values that will affect the critical path.
- Indemnification: Expanded to include “intentionally wrongful” acts or omissions and also provides some clarity to the definition of “Others” who or which are indemnified.
- Insurance: Contractor, rather than the owner, is now the default party responsible for obtaining the builder’s risk insurance policy. The party who procures the builder’s risk insurance policy bears the risk of loss from damage to the work until Final Completion.
- Bonds: No longer requires that the bond penal sum increase automatically in accordance with the contract price when the price increase exceeds 10 percent.
- Changes and Directives: Revisions clarify and account for changes with no time or cost impact and expand changes to encompass “Interim Directives.”
- Payment: Adds an additional category of “losses, expenses, or damages … not compensated by insurance” and “cost of corrective work” as recoverable costs on a cost reimbursable basis.
- Dispute Resolution: Adds a “check-the-box” option for the mediation procedures and administrator. If no box is selected, mediation will be conducted pursuant to the American Arbitration Association rules.
- Fiduciary Relationship: Removed language from the ConsensusDocs 240 Design Professional Standard Agreement that may imply that a fiduciary duty existed between the owner and its design professional.
These revisions affect numerous ConsensusDocs standard agreements, including: ConsensusDocs 200 Owner & Constructor Agreement, ConsensusDocs 205 Owner & Constructor Short Form Agreement, ConsensusDocs 240 Owner & Design Professional Agreement, ConsensusDocs 750 Constructor & Subcontractor Agreement and ConsensusDocs 751 Constructor & Subcontractor Short Form Agreement. Although this blog focuses on changes to the Design-Bid-Build forms, revisions to other ConsensusDocs forms including the Design-Build and construction management at-risk forms (ConsensusDocs 410; 415; 420; 450; 560 and 500) were released in March 2017 and address changes in the industry impacting insurance, legal, technology and terminology.
Disputes often arise because a party is unfamiliar with its contract. This blog should serve as a reminder to review each contract you are presented with; update any forms you may have for use in your company; read your contract (we hope before you sign it); and, if you have questions, consult with a seasoned construction lawyer to increase the likelihood that your project is governed according to what you think you bargained for.