Construction contracts provide a foundation for project success or, if done wrong, project failure. Updating your contracts is essential. You should evaluate and update your contracts based on the latest technology trends, legal developments, and the insurance market. ConsensusDocs updates its documents more frequently than the American Institute of Architects (AIA). The ConsensusDocs Contract Content Drafting Council “Council” solicits and reviews industry feedback to keep the ConsensusDocs ahead of the curve in identifying and establishing industry best practices. On Wednesday, September 20th, ConsensusDocs will publish comprehensive revisions to its most used prime and subcontract agreements that address design-bid-build.
In this revision cycle, the Council maintained the careful risk allocation balance that already exists in ConsensusDocs standard construction contract documents and introduced important revisions that make these best contract documents in the industry even better. Some highlights include:
- Revised the limited waiver of consequential damages (at subsection 10.3.5) to clarify that insurance coverage is exempt from the consequential damages waiver only if the insurance coverage pays for the loss. Waiver of consequential damages is one of the most important and negotiated provisions in construction contracts. The previous standard language excluded insurance coverage from the waiver of consequential damages. This principle remains as insurance provides a fair way to allocate risk among the parties.
- Eliminated the requirement (at subsection 10.3.1) to cover “existing structures” under property insurance. Obtaining property insurance through a Builder’s Risk policy that covers damage to existing structures may not always be feasible.
- Expanded and added more detailed procedures to submit, review, and respond when a portion of project design is delegated from the design professional to the contractor. The expanded provisions establish how an upstream party must respond to produced delegated design and procedures for better overall design coordination responsibility. The new provisions make clear that overall coordination resides with the owner through its design professional for the overall project. This provides structure and organization in the delegated design responsibility process that historically has been missing in standard construction contract documents. The new language requires a Constructor to “conform its delegated design to the performance and design criteria provided” at section 3.15. More on Delegated Design, click here.
- Revised and provided additional clarity surrounding interim directives. ConsensusDocs uses this term to include directed change orders that are ordered because of a lack of agreement on cost and schedule impacts, as well as field instructions. AIA uses the term “construction change directives (CCDs)” for a similar concept. The revisions clarify that an owner’s issuing an interim directive does not necessarily increase price or time.
- Added itemized cost-of-the-work items incurred due to emergency and legal, mediation, and arbitration fees and costs not associated with a dispute between the parties. These cost-of-the-work items potentially apply in this lump sum contract for changed work at subsection 8.3.3.
- Clarified an owner’s options when responding to submittals. Rather than review and approve, an owner may take other appropriate action, such as returning a submittal to revise and resubmit. This was implied as a rejection in previous editions of ConsensusDocs. The updated language is explicit and now clearer.
- Added an explicit time requirement for a Constructor to provide a submittal schedule within 30 days of commencing work. Clarified that an owner may take “other appropriate action” when reviewing submittals at subsection 3.14.2.
- Clarified that all reimbursable attorneys’ fees must be reasonable.
- Added statute of repose in addition to statute of limitations as reasons for barring commencing arbitration (at subsection 12.5.11). Some state courts have ruled that the statute of limitations and statute of repose don’t apply to arbitration actions. Therefore, it is prudent to put this in standard contracts.
- Clarified the “no waiver of performance” language so that not necessarily enforcing or insisting upon a contractual right does not waive such contractual right by implication.
- Revised language clarified that the cost to uncover work is not compensable if the owner instructed that the work be left uncovered.
- Added a required contingent assignment provision for suppliers as well as subcontractors in subcontractor and supplier agreements.
- Created a duty to defend as part of a Constructor’s indemnity obligation to hold the owner harmless for hazardous materials brought to the site by the Constructor or someone the Constructor is liable (at subsection 22.214.171.124).
- Simplified the language requiring the owner to obtain the right for Constructor and Subcontractors to use design documents (at subsection 2.3.1). Revised language also is more appropriate when an owner has in-house licensed design professionals produce the design documents.
- At subsection 3.8.2 clarified that Constructor’s warranty obligations to correct material and equipment defects for owner-provided materials equipment are limited to installation defects.
- At subsection 3.11.5 clarified that Constructor’s obligations to remedy damage or loss do not apply to damage covered by an owner’s property insurance or is attributable to the owner or the owner’s separate contractors.
- Eliminated disclaimer language related to the reliability of estimates for cost and schedule items.
- Defined the term “Overhead” throughout the ConsensusDocs agreement.
- Added a definition for “Prime Contract” in the standard subcontract.
- Additional conforming changes were made to the ConsensusDocs 750 standard subcontract to flow these requirements consistently.
A Comprehensive Overview of the Recent ConsensusDocs Updates Webinar Recording
ConsensusDocs is a Coalition of over 40 different design and construction associations. Each group has an equal voice at the drafting table to write best-practice standard construction contracts that are fair to all stakeholders in the A/E/C industry. Each national association group participating in ConsensusDocs is invited to provide two volunteers for the comprehensive drafting process, making up the Council.
Comments or questions about this article can be directed to Brian Perlberg, Executive Director and Senior Counsel, ConsensusDocs Coalition, at bperlberg@ConsensusDocs.org. Publication of updates to the most used ConsensusDocs standard contract documents is anticipated for Wednesday, September 20th, at www.ConsensusDocs.org. All existing users will get to choose whether to use the new standard forms or the previous edition for the next 13 months.