AGC-Endorsed ConsensusDocs Helps You Stay Ahead of the Curve

You can’t say “general contractor” without saying the word contract. While contracts are fundamental to proper risk management, they are often overlooked. ConsensusDocs, an industry- wide coalition of 40 organizations which AGC is a founding member, has just published comprehensive revisions to its most-used prime and subcontract agreements. After receiving extensive feedback, the risk allocation principles remain intact. This five-year cycle update mostly related to changes in the construction insurance market, technology, terminology and consistency within the ConsensusDocs catalog.

Updating your contracts is important. You certainly don’t wait 10 years to update your business practices or compliance with legal requirements. “Construction is inherently a risky business, and contractors all have to decide how to manage and mitigate those risks,” comments Robert Majerus, general counsel at Hensel Phelps in Greeley, Colorado, an AGC member. “Assigning and balancing risks by contracts is an important risk management tool. The ConsensusDocs collection of contract documents provides a fair-and balanced distribution of risks, and are our preferred set of document forms whenever we get a chance to select the form.”

If your contracts don’t match your business operations or legal requirements, you might find yourself on the wrong end in today’s competitive marketplace. ConsensusDocs helps AGC members utilize the latest best practice to drive better industry results. Here are some highlights in the latest improvements that you should consider incorporating (AGC members get a 20 percent discount with the code AGC100).

INSURANCE UPDATES – BUILDER’S RISK DEFAULTS TO CONSTRUCTOR

Contractual requirements to buy insurance products that don’t exist in the marketplace are dangerous. Some of the more significant changes came in the area of insurance. Purchasing Builder’s Risk property insurance now defaults to be purchased by the constructor, rather than the owner. The constructor’s purchasing of Builder’s Risk may save up to 50 percent of the premium costs. Also, language was added to the additional insured section to avoid case law in certain states that requires upper tier parties’ insurance to completely exhaust before tapping a lower-tiered party’s additional insured policy protection.

TERMINATION FOR CONVENIENCE

ConsensusDocs will no longer automatically convert an improper “termination for cause to be considered a termination for convenience. Consequently, an improper “termination for” cause may have larger damages, such as lost profits on work not performed. AGC also publishes a member-only guidebook addressing the possibility of adding termination for convenience at the subcontract level, that isn’t initiated by an owner.

DESIGN DELEGATION

Professional liability insurance coverage for design delegation now requires prior acts coverage, as well as a delineation of a combined total deductible and self-retention maximum.

INDEMNIFICATION

The indemnification section now explicitly covers intentional wrongful acts – in addition to negligence. It would seem strange to be protected if a company acted negligently, but not protected if a rogue employee intentionally sabotaged a project.

DISPUTE RESOLUTION & MITIGATION

The arbitration section has been revised to withstand the scrutiny of some recent state case law that disfavors the use of arbitration, even where the parties choose it contractually. Moreover, fast-track (and less expensive) procedures are now encouraged for smaller claims. Lastly, more options for the administration of mediation are now called out.

CLARIFICATIONS

If you did a straight redline of the old and new additions, you might see hundreds of changes. The majority of changes are editorial in nature for better clarity, brevity and consistency.

FUTURE OUTLOOK

In March 2017, ConsensusDocs will publish updates to the 400 Design-Build series and the 500 Construction Manager at-Risk contracts. The revisions will be consistent with those highlighted in this article.

Brian Perlberg, Esq. is senior counsel for construction law for AGC of America and serves as executive director for ConsensusDocs. He can be reached at perlbergb@agc.org.

Reprinted with permission from Constructor, March/April 2017, a publication of the Associated General Contractors of America.