Sheryl S. Jackson
Constructor Magazine – January/February 2014
January 10, 2014

WHEN THE IOWA DEPARTMENT OF ADMINISTRATIVE Services (DAS) per-formed a holistic review of the state con-struction program to determine how to reduce the number of claims and disputes that resulted from construction projects, contracts were part of the review. “We were using American Institute of Architects (AIA) contracts with modifica-tions,” explains T. Ryan Lamb, legal coun-sel for the DAS. The number and type of modifications added throughout the years created complicated contracts, which led to misunderstandings, he explains. “We considered going back to the AIA contract as originally drafted but after talking with groups of construction industry representa-tives, we decided to choose ConsensusDocs to eliminate any bias toward owners and design professionals.” Although changing the standardized contracts was only part of the construction program’s transformation, Lamb attributes a significant portion of the dispute reduc-tion to ConsensusDocs. “We have not had a single dispute or claim in the $300 million in construction projects we’ve contracted in the past two years.” Fair contracts are not new to AGC of America. “The original 1918 bylaws of the AGC call for standard contracts that balanced the interests of owners, general contractors, subcontractors, manufacturers and dealers,” points out Brian Perlberg, Esq., ConsensusDocs executive director and counsel, and AGC senior counsel for construction law and contracts. AGC offered contracts for use by members throughout
the years but recognized the need to rede-sign those contracts to reflect the move toward more collaboration in construction. AGC led the effort to create a coalition of diverse construction associations repre-senting all interested parties. A package of 70 documents developed and approved by the initial 20 industry associations in the coalition was released in 2007. Six years later, ConsensusDocs has seen significant growth: • 150 percent increase in users • 100 percent increase in coalition size and breadth • 50 percent increase in contract docu-ments published The use of ConsensusDocs has contin-ued to grow for a number of reasons, says Perlberg. The documents are clearly writ-ten, using plain English, and fairly outline each participant’s responsibilities. Issues addressed in each contract include risk allocation, indemnity, consequential dam-ages, liquidated damages, dispute resolu-tion and payments. Because the documents were created with input from coalition members representing all interested parties in a construction project, the contracts are fair and equitable, with no one company assuming risk liability for work done by other project team members.
KEEPING UP WITH THE TIMES A key reason for the growth in ConsensusDocs use includes timely con-tract updates that keep pace with changes in the law and the industry, points out Perlberg. Documents addressing the legal
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and administrative issues associated with the use of building information modeling (BIM), design-build strategies and green building components for LEED certification have been introduced as the industry has changed. The 300 series of contracts was of particular interest to William Seed, vice president of design and construMion for OHS of Delaware, a hospital management company that operates over 100 acute care, behavioral health, and ambulatory facilities. “Six years ago, our company adopted the Lean philosophy and began the journey to change behavior and prac-tices throughout the company to focus on customers,” he explains. About three years ago, he began looking for a construction contract that reflected the organization’s Lean principles. ConsensusDocs’ Tri-Party agreement for Integrated Project Delivery (1153), the first standard IPD agreement published in the United States, fit his needs. “This is a relational contract that incorporates Lean principles versus a transactional contract,” he says. “It sup-ports an integrated team approach to the project versus individual contracts that create communication silos.” Although his company modified the con-tract slightly to fit their needs, the same contract is used for all external projects, says Seed. “Lean construction is a new concept for many people so the contract-ing process takes a little more time as the relationship is built,” he says. All contract-ing documents are easy to modify but Seed lilies the flexibility of the multiple-party CONSENSUSDOCS 411 More than 100 contract documents addressing every type o agreement a contractor might need are included in ConsensusDocs Customers have the choice of three subscriptions that rafted their contracting needs. The ConsensusDocs contract document series include: • 200 Series – General Contracting • 300 Series – Collaborative • 400 Series – Design-Build • 500 Series – Construction Management • 700 Series – Subcontracting • 800 Series – Program Management For more information go to
agreement that allows up to 10 parties to sign the same agreement. The benefit of ConsensusDocs is that the document is eas-ily replicable, an advantage when your company awards 50 contracts a year.” Launch of a new technology platform that facilitates participant collaboration is another way ConsensusDocs has changed to meet customers’ needs, says Perlberg. The Web-based service enables real-time,
online review and negotiation of contracts. Use of Word simplifies the process because so many people are accustomed to read-ing and reviewing Word documents. New editing capabilities and dashboards enable each person to easily see what changes are made between each version of the con-tract. “Not only does the dashboard feature keep track of the number of versions and who has reviewed the contract, but the
system automatically renumbers and cor-rects internal references when needed” he adds. Because the service is cloud-based, it is possible to access documents in progress, or documents stored on the service, from any location. “It is easy to download the contracts and see the highlighted fields that need to be completed.” says Skye E. Kent, contract manager at War Construction in Tuscaloosa, Ala. Because her subcontractors prefer to have a print copy of the contract, once the document is finalized, copies are given to the subcontractors and placed in War Construction’s files.
NO BIAS IN CONTRACTS War Consttuction was an early adopter of ConsensusDocs and there were many questions from subcontractors when the documents were first used, admits Kent. “There are fewer questions now, espe-cially because we have so many subcon-tractors we work with on a regular basis,” she says. “Subcontractors who receive a ConsensusDocs for the first time feel safer and more protected when they see how many organizations worked together to produce them.” “We used the contracts in projects with school systems and municipal projects, whose owners had their in-house attor-neys review them.” says James E. Latham, chief executive officer of War Construction.
“In those cases, the attorneys were famil-iar with ConsensusDocs and we had no problems using them.” Most users choose not to modify, or to modify slightly, the ConsensusDocs, but it is possible to create addendums if necessary, says Latham. “We have an addendum that addresses state-specific laws,” he says. Examples include lien laws, which are addressed generically in ConsensusDocs because laws vary widely between states, insurance requirements which differ according to project, and War Construction’s payment policies. While the standardized contracts are beneficial to all members of the construction industry, small and mid-sized contractors without in-house counsel or large legal budgets will benefit most, says Perlberg. ConsensusDocs doesn’t replace outside legal advice, especially for complex projects, but once a contractor has vetted the docu-ment and modified it to fit specific needs, the need for legal review is minimized.

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“We’re a small general contractor but as we moved up the food chain and began to contract with subcontractors, we looked for a standard document we could use,” says Leon Laleunesse, president of Custom Contracting in Lake Zurich, III. There was a perception that most stan-dard contracts were written to benefit whichever group produced the contract, so LaJeunesse chose ConsensusDocs because the contracts are fair to all parties. “We get minimal changes requested on the documents, which is very different from previous contracts that had layer upon layer of risk-avoidance language added.” These revisions resulted in complicated contracts that made it difficult to manage the project, he says. “It is better to invest the time upfront to make sure everyone has a clear understanding of the rules.” ConsensusDocs reduces some of the time required upfront with contracts that represent best practices in the construc-tion industry. Review of the contract and negotiation is an important part of the process. In fact, a University of Calgary study demonstrates that the existence of a trust relationship developed through front-end discussions reduces higher project costs associated with inappropriate risk allocation. “A lot of project breakdowns are due to miscommunication so we’ve provided documents that provide clear communica-tion about performance expectations,” says Perlberg. “This is especially important at the beginning of the relationship.” Contractors who are considering use of ConsensusDocs should do their home-work first, suggests Latham. “Drill into the details of the documents so you understand what issues are addressed and how they are handled.” Latham also had an attor-ney review his “homegrown” contracts, as well as other standardized contracts, to see how ConsensusDocs compared before he switched. People managing the documents also need to study the contracts carefully, sug-gests Kent. “They are well-written with no ambiguous language, but you need to see what is included in the document,” she says. “The process is very intuitive, with options you select for each project contract, but you have to know your business needs to determine which options are best for that specific contract.”